The ATO has clarified that the following count towards JobKeeper’s $1,500 per fortnight payments to employees:
- salary and wages covered by section 12-35 of Schedule 1 to the Taxation Administration Act 1953
- all allowances other than a reimbursement of expenses or a fringe benefit
- overtime, shift and penalties
- bonuses and commissions
- PAYG withholding amounts under section 12-35 of Schedule 1 to the Taxation Administration Act 1953
- amounts applied under an effective salary sacrifice arrangement.
However the ATO emphasises that the following payments do not count towards the $1,500 per fortnight amounts:
- government Paid Parental Leave
- workers’ compensation absence (not able to work)
- reimbursements of expenses incurred by employees
- directors’ fees (that are not salary and wages)
- lump sum payments (lump sum A, B, D and E)
- exempt foreign income (exempt from PAYG withholding)
- fringe benefits provided to an employee that are not part of an effective salary sacrifice arrangement
- employment termination payments.
On the latter, the ATO has clarified its position on employment termination payments (ETPs) in relation to JobKeeper payments and employees who have been terminated or made redundant.
It says that from JobKeeper fortnight six (starting 8 June 2020) until the end of the scheme, ETPs cannot be included as part of the $1,500 an employer makes to eligible employees and claims as a JobKeeper reimbursement from the ATO.
If employers claimed JobKeeper payments that included ETPs paid to terminated employees between JobKeeper fortnights one to five (from 30 March to 7 June) the ATO has stated that it will not seek to recover an overpayment that has occurred as a result of these payments.
The basics revisited
Remember, all JobKeeper payments are assessable income of the business that is eligible to receive the payments. The normal rules for deductibility apply in respect of the amounts a business pays to its employees where those amounts are subsidised by the JobKeeper payment. The payments are not subject to GST.
To be eligible for JobKeeper payments, employers need to pay the minimum $1,500 (gross salary inclusive of PAYG withholding, and also see list above) to each eligible employee in each fortnight to claim the JobKeeper payment for that fortnight.
If your eligible employees earn less than $1,500 (gross salary inclusive of PAYG withholding) per fortnight, an employer must pay them at least $1,500 in each fortnight to claim the JobKeeper payment. This is a “top up” of their salary or wages but it will ensure the employer remains eligible.
An employer cannot pay employees less than $1,500 in each fortnight and keep the difference. They will not be eligible for the JobKeeper payment if they pay their nominated employee less than $1,500 in each fortnight.
If eligible employees earn more than $1,500 per fortnight, the employer should continue to pay them their regular salary or wages. However, the employer will only receive $1,500 for each eligible employee. Any amount paid above $1,500 in a fortnight is not subsidised by the JobKeeper payment.
See our resource page for JobKeeper, which has a number of the commonly asked questions that Tax & Super Australia have received regarding the JobKeeper subsidy.