The federal government recently passed into law the Coronavirus Economic Response Package (Payments and Benefits) Act 2020 with the main feature being a new form of wage subsidy called JobKeeper. With many medicos doing it tough at the moment, this legislation is a welcome and timely boost to assist with cash flow and the retention of staff within medical businesses during this difficult period.

Note, on 8 May, the ATO released alternative decline in turnover tests. To read more about these alternative tests click here.

Is my business eligible?

Medical businesses who project a decline in their turnover of at least 30% (for entities with a turnover of less than $1billion per year) due to the COVID-19 pandemic will be able to access the JobKeeper payment to help keep employing staff. The projected decline is based on turnover for GST purposes. If the turnover test is not met immediately but is later satisfied (for the next month’s or quarter’s projection), and the business registers for the concession, it will be eligible for JobKeeper payments from the date of registration onwards.

Businesses can compare their decline in turnover on either a monthly or quarterly basis. If monthly, the months of March 2020 to September 2020 can be compared to the same month in 2019. If comparing quarterly, the quarters starting 1 April 2020 and 1 July 2020 would be compared to the same period in 2019. For example, a medical business can make the comparison by comparing the whole of the month of March 2020 with March 2019, or by comparing the quarter beginning on 1 April 2020 with the quarter beginning on 1 April 2019. These periods align with the reporting periods for which GST registered businesses submit GST returns on their business activity statement.

Example 1

As an example, Sarah owns and runs a large general practice and assesses her eligibility on 11 May 2020 based on a projected GST turnover for May 2020 of $100,000. The corresponding period is the month of May 2019 for which she had a GST turnover of $200,000. The May 2020 turnover falls short of the May 2019 turnover by $100,000, which is 50% of the April 2019 turnover. This exceeds the specified percentage of 30% that applies to any business entities with less than $1 billion turnover per year. Sarah is therefore eligible for JobKeeper payments.

The Australian Tax Office (ATO) also has the discretion to apply other tests for businesses where the decline in turnover test is not appropriate, such as for a newly established medical practice that wasn’t operating last year.

Example 2

For example, John, a Urologist, recently setup a new practice that began carrying on a business on 1 October 2019. Despite strong initial revenue, John’s business income has declined substantially from March 2020 due to the COVID-19 pandemic. He assesses his eligibility for JobKeeper payments on 15 April 2020 based on a projected GST turnover for April 2020 of $15,000. However, because John did not begin to carry on a business until 1 October 2019, there is no corresponding period in 2019 that applies. John can therefore apply to the ATO to apply an alternative test.

The ATO Commissioner determines an alternative test under which the relevant comparison period is the average of the actual GST turnover in all of the months in which the business was being carried on prior to the turnover test period. In October 2019 to February 2020, John had an average monthly GST turnover of $30,000. This represents a shortfall of 50% when compared to its projected GST turnover for April 2020 of $15,000. This exceeds the specified percentage of 30% and John’s business will be eligible to receive the JobKeeper payments.

The legislation also allows the ATO to recover JobKeeper payments made to businesses which are ultimately ineligible for the concession as well as charge interest on any overpaid amounts so it’s very important to make sure that your business is eligible and meets all of the requirements before applying for the scheme.

What is the concession?

The subsidy totals $1,500 per eligible employee, per fortnight, from 30 March 2020 until 27 September 2020. An eligible employee must be at least 16 years old and have been employed by the business at 1 March 2020. Businesses must confirm that the individual remains employed (even if they have been stood down temporarily or re-hired since that time) and earns at least $1,500 per fortnight. This will be done using information reported through the Single Touch Payroll (STP) system.
Eligible employees include full-time, part-time or long-term casuals (i.e. casuals employed for longer than 12 months). Further, employees must be Australian citizens, holders of permanent visa or, a Protected Special Category Visa Holder, or a Special Category (Subclass 444) visa holder in order to qualify for the subsidy.

Eligible medicos employing staff will need to actually pay eligible employees a minimum fortnightly amount of $1,500 before tax to receive the JobKeeper payment. These payments include wages, bonuses, commissions, allowances and salary sacrificed amounts. Those employees on low incomes will need to have their income “topped up” to a minimum fortnightly payment of $1,500 in order for the business to receive the subsidy on their behalf. Employers will not be required to pay Superannuation Guarantee on such top up payments, however have the discretion to do so. These payments are required to be paid as a part of the normal payroll cycle for the fortnight.

How will the payments work?

The first payment is expected to be received in the first weeks of May and will be paid by the ATO monthly in arrears. These payments will be taxable to employers when received and deductible when paid to employees.

Eligible medicos must be registered by the end of the relevant fortnight in order to receive a payment for that fortnight, with the exception of the first two fortnights for which registration must occur by 8 May 2020.

In addition, only one JobKeeper payment can be received per individual. Employees must notify the employer that they are eligible for the JobKeeper, and that they wish to claim the JobKeeper through them. Following registration, the employer must inform the employee/s that the JobKeeper payments have been applied for on their behalf within 7 days of informing the ATO. The forms in relation to these notices are now available for download on the ATO’s website.

An employee can only nominate one employer through which a JobKeeper payment can be received. Employees will be excluded from the scheme if they are owed paid parental leave relating to the relevant fortnight.

What do I need to do?

Medical businesses can register with the ATO via the ATO’s website or through a registered tax agent, and will need to provide the ATO with the number of eligible employees on their books as at 1 March 2020, and those still employed each month. This will work through the Single Touch Payroll system. Employers must also report their monthly GST turnover and projected GST turnover for the following month within 7 days of the end of each month.

We have summarised the major action points for your business:

  1. Check if your business meets the expected 30% decrease in turnover for a relevant period (monthly or quarterly).
  2. Check if you and your nominated employees meet the eligibility requirements for the concession.
  3. Be sure to notify eligible employees that your business intends to participate in the JobKeeper scheme.
  4. Confirm in writing with eligible employees that they agree to you being their primary employer to receive the JobKeeper payments.
  5. Be sure to send the nominated employees a copy of the ATO nomination forms to complete, sign and return to you for filing.
  6. Pay the minimum $1,500 to each eligible employee per JobKeeper fortnight. The first fortnight starts on 30 March and ends on 12 April. Alternatively, you can make one combined payment of $3,000 for the first two fortnights paid by 8 May, 2020.
  7. Enrol for JobKeeper using the ATO Business Portal or via your Tax Agent/Accountant.

It is important to note that superannuation contributions must continue to be made on behalf of your employees, and this is based on the employee’s standard wage. For example, if the work actually done by an employee over a period entitled them to be paid $1,000, but you instead paid them $1,500 to satisfy the wage condition for a JobKeeper fortnight, then you will only be required to make superannuation contributions in relation to the $1,000.

JobKeeper for Medicos Operating Through a Company, Trust or Partnership

Medical businesses that qualify for the JobKeeper payments will also be able to nominate one “eligible business participant” per fortnight to receive an additional $1,500.

Eligible business participants cannot be employees of the business or any other entities, and must be actively engaged in the business conducted by the entity.

Eligible business participants must be an individual who is also one of the following:

Employing entity Eligible business participant
Partnership A partner
Trust An adult beneficiary of the trust
Company A shareholder or director of the company

 

It’s important to note that in addition to having an ABN on 12 March 2020, and meeting (or exceeding) the decline in turnover thresholds, medicos will need to satisfy one of the following tests in order to qualify for the JobKeeper payments for eligible business participants:

  • The entity carried on a business during FY2019 and had lodged its tax return prior to 12 March 2020; or
  • The entity made a taxable supply between 1 July 2018 and 12 March 2020 and lodged the appropriate activity statements by 12 March 2020.

The ATO has the discretion to extend the 12 March 2020 date where a relevant lodgement has not yet been made; this will be exercised where the required lodgement date was after 12 March 2020 or it was extended past that date by the ATO.

However, to be eligible as the business participant, you cannot be an employee of any other organisation (unless you’re a casual employee), even if you don’t claim a JobKeeper payment from that other employment. Even if the business participant isn’t eligible, employees still can be.
To access the JobKeeper payment as a business participant, the process is slightly different.
If you’re eligible to receive the JobKeeper as a business participant, follow the steps below:

  1. Check if your business meets the expected 30% decrease in turnover for a relevant period (monthly or quarterly).
  2. Nominate yourself for the job keeper payment using the ATO’s nomination notice and keep this on file.
  3. If your business also has employees, be sure to determine their eligibility and complete steps 3 to 6 of the previous action points to include them in the registration.
  4. Enrol for the JobKeeper payment using the Business Portal or via your Tax Agent/Accountant, and enter the details of the eligible business participant.

An extra $1,500 per fortnight will now be received by the business (paid monthly) in respect of the business participant, as well as the payments for the eligible employees.

JobKeeper for Medicos Operating as a Sole Trader

Where you run your practice as a sole trader, the process is similar. Again, the same conditions apply in regards to the sole trader not being employed (except as a casual) by another other entity if they are to be eligible for JobKeeper.
Even as a sole trader, you can still claim the payment for your employees regardless of your personal eligibility for JobKeeper.
For a sole trader, only the individual themselves are able to be the business participant (where there may be several candidates for a company, partnership or trust).
If you’re eligible to receive the JobKeeper as a sole trader, follow the steps below:

  1. Check if your business meets the expected 30% decrease in turnover for a relevant period (monthly or quarterly).
  2. If you’re a sole trader there is no need for a nomination notice (as you would be effectively notifying yourself). This nomination will be made during the online registration process instead.
  3. If your business also has employees, be sure to determine their eligibility and complete steps 3 to 6 of the previous action points to include them in the registration.
  4. Enrol for the JobKeeper using the Business Portal or via your Tax Agent/Accountant.

To explain some circumstances where a sole trader can access the JobKeeper payment, either for themselves as the business participant, or for their employees, or both, see the following example:

Example

Jack, a dermatologist, runs his own private practice as a sole trader. He also employs a medical secretary in his business to assist in the administration of the practice. Jack also works for a local public hospital where he takes appointments on a part-time basis. As a result of COVID-19, Jack has seen the revenue for his private practice decline significantly and estimates that turnover for the June 2020 quarter will be more than 30% lower than the turnover for the June 2019 quarter.
As Jack is a permanent employee of the hospital, he is not eligible for JobKeeper, even though the hospital is not participating in the JobKeeper scheme and not receiving a payment on his behalf. He is ineligible solely because he is a permanent employee, if he was a casual employee at the hospital (and only took occasional appointments) he may be eligible.

Assuming that Jack did not have a position at the hospital and is eligible for JobKeeper, he applies for the JobKeeper payment as a business participant. He notifies his secretary that he intends to claim the JobKeeper payment for them who confirms in writing they wish to be nominated, and Jack then asks them to fill out a nomination form. He also ensures that he keeps paying the secretary at least $1,500 per fortnight to cover the reimbursement. He receives the completed nomination form from the secretary and registers for JobKeeper before the end of the fortnight. He declares that he himself is eligible as a business participant and that he also has one eligible employee. Following registration he informs the practice secretary within 7 days that he has registered them for the payment.

The JobKeeper payment for himself is paid directly into his own bank account each fortnight, while the practice receives $1,500 per fortnight (paid monthly) to subsidise the cost of the secretary’s wages. At the end of each fortnight Jack confirms to the ATO that the practice still has 1 eligible employee (who he has paid at least $1,500) and that he is still eligible as the business participant. Jack must also ensure that he (or his Tax Agent/Accountant) reports his monthly turnover for the month and projected turnover for the following month to the ATO within 7 days of the end of each month.

If Jack was not eligible as the business participant, he would still be able to claim the JobKeeper payment for his secretary.

Where to from here

On behalf of the team at Pilot Partners, we would like to thank each of you for your continued efforts on the frontline dealing with this unprecedented medical emergency.

If you require any further guidance or assistance in relation to the JobKeeper payment or any of the other COVID-19 stimulus and administrative relief measures, please contact your Pilot Advisor or Angela Stavropoulos and Kristy Baxter.