To support businesses and individuals impacted by COVID-19, a range of new measures have been introduced by the Australian Government, Fair Work Commission (FWC), and Australian Tax Office (ATO). These range from legislation changes and economic relief packages through to tax measures and employee entitlement changes.
As a business owner or employer, you want to protect the financial and personal wellbeing of your employees, and make sure that your payroll system is compliant with the latest legislation.
To help you make sense of the new measures introduced due to COVID-19, this article will explain what the new changes are, what they mean for your business, and how to meet your payroll obligations.
For existing E-Payoffice customers, our team is working diligently to implement these changes into our software, so as to simplify and (where possible) automate these processes to make your life easier and help you stay compliant.
And if you’d like to get your payroll right during these uncertain times and beyond, contact E-Payoffice to request a FREE trial demo.
Payroll Tax Relief
Across Australia a range of Payroll tax measures have been introduced to provide relief to businesses suffering from cash flow strain during COVID-19. Each state and territory has slightly different starting periods and requirements. For instance, NSW businesses with total grouped Australian wages of $10 million or less will have their annual payroll tax liability reduced by 25% for the 2019-20 financial year. But they must still lodge their annual reconciliation, with the due date being extended from 28 July 2020 to 30 October 2020.
Based on your state or territory and payroll size, you may not need to register for the reduction. In this case, when you lodge your annual reconciliation, the reduction will automatically apply to your tax liability. Please refer to your relevant state or territory government to see if this applies to you.
Jobkeeper Payment Scheme
The JobKeeper payment of $1,500 earnings per fortnight (before tax) is paid to eligible employers to assist with the payment of salaries and wages for eligible employees.
Administered by the Australian Taxation Office (ATO), the JobKeeper payment scheme will operate for a total of 13 fortnights from 30 March to 27 September 2020.
To be eligible for the JobKeeper payment, both employers and employees have to meet certain criteria. Below is a breakdown of the eligibility requirements as explained by business.gov.au:
Employers will be eligible for the subsidy if:
- their business has a turnover of less than $1 billion and their turnover will be reduced by more than 30 per cent relative to a comparable period a year ago (of at least a month), or
- their business has a turnover of $1 billion or more and their turnover will be reduced by more than 50 per cent relative to a comparable period a year ago (of at least a month), and
- the business is not subject to the Major Bank Levy
- The employer must have been in an employment relationship with eligible employees as at 1 March 2020, and confirm that each eligible employee is currently engaged in order to receive JobKeeper Payments.
- Not-for-profit entities (including charities) and self-employed individuals (businesses without employees) that meet the turnover tests that apply for businesses are eligible to apply for JobKeeper Payments.
Eligible employees are employees who:
- are currently employed by the eligible employer (including those stood down or re-hired);
- were employed by the employer at 1 March 2020
- are full-time, part-time, or long-term casuals (a casual employed on a regular, systematic basis for 12 months or more as at 1 March 2020)
- are at least 16 years of age
- are an Australian citizen, the holder of a permanent visa, a Protected Special Category Visa Holder, a non-protected Special Category Visa Holder who has been residing continually in Australia for 10 years or more, or a Special Category (Subclass 444) Visa Holder
- are not in receipt of a JobKeeper Payment from another employer.
If your employees receive the JobKeeper Payment, this may affect their eligibility for payments from Services Australia, as they must report their JobKeeper Payment as income.
How to apply for JobKeeper Payment Scheme
As of 30 March 2020, all employers can register their interest to apply for the JobKeeper Payment scheme.
Please note the period in which eligible businesses can apply has been extended from 31 April 2020 until 31 May 2020. If you enrol by 31 May, you may still be able to claim fortnights in April and May as long as each employee was paid $1500 in each ATO period. The cut-off for any April adjustments is the 8th May. Each JobKeeper from ATO FN03 stands alone for calculations and Top-ups with no backdating allowed.
Once enrolled, you need to nominate eligible employees. You are not allowed to pick and choose between eligible employees. Any employee who is eligible to participate in the JobKeeper Payment scheme must be included.
Then, you need to let each eligible employee know you intend to nominate them for JobKeeper Payment. To confirm that your eligible employees agree to be nominated and receive the JobKeeper payment, you must both complete the Employee Nomination Notice form.
You do not need to send this notice to the ATO. However, you should keep a copy of each document for record-keeping purposes.
If you are a sole trader or eligible business participant, you may be able to nominate yourself.
For employees aged 16 to 17 years old
From 11 May 2020, there are new rules for employees aged 16 to 17 years old.
Firstly, 16 to 17 year old employees who work part-time or casual are no longer eligible for JobKeeper payments. The only exception is if they are independent or not in full-time study.
If you have any 16 to 17 year old employees who have already lodged a form with you, that form is no longer valid for JobKeeper fortnights commencing on or after 11 May 2020. Therefore, you need to issue them with the latest version of the Employee Nomination Notice so that they are eligible for JobKeeper.
Here’s a quick summary of what’s new for 16 and 17 year old employees:
- If you are a full-time student you cannot claim JobKeeper unless you are also independent
- All part-time students can claim JobKeeper (you do not need to worry about the “independent” criteria)
How to pay JobKeeper to your employees
You need to pay eligible employees at least $1,500 a fortnight in line with your existing pay cycle through your current payroll system (the Pay Date of your payroll cycles are what needs to be in line with each ATO fortnight). All leave is still required to be accrued during the JobKeeper Payments.
If an eligible employee earns less than $1,500 (before tax) per fortnight, you must still pay them at least $1,500 each fortnight. In essence, this is a temporary ‘top-up’ of their usual salary or wage. You cannot use the JobKeeper Payment to pay your employees less than $1,500 per fortnight and keep the difference.
If an eligible employee earns more than $1,500 (before tax) per fortnight, you must continue to pay their usual wage or salary. Any amount you pay above $1,500 per fortnight cannot be subsidised by the JobKeeper payment.
If you usually pay eligible employees on a monthly basis, you can allocate the fortnightly payments in a manner that suits you. For example, you can either pay $3000 per month or $3250 per month.
COVID-19 LWOP (Leave Without Pay)
E-Payoffice makes it easy to manage leave entitlements during COVID-19. How? Instead of reducing your employee hours, we have set up a special type of leave in each called ‘COVID-19 LWOP.’
When an employee does not work on a day they usually would (due to COVID-19), this leave type should be used as employees are still required to accrue leave on their pre-COVID-19 work hours. This leave type will also take care of Public Holidays as per the Fair Work rulings as an employee that is stood down must still receive their public holiday payment if they would normally work on that given day.
Additionally, you can use ‘COVID-19 LWOP’ if an employee does not want to take (or does not have) paid leave, but they need to take time off due to COVID-19. Depending on your circumstances, you may need to seek independent legal advice to find out if this payroll approach is suitable for you. You’re also welcome to contact E-Payoffice at any time for expert advice.
Business monthly declaration to the ATO
Whether or not the JobKeeper subsidy payment is liable for payroll tax depends on your state and territory.
At the time this was published, South Australia, Western Australia, Victoria, Queensland and Tasmania, are exempting JobKeeper from payroll. However the rest of Australia (NSW, ACT, and NT), JobKeeper payments are still payroll taxable. For employees based where the JobKeeper is exempt from payroll tax, if an employee earns more than the $1,500 per fortnight subsidy payment, any additional wages paid by you (the employer) must be included in the monthly return.
E-Payoffice is STP Compliant for JobKeeper and are managing all clients top-ups and STP coding in line with the legislation.
To request a no obligation DEMO of E-Payoffice, contact us today.