Following its release of step-by-step instructions for business owners looking to apply for JobKeeper Payment, the Tax Office has now published guidance for sole traders and businesses that operate in the form of a company, trust or partnership.
Sole traders and some other entities (such as partnerships, trusts or companies) may be entitled to the JobKeeper Payment scheme under the business participation entitlement. However, not-for-profit organisations are not included.
JOBKEEPER BUSINESS PARTICIPANTS
Your entity may be eligible for the JobKeeper Payment scheme if you:
Have a non-employee individual who is actively engaged in the operation of the business – we refer to this individual as the eligible business participant
ELIGIBLE BUSINESS PARTICIPANT
Your non-employee individual is an eligible business participant of your entity for the fortnight if they meet all of the following:
- They are an individual not employed by your entity.
- They are actively engaged in the business carried on by your entity (at 1 March 2020 and for the fortnight you are claiming).
- They are one of the following (at 1 March 2020 and for the fortnight you are claiming)
- a sole trader
- a partner in the partnership
- an adult beneficiary of the trust
- a shareholder or director in the company.
- As at 1 March 2020, they are both
- aged at least 16
- an Australian resident (within the meaning of section 7 of the Social Security Act 1991), or a resident for income tax purposes and the holder of a special category (Subclass 444) visa.
- They are not currently receiving government parental leave or Dad and partner pay.
- They are not currently totally incapacitated for work and receiving payments under an Australian workers’ compensation law in respect of their total incapacity to work.
If these requirements are met, sole traders and businesses that operate via a company, trust or partnership need to nominate an eligible business participant.
A limit applies of one $1,500 JobKeeper payment per fortnight for one eligible business participant. If your entity also has employees, you may also be able to claim additional JobKeeper payments of $1,500 per fortnight per eligible employee.
The entity, not the eligible business participant, receives the JobKeeper payment. The exception is a sole trader, who is both the business entity and an eligible business participant, and so receives the JobKeeper payment themselves.
This person must be a non-employee that is actively engaged in the business — either a sole trader, a partner in the partnership, an adult beneficiary of the trust, or a shareholder or director in the company.
ELIGIBLE BUSINESS ENTITIES
Your entity is eligible if:
- on 1 March 2020, it carried on a business in Australia
- it satisfies the fall in turnover test for the relevant period
- it satisfied certain conditions as at 12 March 2020, being
- it had an ABN on 12 March 2020, and
- it had lodged, on or before 12 March 2020, at least one of
- 2018–19 income tax return showing that it had an amount included in its assessable income in relation to it carrying on a business, or
- an activity statement or GST return for any tax period that started after 1 July 2018 and ended before 12 March 2020 showing that it made a taxable, GST-free or input-taxed sale.
Note: A discretion to give further time after 12 March 2020 may apply in limited circumstances. More information will be available soon.
“When you have worked out that your business is an eligible entity and your individual non-employee is an eligible business participant, you need to enrol,” the ATO’s guidance states.
ENROL & NOMINATE FOR THE JOBKEEPER PAYMENT
The entity needs to enrol by the end of April for payments in either the fortnights starting 30 March 2020 or 13 April 2020. If you have enrolled before the end of April, you will receive the payments for April from the ATO in the first week of May.
The ATO has also advised that a sole trader with more than one business cannot receive multiple JobKeeper payments. Additionally, more than one eligible business participant cannot be nominated by an entity.
- You or your registered tax or BAS agent can enrol for the JobKeeper payment.
- Log in to ATO online services via myGov or the Business Portal using myGovID.
- Enrol and nominate by confirming:
- your business has experienced a fall in turnover of at least 30%
- expected number of eligible employees (if you have them)
- your bank and contact details for payment
- you are a sole trader nominating as an eligible business participant.
- Notify all your eligible employees you have nominated them.
- To ensure you receive your JobKeeper payments as early possible, you should enrol by the end of April. However, enrolments are open till the end of May if you need more time.
NO REQUIREMENT TO PAY $1500 TO EMPLOYEE
Whilst Employers have a wage condition that must be met which requires them to pay a minimum of $1,500 per fortnight to their eligible employees, there is no equivalent condition that applies for business participants.
The nominated individual who is actively engaged in the business provides a basis for the entity to receive the payment of $1,500 per fortnight. This payment forms part of the assessable income of the entity. What the entity does with it after that is up to the entity. There’s no requirement to pay it out or pay it to the nominated individual.
No requirement for the entity to register for PAYG withholding, start reporting through Single Touch Payroll, or pay salaries and wages to the individual, which, of course, isn’t possible for a sole trader or a partner in a partnership — you can’t pay them a wage from that structure. In the case of a company or a trust, if they’ve only ever made trust distributions or paid dividends, you don’t have to pay the JobKeeper payment as a salary or wage out to the individual.”
Example – Sole trader and employee
Zora is a sole trader and actively manages her podiatry business, Feet by Zora. She is also employed in another business owned by another entity on a permanent part-time basis as an administrative assistant.
The Flowers by Zora business has suffered a significant downturn due to the coronavirus. Zora’s hours at her office job have been cut as a result of the coronavirus causing a decline in the business of her employer.
Zora is an eligible employee for the purpose of the JobKeeper Payment scheme in respect of her part time job as an administrative assistant, and her employer qualifies for a JobKeeper payment in respect of her employment.
Zora, in her capacity as a sole trader, is not eligible for the JobKeeper payment because she is an employee of another entity. This conclusion would be the same whether her employer qualifies for JobKeeper payments or not.
What are the eligibility requirements for sole traders?
You need to be an eligible entity and have an eligible business participant. See the Eligibility requirements for sole traders information on our website.
How do I apply?
The first step is to check that your business is an eligible entity and your individual non-employee is an eligible business participant.
You can enrol for JobKeeper from 20 April 2020 by filling out the form on our website (link to be included from 20 April). You need to enrol by the end of April to receive payments for the fortnights starting 30 March 2020 or 13 April 2020.
What if I have another job?
Only one claim for JobKeeper can be made per person.
If you’re a long-term casual employee of another business and an eligible sole trader, you can choose who you claim JobKeeper through.
If you’re a permanent employee of another business you can’t claim JobKeeper as a sole trader.
How do I calculate turnover if I’m not registered for GST?
You don’t need to be registered for GST to be eligible for JobKeeper. However, you need to have had an ABN on 12 March 2020 and an amount of assessable income related to your business in your 2018–19 income tax return.
When will I receive these payments?
If you have enrolled before the end of April, you will receive the payments for April in the first week of May.
Do I need a myGovID to enrol?
Yes, you will need a myGovID to enrol through the Business Portal. See Accessing online services with myGovID and RAM on our website.
Do I need an ABN to be eligible?
Yes, you need to have had an ABN on or before 12 March 2020.