***as at 14 April 2020***
One of my favourite sayings is "I'm not bossy, I am the boss", though the word bossy is still quite a trigger for me!
This blog is all about support and options available to employers through covid. We have a separate blog for sole trader specific covid stuff, focused on the 'self-employed' rather than employer of other people. It is a bit confusing, I know...
If you are a sole trader, with no employees, this is not for you.
If you are a sole trader employing others or a Company, Trust, Not For Profit etc that employs you and/or others, then please read on... and also check out the other blog because there might be some relevant info in there for you as an individual.
If you are feeling confident about your ability to understand Scomo and his team, then head here for the official Treasury info.
If not, then let me help translate the government info for you so you know what support might be available to you.
As a sole trader, you are your business, meaning you are the one legal entity. You can employ others, just not yourself. Whereas if you were operating through a Company or a Trust, that would be a separate 'being' to you, the individual. This entity can employ you (the individual) and others! Confused already? No worries, check out this blog on the different structures.
There a few things the Government have released that might be applicable to your business, and that we will go through here:
Other stuff they have on offer, but that doesn't apply to a lot of my clients so not covered in this blog (email me if you want to chat through these further!):
Ah yes, what we all wish we were, right?
This is a new shiny thing released by the government on the 30th of March 2020. ***legislation now released***
Here is the actual legislation.
Job Keeper is designed to help employers keep their staff employed, but the government has kindly said this will apply to the "self-employed" too.
NEW INFO - The legislation now says ALL ENTITIES (with a few exceptions that don't really apply to my main client base).
It is basically a payment of $1,500 per employee per fortnight (pre-tax), from the government to the 'employer', for them to pay to their employee.
Who is eligible?
Tell me about this 30% drop...
We don't know the details yet, but what we believe you will need to show is that in this last quarter (or month, depending on your usual reporting cycle), you have 30% or more of a drop in total sales (income) of the business when compared the same month/quarter in 2019. If your business is new, then a drop compared to it's average/usual conditions.
NEW INFO - You (employer) will need to report monthly to the ATO re your earnings to ensure you are still eligible.
NEW INFO - You (employer) will need to show that April 2020 (eligible month) has seen a drop of 30% or more as compared to a comparable period in 2019 i.e. April 2019. The fact sheet suggests you can use alternative estimates, averages, periods etc. if you have lumpy income.
Which employees count?
Self-employed individuals will be eligible to receive the Job Keeper Payment, and we're pretty sure it will just be paid directly into your nominated account. Keep in mind this is taxable income so don't spend it all at once!
NEW INFO - You need to have registered your interest and then make monthly reports in order to get the payment in arrears from the ATO.
For those of you who employ other people, this is pretty important to understand. You will receive the $1,500 per fortnight for each of the eligible employees on your books at 1 March 2020. No sneaky back dating off stuff!
Eligible employees include:
How does it work?
How much do I receive? How much do I pay my employees?
The employer/self-employed receives $1,500 per eligible employee per fortnight, for up to 6 months, in arrears.
NEW INFO - Timing: the first 'job keeper fortnight' begins 30 March 2020, and the payments will be received by the employer in arrears (not a sexual reference). This means 'after the fact' i.e. the employer pays the employee through April, then receives a kind of 'reimbursement' from the ATO from 1 May 2020 (and so on). This arrangement is planned to end 27 September 2020.
***get in touch with us today if you need help setting this all up in your accounting software!***
If the employer chooses to/has to keep them on at their usual (higher) rate, then this acts like a subsidy - think like when the parents of the birthday girl subsidise the drinks at the 18th birthday. The government are pitching in so the employer just pays the top-up amount.
The same applies if the employee ceased work and then was re-engaged.
Also, it is up to the employer whether they will pay the extra superannuation on any amounts paid above the usual wage.
NEW INFO - What if I work in my business but I am not 'employed'?
Firstly, you should book a meeting with us to discuss pros and cons of the approach you have taken.
Secondly, it is going to be ok - the government updated the offer to cover what they refer to as business participants.
Your entity is entitled if:
Please note your entity can only have one business participant receiving the Job Keeper payment. Your entity cannot be entitled if another entity is entitled re that same individual.
Your entity needs to notify you (the individual) of the nomination to be the eligible entity.
You are an eligible business participant if:
NEW INFO - Reporting Requirements
You have 7 days from the end of the calendar month to make your reports to the 'commissioner' (AKA the ATO).
Too good to be true?
Kind of. One thing to keep in mind is that the payment from the government will be in arrears. That is not a sexy reference. In arrears kind of means after the fact. So, if cash-flow is an issue, this might help but not perfectly. As the employer, you probably need to cover the actual wages paid to employees through April, and then the subsidy will be paid by the government to the employer from the first week of May 2020.
Check out more examples at the end of this fact sheet.
I sure loved reading the legislation on this one! To be honest, how all of the calculations are going to happen is something we're still working through, but you don't need to worry about that level of detail if we're your accountant anyway.
This is a cash bonus from the government, to help employers keep their employees employed. The official name is 'boosting cash flow for employers' and the fact sheet is here. If you get super bored, here is the bill for the Act that eventually makes this law.
The general gist: the Government will provide up to $100,000 (previously $25,000) to eligible small and medium businesses and not-for-profits that employ people with a minimum payment of $20,000 (previously $2,000).
Don't get too excited just yet...
Who is eligible?
Not for profits, please check out the fact sheet for your specific eligibility criteria!
What is an eligible payment?
In terms of employees, which is the most common eligible payment my clients would have made...
GOOD NEWS: All eligible entities that received initial cash flow boosts may be entitled to additional cash flow boosts.
How much will the employer receive?
The first BOOST
One catch: if you withheld between $0-$9,999 in the march quarter, your business may not be eligible to receive any more cash flow boosts until the PAYG withholding exceeds $10,000 over the relevant periods.
Example (credit: Treasury):
Tim owns and runs a small paper delivery business in Melbourne, and employs two casual employees who each earn $10,000 per year. In the March 2020 quarterly activity statement, Tim reports withholding of $0 for his employees as they are under the tax-free threshold. The March 2020 quarter is the first period Tim is eligible for an initial cash flow boost. His withholding of $0 is less than $10,000 so Tim’s initial cash flow boost will be the minimum amount $10,000. Tim will not receive any further initial cash flow boosts unless his withholding in the June 2020 quarter is greater than $10,000.
The additional BOOST
The amount you get in the additional boost depends on what you go in the first one:
Example (credit: Treasury):
Tim received initial cash flow boosts of $10,000. When Tim lodges his June and September 2020 quarterly business activity statements he will receive additional cash flow boosts as follows: $5,000 for quarter ended June 2020 and $5,000 for quarter ended September 2020.
How does it work?
Tell me WHEN!
"The cash flow boosts will be applied to reduce liabilities arising from the same activity statement. This will result in eligible entities being required to pay less to the ATO. Generally where a credit exceeds a business’ other tax liabilities, the business will be refunded the excess amount. [this means it could reduce GST payable too!] A business may also receive a refund if it overpays its activity statement because the business’ system was unable to take the cash flow boost into consideration when working out how much was payable. If a business is placed in a refund position, it will generally receive the refund within 14 days."
I might be biased but now seems like the perfect time to put some energy into organising your finances and getting on top of your tax. This also helps me, your friendly neighbourhood accountant, to negotiate special things for you with the ATO.
Following covid, the ATO and government decided on giving us a bit of help when it comes to our reporting and tax payment obligations:
One catch: As the cash flow boost (discussed above) is generated on lodgment of an eligible activity statement, if you defer lodgement, then you also defer receiving the cash-flow boost. This ensures that eligible entities that have received deferrals, for example, due to recent natural disasters, do not miss out on the payment or have to forgo their extended time to lodge to qualify.
These are not automatically applied, and you need to call the ATO. If you need a hand, you know where to find me!
Phewf!! (another) big blog.
I hope that this has been useful to you and your friends. Please share this amongst your community too. We will endeavour to keep it up to date for you.
Feel free to email or DM me any questions you have, and please share handy links and resources you find. We're happy to collaborate and share the love and knowledge around!