Special Topic:  JOBKEEPER PAYMENT  FOR SELF-EMPLOYED AND SOLE TRADERS

On Monday, the Federal Government announced details of the new JobKeeper Payments program, and sole traders and self-employed people will need to consider if they are eligible to access the wage subsidy program. 

Sole traders and self-employed people are included in the group of eligible employers, and the available $1,500 per fortnight subsidy will start flowing to eligible employers and employees from the first week of May.

 We have prepared the following Q&A to help explain the details which are currently available.

Are sole traders and self-employed people eligible for JobKeeper payments?

Yes. Sole traders that have seen the revenue from their business affected by COVID-19 are eligible to receive the JobKeeper payments  .

What are the eligibility criteria?

Sole traders will be eligible for the JobKeeper Payments if their business has a turnover of less than $1 billion per annum, and turnover is expected to be reduced by more than 30% as a result of COVID-19, compared to "a comparable period a year ago, of at least a month". 

For sole traders that have employees, payments will be available for each eligible employee that was on employed as at 1 March 2020 and continues to be "engaged" by the sole trader.   Employees can include full time, part time, casual (if employed on a regular basis for at least 12 months) and stood-down employees.

 To be eligible, employees must also be an Australian citizen, or they must hold a visa that would allow them to access other government payments (such as the JobSeeker payment).

How do I demonstrate that the turnover of my business has reduced by 30% (or 50%) relative to a comparable period (of at least one month) last year?

No definition of 'turnover' has been offered, but what is clear is that a business owner can self-assess that turnover has or will reduce by the necessary 30% (or 50% for large businesses) and that reduction needs to be assessed by reference to a comparable period from a year ago of at least a month.

 The business owner will need to demonstrate in due course that the reduction in turnover has actually occurred, and we expect the ATO will verify the reduction in turnover figures.

What if an employee was first employed after 1 March 2020?

Information currently provided by the Government states that only employees employed as at 1 March 2020 are covered.  Whether this will be expanded to include employees first employed after this date is not known.

What if I am a sole trader with no employees, can I still get the JobKeeper payment?

Yes, both sole traders who employ people, and those who do not, can access these payments.

 Provided they met the eligibility criteria (see above), sole traders will receive $1,500 per fortnight (before tax), per eligible employee, which can also include themselves if they are self-employed.

 The payments will be for a maximum of six months, running up to 30 September 2020.  Sole traders will receive the first payments in the first week of May, with amounts backdated to 30 March 2020.

 It is important to note that your business will need to fund the JobKeeper Payment scheme from your own cash reserves for the month of April 2020, until the first back-dated payment is received

Does the JobKeeper Payment include high income employees?

Yes.   The JobKeeper Payment is payable to all employees, but the amount is set at $1,500 per fortnight per employee.   Effectively, the JobKeeper Payment will cover the first $1500 of a high income employee's wages.

 It is up to employers whether they top up the payment to cover all or a proportion of an employee's usual wage, subject to the existing employment obligations that apply (ie employers need to continue to comply with their obligations to employees under contracts, enterprise agreements, modern awards, etc, subject to the implementation of lawful measures such as stand down, etc).

What information do you need to provide to the ATO?

Sole traders and self-employed businesses will need to confirm their intention to participate in the JobKeeper Payment program by applying through the Australian Taxation Office website.

Business owners will need to provide an ABN, nominate an individual to receive the subsidy payment, that individual's Tax File Number, and complete a declaration of the downturn in their recent business activity.  Payments will then be made to the nominated individual's bank account.

Business owners will then be required to provide various information to the ATO each month, including the details of eligible employees "engaged" within the business and monthly financial information.

How will the JobKeeper Payment be received?

Sole traders and self-employed businesses will receive the JobKeeper Payments monthly, in arrears, directly from the ATO.

If the sole trader or the self-employed business is receiving JobKeeper Payments for eligible employees, they will then need to use the payments to pay their employees' wages. 

The subsidy payment will be applied under the following scenarios (depending on the fortnightly salary of each employee), as follows:

• For employees that were already receiving $1,500 per fortnight (before tax) from the employer then their income will not change;
• For employees that have been receiving less than $1,500 per fortnight (before tax), the employer will need to top up the payment to the employee up to $1,500 (before tax);
• For those employees earning more than $1,500 per fortnight (before tax), the employer can provide them with a top-up; and
• Once receiving the JobKeeper Payment, the JobSeeker payment becomes redundant

Is the JobKeeper Payment itself subject to superannuation guarantee contributions?

While we have not yet seen the legislation giving effect to the JobKeeper Payments, the Government has said that "it will be up to the employer if they want to pay superannuation on any additional wage paid because of the JobKeeper Payment".

Superannuation is payable according to ordinary rules for payments to employees for ordinary time earnings (even if the funds for those payments are received by employers through the JobKeeper Payment scheme).

The following treatment may arise in these different circumstances:

• For employees' whose usual wages are less than $1500 per fortnight (ie superannuation would be payable on the part of the $1500 payment necessary to cover the employee's wages, but not on any windfall balance).
• For employees who have been stood down without pay (ie superannuation will not be payable on the $1,500 JobKeeper Payment paid to employees as it is not paid as ordinary time earnings for work that has been undertaken).

Can you still access other government payments, such as JobSeeker payment and rent assistance, if you receive the JobKeeper Payment?

The Government has temporarily expanded the eligibility criteria for the JobSeeker payment so that more sole traders can access those payments.  

Accessing the JobKeeper Payment as a non-employing sole trader may change your eligibility for other government payments, such as the JobSeeker payment and rent assistance.  Employees will need to report all income from the JobKeeper Payment to Centrelink.

What happens if a sole trader has already stood down employees because of COVID-19?

If you have stood down workers before the JobKeeper Payment was announced on 30 March 2020, and they worked for your business as of 1 March 2020, you will still be able to access the JobKeeper Payments for them.   Provided you and the employees meet the other eligibility criteria (see above), the JobKeeper Payments should be passed on to them.

If eligible terminated employees are rehired, what happens with entitlements that were already paid out (i.e. redundancy pay, annual leave, long service leave, etc.)?

Based on the information available to date, employees will be entitled to retain severance payments they have received on termination, even if they are rehired.   This will likely be treated in the same way as an ordinary re-employment scenario.

For most employees, their service with the employer will be deemed to be continuous if they are rehired (though the gap in service will probably not count as service).  However, employees will not be entitled to 'double dip' on service related entitlements that they have been paid out (ie. employees paid redundancy payments will not be entitled to another redundancy payment with respect to that period of service).

The rules that apply will vary depending on the specific circumstances of each employee.  We recommend that you seek specific professional advice if employee entitlements for rehired employees are not clear.

What if you operate your business through a partnership or a trust?

According to the Treasury announcement, Australian businesses that are structured as companies, partnerships, trusts and sole traders are all eligible for the JobKeeper Payment program.   It is also available to not-for-profit entities and charities.

How do you register to receive the JobKeeper Payments?

You can register an expression of interest on the ATO website at www.ato.gov.au

The ATO has recommend that businesses do not need to call the tax office to register.

What other assistance is available to sole traders that are being affected by COVID-19?

Sole traders may also be able to access other financial assistance through the Government's previously announced stimulus packages, including access to JobSeeker payments, and the expansion of the instant asset write-off scheme (from $30,000 to $150,000 per asset).

Sole traders that have experienced a reduction in their income may also be able to access their superannuation early (up to $10,000 before 30 June 2020, and a further $10,000 after 1 July 2020).  Also, sole traders are included in the list of eligible businesses for the Government's coronavirus SME guarantee scheme for loans (Govt. will provide a guarantee of 50% to SME lenders for new unsecured loans up to $250,000 to be used for working capital).

Please note: The proposed JobKeeper Payment is not yet law, and we are not aware of any  clear guidance provided by Federal or State Governments (where appropriate) in relation to many of the issues raised above.

Please do not hesitate to contact your Lowe Lippmann Relationship Partner if you wish to discuss any of these matters further