During 2020 tax agents have been hammered by the JobKeeper scheme, with its tight reporting deadlines, inconsistent interpretations and constantly changing rules. However just when tax agents thought there might be some calmer waters on the horizon, another “job…” scheme is about to land, which may again see tax agents burning the midnight oil.
The JobMaker Hiring Credit scheme, as announced in the 2020-21 Federal Budget, commenced on 7 October 2020 and runs until 6 October 2022. However, the legislative instrument through which the scheme will come into operation is still in draft form and the comments period does not close until 27 November 2020.
However, when it does land, tax agents will notice something very familiar about JobMaker.
The JobMaker rules will be introduced as an amendment to the legislative instrument that contains the JobKeeper rules, and the similarities with the JobKeeper rules do not end there.
- Where JobKeeper has “JobKeeper fortnights”, JobMaker has “JobMaker periods”
- To be eligible for JobMaker an entity must be carrying on a business in Australia and have an ABN
- The employer must notify the ATO of its election to participate in the scheme
- There will be a reporting obligation, as there is for JobKeeper
- There will be a notice require, similar to the nomination notice required for JobKeeper, and the employee cannot have provided a similar notice to another entity (while still employed by the first entity)
- Two entities cannot be receiving JobMaker support for the same employee at the same time (however where an employee leaves one employer and joins another employer, JobMaker assistance can continue if eligibility criteria are met)
- An entity will be ineligible for JobMaker if a liquidator or a trustee in bankruptcy had been appointed
- There are JobMaker integrity measures to prevent employers from artificially manipulating their circumstances to gain access to the scheme
What you need to know now
- The JobMaker scheme runs from 7 October 2020 to 6 October 2022 (yes, it’s already started)
- There are eight “JobMaker periods” over the duration of the scheme, with each period being approximately 90 days
- Similar to JobKeeper, an entity can jump into any JobMaker period in which they have “eligible additional employees”, but the entity must notify the ATO of its election to participate in JobMaker by the end of that JobMaker period
- The first JobMaker period finishes on 6 January 2021. Take out the Christmas/NY close down period and the fact that we do not have a legislative instrument yet, and that actually leaves very little time for entities that intend to participate from the first JobMaker period
- An entity cannot participate in the JobMaker scheme if any of its income tax or GST returns for the last two years are outstanding. Therefore, entities intending to participate in JobMaker must immediately get their tax affairs in order
- A relative of the employer is not eligible for JobMaker support, even if the employee meets all the other eligibility criteria
- Shareholders, directors, trustees and beneficiaries (or their relatives) cannot be eligible additional employees of the entities for which they act in those capacities
- Individuals who were contractors or sub-contractors of an entity between 6 April 2020 and 6 October 2020 cannot subsequently become eligible additional employees of that entity
- The JobMaker scheme is only available for eligible additional employees between the ages of 16 and 35, with 16 to 29 years olds being eligible for $200 per week support, and 30 to 35 year olds, $100 per week
- An eligible additional employee must have worked an average of at least 20 hours a week during the JobMaker period
- The employer must have had a headcount increase and a payroll increase in the JobMaker period. These calculations are quite involved as demonstrated by the examples below. The integrity measures are specifically targeting artificial manipulation of these points
- The reporting obligation must be completed through Single Touch Payroll
- The eligible additional employee must have commenced employment with the entity between 7 October 2020 and 6 October 2021
- For at least 28 days in the last 84 days immediately before being employed by the entity, the eligible additional employee must have been receiving certain specified social security support payments
- JobMaker assistance for an eligible additional employee is limited to 12 months
- An entity cannot participate in both JobKeeper and JobMaker at the same time
NOTE: The above is based on the exposure draft legislative instrument and the explanatory material thereto. The requirements contained in the final legislative instrument may differ from the requirements contained in the exposure draft.
Headcount increase for the first JobMaker period
TBT Co has elected to participate in the JobMaker scheme. To be entitled to the JobMaker Hiring Credit payment for the first JobMaker period (between 7 October 2020 and 6 January 2021), TBT Co must have a headcount increase.
At the end of 30 September 2020, TBT Co had 8 employees. Therefore TBT Co’s baseline headcount is 8.
During the first JobMaker period, 1 of the 8 employees ceased employment and TBT Co employed 3 new employees during the period. This meant that at the end of the last day in period 1, TBT Co had 10 employees.
TBT Co has had a headcount increase for the period because at the end of the last day of the period, its headcount of 10 exceeds its 30 September 2020 headcount of 8.
TBT Co’s headcount increase amount for the first period is 2.
Headcount increase for the sixth JobMaker period
Following on from the above, TBT Co continues to be a qualifying entity under the JobMaker scheme for the sixth JobMaker period (7 January 2022 to 6 April 2022).
TBT Co’s baseline headcount increase amount for the sixth JobMaker period is worked out as the greater of the baseline headcount increase amount for the corresponding period and the amount by which TBT Co’s baseline headcount was increased by in the fifth period.
The corresponding period for the sixth JobMaker period is the second JobMaker period (7 January 2021 to 6 April 2021). The baseline headcount for the second JobMaker period was 8. The baseline headcount increase for the fifth period was 2.
TBT Co’s baseline headcount increase for this corresponding period is worked out as the lesser of:
- the headcount increase amount for the corresponding period; and
- the proportion of total counted days from the number maximum payable days multiplied by the headcount increase amount for that period – this formula calculates the proportion of the claim in relation to the headcount increase in the corresponding period where the maximum payable days has not capped the total counted days.
TBT Co applies the formula using the following information:
- the headcount increase amount for the second JobMaker period was 3;
- total counted days for the second JobMaker period was 210;
- maximum payable days for the first JobMaker period was 273; and
- (210/273) × 3 = 2.3, rounded up to 3.
Further, TBT Co’s baseline headcount increase for the sixth JobMaker period (3) is greater than TBT Co’s baseline headcount increase amount in the fifth JobMaker period (2) and therefore TBT Co’s baseline headcount increase for the sixth JobMaker period is 3.
This means that TBT Co’s baseline headcount for the sixth JobMaker period is 11 (the baseline headcount for the second JobMaker period, which is the 30 September 2020 headcount of 8, plus the baseline increase amount of 3 as worked out above).
At the end of the sixth JobMaker period (6 April 2022), TBT Co had a total of 14 employees. This number is greater than the increased baseline headcount of 11 (as worked out above) and therefore, TBT Co has satisfied the headcount increase for the sixth JobMaker period.
Payroll increase for the first JobMaker period
Continuing the previous example, TBT Co operates on a fortnightly pay cycle ending on every second Wednesday. For the first JobMaker period of 7 October 2020 to 6 January 2021, the first pay cycle in this period ended on 14 October 2020 and the last pay cycle ended on 6 January 2021. There were 7 fortnightly pay cycles that ended in this JobMaker period.
To establish the reference period for the purposes of working out the baseline payroll amount for this JobMaker period, the entity sums up the total payroll amounts based on the 7 consecutive fortnightly pay cycles ending on or immediately before 6 October 2020. For TBT Co, these include the pay cycles that ended on 8 July 2020 through to 30 September 2020.
TBT Co sums up the payroll amounts for the JobMaker period and compares that to the corresponding reference period. TBT Co satisfies the payroll increase as their actual payroll amount in the JobMaker period is greater than the baseline payroll amount in the corresponding reference period.
Payroll increase for the second JobMaker period
TBT Co remains a qualifying entity for the second JobMaker period, from 7 January 2021 to 6 April 2021. TBT Co, continued to operate on fortnightly pay cycles ending on every second Wednesday. For the second JobMaker period, there were 6 pay cycles that ended in this period, with the first on 20 January 2021 and the last ending on 30 March 2021.
To establish the reference period used for the purposes of the payroll increase for the second JobMaker period, TBT Co sums up the payroll amounts for the 6 pay cycles that ended on or immediately before 6 October 2020 (i.e. the pay cycles that ended on 22 July 2020 to 30 September 2020).
* Source: Coronavirus Economic Response Package (Payments and Benefits) Amendment Rules (No. 9) 2020 Explanatory Material