COVID-19 JobMaker Hiring Credits
By Paolo Coniglio, 30.12.2020
The Economic Recovery Package Amendment Bill 2020, commonly known as ‘The JobMaker Hiring Credits’ has been passed into law, receiving Royal Assent on 13th November. This stimulus is set to cost the Australian Government an estimated $4 billion dollars.
With youth employment having been particularly affected by the COVID-19 Pandemic, JobMaker is designed to incentivize employers to increase their workforce by hiring young jobseekers (16-35 yo), currently receiving other forms of Government Income Support.
The scheme is backdated to 7th October 2020 and is set to expire on 6th October 2021. With employers continuing to receive subsidies for eligible employees starting in October 2021 up to October 2022.
The subsidy payments are paid to eligible employers from the first whole week of employment of each eligible employee and can continue for a maximum of 12 months of their hiring period.
Subsidy payments are made to eligible employers quarterly in arrears by the ATO, as follows:
- Up to $200 per week > for employees between 16 and 29 years old;
- Up to $100 per week > for employees between 30 and 35 years old;
Once an employee turns 36 years old, he/she becomes ineligible to receive additional subsidies.
JobMaker Eligibility – Employer
Employers will need to meet two separate sets of eligibility criteria: the first to be granted into the scheme and a second set (defined as ‘Job Creation’ criteria) to receive the quarterly hiring credits. This last set of criteria is reviewed each quarter by the ATO when the subsidy claim is lodged.
Criteria to enter the Scheme
What type of employers are eligible?
Qualifying employers must meet the following criteria:
- Be a Private Entity (Sole Trader, Trust, Partnership or Company), Not for Profit or Deductible Gift Recipient;
- Have an active ABN as of the start date of their JobMaker Registration;
- Be registered for PAYG Withholding;
- Report their Payroll through Single Touch Payroll;
- Have no outstanding Tax or GST Returns;
- Have at least one active employee.
What type of employers are not eligible?
Employers are not entitled to enter the JobMaker scheme if:
- They are an Australian Government Agency or local governing body;
- They are entities (including Sole Traders and Partnerships) in liquidation, provisional liquidation or bankruptcy;
- Have outstanding Tax or GST Returns within the last 2 years;
- They are claiming the JobKeeper subsidy payment for a fortnightly period that started during the JobMaker period.
Job Creation Eligibility Criteria
To be able to receive the quarterly Hiring Credits for their eligible employees, Employers must be able to prove that:
- Their quarterly employee headcount has increased compared to a previous period;
- Their quarterly payroll cost has also increased, compared to a previous period.
More detailed information on how the Job Creation Criteria is covered further in the blog.
JobMaker Eligibility – Employees
Eligible employees must meet the following criteria:
- Be between the age of 16 to 35 years old;
- Have received, for at least 28 consecutive days within 84 days before commencing the new employment, one of the following income support subsidies*:
– Parenting Payments;
– Youth Allowance;
* Employees can include eligible days where the income support payment was Nil
- Are not receiving JobMaker or JobKeeper payment subsidies from another employer;
- Have started employment between 7th October 2020 and the 6th October 2021 (inclusive);
- Are hired as employees (Full-Time, Part-Time or Casuals), not subcontractors;
- Are working an average of at least 20 hours for each whole week of employment* for the employer applying for the JobMaker Hiring Credits.
* Includes Paid Leave and Paid absence on Public Holidays
The following employees are not eligible for the JobMaker Hiring Credits:
- Employees previously employed as subcontractors by the applying entity between the 7th April 2020 and the 6th October 2020;
- Relatives of the Sole Trader;
- Partners in a Partnership or close associates* to one of the Partners;
- Trustees or a Beneficiaries of the Trust, or close associates* to one of the Trustees;
- Shareholders or a Director of the Company or close associates* to the Director or one of the Shareholders.
* “Close associate” is a term newly introduced by paragraph 4AA of the JobMaker Rules and is defined to mean a “relative” of any of the ineligible individuals listed above. As described in the Explanatory Statement to the Coronavirus Economic Response Package (Payments and Benefits) Amendment Rules (No. 9) 2020, “relative” is defined in subsection 995-1(1) of the Income Tax Assessment Act 1997 (“ITAA97”) to be one of the following:
• the person’s spouse;
• the parent, grandparent, brother, sister, uncle, aunt, nephew, niece, lineal descendent or adopted child of that person, or of that person’s spouse;
• the spouse of the parent, grandparent, brother, sister, uncle, aunt, nephew, niece, lineal descendent or adopted child of that person, or of that person’s spouse.
JobMaker – Employer Registration & Claim Process
Register for the JobMaker Hiring Credit
Eligible Employers must register their intention to participate in the JobMaker Hiring Credit at any time, even before they hire any eligible employees. Registration to the scheme was opened on 6th December 2020.
However, to receive subsidies for a specific JobMaker Period, the Registration must be submitted to the ATO by no later than the last day of such period.
Registrations can be lodged directly by the Employers through their Business Portal or via their Registered Tax/BAS Agent.
When registering for the scheme employers must report the following data:
- A headcount of their active employees as of 30th September 2020;
- The total Payroll Expense for the Quarter up to the 6th October 2020
These values will form the Baseline to determine the Job Creation eligibility criteria for the first four quarterly JobMaker periods.
* Claim Periods 5 – 8 only apply to employees that started by no later than the end of JobMaker Period 4 (6th October 2021)
Employers will need to submit evidence that the Job Creation criteria have been met for the quarter:
From JobMaker Period 1 to JobMaker Period 4 (Inclusive)
- The employee headcount has increased* by comparing the Baseline Headcount as of 30th September 2020, recorded during the Registration Process with the Headcount at the end of the relevant JobMaker period.
- The Payroll expense has increased** by comparing the quarterly Baseline Payroll Expense as of 6th October 2020 with the equivalent amount of consecutive pay cycles paid in the relevant quarter.
For New Starters, the Baseline Payroll Expense is Nil. However, the headcount baseline starts from one employee (New Starter businesses will become eligible upon hiring their second employee)
From JobMaker Period 5 to JobMaker Period 8 (inclusive)
- The employee headcount has increased* by comparing the headcount recorded in the equivalent quarter the previous year with the headcount at the end of the relevant JobMaker period;
- The Payroll expense has increased** by comparing the equivalent number of consecutive pay cycles for the relevant quarter with the same quarter the previous year.
* Employers cannot reduce an existing employee’s hours to have the new employee cover those hours.
** Employers cannot claim an increase in Payroll that does not relate to an increase of employment (i.e. make Bonus Payments to existing Directors who are paid as employees).
Based on the information provided, the ATO will automatically calculate the eligible employees’ subsidy payable amount.
Claims can only be made during the relevant claim period. No exemptions or extensions are currently available. Once the claim period has expired, employers are no longer eligible to make claims for that period. However, they can register and make claims for future periods.
JobMaker – Wages & Salaries Assessment
When assessing the Payroll expenses for their business, Employers should include amounts paid in the relevant pay cycles by way of:
- Salaries & wages
- Overtime, shift and penalty rates
- Paid leave
- Paid absence on Public Holidays
- Commissions & Bonuses
- JobKeeper top-up payments
- Tax withheld
- Super salary sacrifice
- Other effective Salary Sacrifice arrangements (Pre-Tax Deductions)
The following amounts should not be included in the Payroll expense assessment:
- Government Paid Parental Leave
- Lump-Sum Payments and Employment Termination Payments (ETP)
- Employer Superannuation Contributions
- Director’s Fees
- Fringe Benefits provided to employees*
* Unless part of an effective Salary Sacrifice arrangement
- Reimbursements of expenses incurred by employees
JobMaker – Employee Registration
Employees must complete a JobMaker Employee Notice form once they commence employment and hand it over to the Employer.
The JobMaker Employee Notice is a declaration confirming the employee satisfies the following eligibility requirements:
- The employee is between 16 -29 years old or 30 – 35 years old at the start of the Scheme;
- The employee was eligible to receive one of the eligible Government Income Support payments for 28 consecutive days within the last 84 days before the start of the employment*;
- The employee has not nominated another employer for the JobMaker Hiring Credits scheme.
There is no change to how the employee is paid through Payroll as the subsidy is paid directly to the employer.
Employee’s registration to the Scheme is then notified to the ATO through Single Touch Payroll reporting.
* The ATO will cross-check payment information with Services Australia to identify Employers that are incorrectly claiming JobMaker Hiring Credits.
JobMaker – Termination, Transfer & Re-employment
When an eligible employee resigns or is terminated, the employer must exit the employee out of the scheme (this is done via Single Touch Payroll).
When changing employment, the JobMaker scheme is transferrable from one Employer to another.
If returning to the same employer, the employee can re-enter the Scheme. However, a new JobMaker Employee Notice must be completed.
JobMaker – Subsidy Payments
Employers will receive the following payments for eligible employees:
- Up to $200 per week for employees between 16 and 29 years old;
- Up to $100 per week for employees between 30 and 35 years old.
Payments are made quarterly in arrears by the ATO upon lodging a claim and satisfy the Job Creation eligibility criteria.
The Subsidy payable amount is the lesser between the Headcount Increased Subsidy Amount and the Payroll Increased Expense Amount.
For example, an employer has hired 3 eligible employees (aged between 16-29 years old) from the start of a quarter. The Headcount Subsidy amount is calculated as follows:
3 * $200 = $600 * 36 weeks = $7,200.
However, if the Payroll expense for the same consecutive pay cycles has only increased by $6,000, the employer will only receive $6,000 Job Hiring Credits for that Claim Period.
Employees Ageing During the JobMaker Periods
For employees ageing across the subsidy threshold (29 years old turning 30) or out of the scheme (35 years old turning 36), the subsidy amount will be calculated on the number of days in the pay week the person aged from one stage to another. For example, for a person ageing across the subsidy threshold, the calculation will be as follows:
Higher Rate days * $200/7 + Lower Rate days * $100/7
Tax & Accounting Treatment
JobMaker Credits are Income Tax Assessable Subsidies, not subject to GST. The Subsidy amounts are not reportable in the Business Activity Statement (BAS).
JobMaker subsidy amounts should be recorded as Other Income in the accounting system.
For entities reporting Income Tax on Accrual basis, the credits should be recorded on the date the JobMaker Claim has been lodged to the ATO.
For entities reporting Income Tax on Cash basis, the credits should be recorded on the date the JobMaker subsidy is paid into the entity’s Bank Account.
This blog and attached resources are of general nature designed for informational and educational purposes only. They should not be construed as professional financial advice for your individual business. Should you need such advice, consult a licensed financial or tax advisor.