Exiting JobKeeper for monthly, fortnightly and weekly payrolls

Exiting JobKeeper

The focus on the JobKeeper program to date has, understandably, been on digesting and applying the rules to determine if businesses are eligible for JobKeeper assistance. This has entailed a thorough examination of the Coronavirus Economic Response Package (Payments and Benefits) Rules 2020 (the JobKeeper Rules), the subsequent amendments to the rules made by the Coronavirus Economic Response Package (Payments and Benefits) Amendment Rules (No. 2) 2020 and further information in the form of the Commissioner’s legislative instrument, the Coronavirus Economic Response Package (Payments and Benefits) Alternative Decline in Turnover Test Rules 2020.

At the heart of the JobKeeper Rules is the requirement known as the ‘wage condition’ which obligates enrolled employers to pay at least $1,500 to each eligible employee in each fortnight they wish to claim the JobKeeper payment from the ATO.

Related reading: How to apply for JobKeeper payments if you’re affected by COVID-19

The looming exit from JobKeeper

Since the start of the JobKeeper program, there has been confusion about the interaction of JobKeeper with the normal payroll cycles of businesses. This confusion will be exacerbated by the exit of these businesses from the JobKeeper program, some sooner than others.

The Government’s announcement by media release on 8 June 2020 that JobKeeper for employers in the childcare sector[1] will be turned off from 20 July 2020, in line with the resumption of the Child Care Subsidy (CCS) to support families to access affordable child care, is a precursor to the cliff on 27 September 2020 when JobKeeper ceases for all other sectors. The Coronavirus Economic Response Package (Payments and Benefits) Amendment Rules (No. 5) 2020 which give effect to this measure were registered on 6 July 2020.

The currently legislated ending of the JobKeeper program on 27 September 2020 is subject to the Government’s Economic Statement on 23 July 2020 when the findings of the JobKeeper review are expected to be released together with an update on the Government’s intentions regarding any possible early cessation or extension of the JobKeeper program for selected sectors in response to the economic crisis.

The exit of the JobKeeper program by employers in the childcare sector will be a prelude to those exiting en masse in September, so this is an opportune time to consider how JobKeeper interacts with the weekly, fortnightly or monthly payroll cycles which almost certainly will not align with the schedule of JobKeeper fortnights.

Related reading: JobKeeper: determining decline in turnover using cash or accruals

The wage condition

Section 10(1) of the JobKeeper Rules provide that an employer satisfies the wage condition in respect of an individual for a fortnight if the sum of the amounts in the left column of the table below equals or exceeds $1,500:

Payments that count
towards the $1,500 per fortnight

Payments that do not count
towards the $1,500 per fortnight

  • Salary and wages covered by s. 12-35 of Schedule 1 to the TAA 1953
  • All allowances other than a reimbursement of expenses or a fringe benefit
  • Overtime, shift and penalties
  • Bonuses and commissions
  • PAYG withholding amounts under s. 12-35 of Schedule 1 to the TAA 1953
  • Amounts applied under an effective salary sacrifice arrangement.
  • Government Paid Parental Leave (GPPL)
  • Workers’ compensation absence (not able to work)
  • Reimbursements of expenses incurred by employees
  • Director’s fees (that are not salary and wages)
  • Lump sum payments (lump sum A, B, D and E)
  • Exempt foreign income (exempt from pay as you go withholding)
  • Employment termination payments
  • Fringe benefits provided to an employee which are not part of an effective salary sacrifice arrangement.

Source: ATO website

Payroll cycles

There has been widespread confusion regarding payroll cycles. While the JobKeeper fortnights are set by the legislation, the JobKeeper Rules do not require any employer to change their payroll cycle to conform to the JobKeeper fortnights.

Related Reading: JobKeeper key dates & payroll cycles

This has resulted in inevitable questions such as: “So what do I do if my payroll cycle doesn’t align with the JobKeeper fortnights?” and “What if I pay my employees monthly?”. And now with the imminent ending of JobKeeper for the childcare sector from 20 July ahead of all other employers in September, “What happens if my payroll cycle ends before or just after the end of the last JobKeeper fortnight? Do I prorate JobKeeper for the extra few days?”

I have detailed scenarios for exiting the JobKeeper scheme when using weekly, fortnightly and monthly payroll cycles, with examples for each, in a new summary available to Tax Institute members through their member portal. In this resource, you’ll also find:

  • further information on JobKeeper’s interaction with the Fair Work Act;
  • rules around making superannuation guarantee contributions; and
  • a handy breakdown of JobKeeper fortnights through to the end of September.

Members can access this analysis here.

If you’d like access to timely, tax technical insights like this to better help your clients and grow your career, become a member today or contact our friendly team for more information on membership.

Further information is available from the ATO website. Or, head to our dedicated COVID-19 economic stimulus hub for more on JobKeeper, the Cash Flow Boost and other important measures.

Become a Tax Institute member

[1] Specifically, this applies to employees of a child care subsidy approved service and for sole traders operating a child care service.

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