JobMaker – a great incentive but beware it is not just about hiring an additional young employee
In October 2020, the JobMaker Hiring Credit Scheme (JobMaker) was introduced by the Federal Government as another mechanism to incentivise employers to rebuild their businesses, post pandemic, by employing young job seekers. The initiative aims to combat the extremely high levels of unemployment for young people aged between 15 and 24 years.
Employers must be aware that hiring a new additional employee does not automatically yield an entitlement to JobMaker. The essence of the scheme is that a real new job for a young person must be created. For instance, no JobMaker Hiring Credit will be provided where the hours of an existing employee are reduced and a new young person is hired to undertake the same work.
What is the JobMaker Hiring Credit?
The JobMaker Hiring Credit is a subsidy paid to eligible employers to help support the wage costs of hiring new, young employees in the business. The JobMaker program runs from 7 October 2020 to 6 October 2022.
An eligible employer receives a JobMaker payment for each eligible employee added during the period from 7 October 2020 to 6 October 2021 (inclusive). For employees:
- aged between 16 and 29 years of age, the employer may receive a credit of up to $200 (gross) per week; and,
- aged between 30 and 35 years of age, the employer may receive a credit of up to $100 (gross) per week.
The JobMaker is paid in arrears according to 3-monthly periods (referred to as JobMaker periods) with the first JobMaker 3-month period covering the period from 7 October 2020 to 6 January 2021.
Significantly, JobMaker cannot be claimed in respect of an employee who is entitled to receive a JobKeeper payment or an apprentice subsidy for a fortnight existing within the JobMaker period.
How does an employer claim the JobMaker Hiring Credit?
Broadly, to claim JobMaker there are employer and employee eligibility requirements.
Employer eligibility requirements
The employer must satisfy the following JobMaker eligibility criteria:
- The employer:
- carries on business in Australia,
- is a non-profit body that pursues its objectives primarily in Australia, or,
- is a deductible gift recipient that meets additional conditions.
- The employer has an ABN, is registered for PAYG withholding and reports through Single Touch Payroll (STP);
- At the time of a JobMaker claim, the employer has no outstanding income tax return or business activity statement (BAS) lodgments that needed to be lodged in the two years prior to the end of the relevant JobMaker period;
- The employer has registered for JobMaker and claimed it for a relevant JobMaker period by the claim due date;
- The employer is not an excluded entity, for example, the employer is not a bank, an Australian government entity, local governing body, sovereign entity or entity in liquidation or bankruptcy; and,
- Another employer is not claiming JobMaker for the same employee.
Additionally, there are integrity provisions which are aimed at preventing employers artificially inflating payroll or head count in order to inappropriately claim the JobMaker Hiring Credit.
The employer must meet the following additional tests:
- Headcount increase – for the first four JobMaker periods (i.e. October 2020 to October 2021), the employer’s business must have increased its employee headcount at the time JobMaker is claimed compared to a baseline headcount as at 30 September 2020. For the fifth and subsequent JobMaker periods (i.e. October 2021 to October 2022), the headcount baseline will be adjusted to reflect changes in the employer’s head count in the first year of the scheme. The ATO indicates that it will provide more information at the relevant time on how to calculate this new baseline; and,
- Payroll increase – the total payroll cost for the JobMaker period claimed must be greater than in the 3-month period ending 6 October 2020 (the baseline payroll). That is, an employer cannot receive a JobMaker Hiring Credit that exceeds the amount of the payroll increase during that baseline payroll period. For new businesses starting after 6 October 2020 the baseline payroll will be zero.
These additional employer tests are complicated and need to be worked through carefully by an employer with their accountant or tax agent.
Employee Eligibility requirements
An employee will be eligible for JobMaker during a relevant JobMaker Period if they:
- commenced work with the employer between 7 October 2020 and 6 October 2021;
- are aged between 16 to 35 years of age (inclusive) at the time their employment commenced;
- have worked or been paid for an average of 20 hours per week for each whole week they were employed by the business during the relevant JobMaker period;
- have received at least one of the following income support payments for at least 28 consecutive days in the 84 days immediately before commencing employment with the business (i.e. 4 out of 12 weeks):
- Parenting Payment;
- Youth Allowance (except those in full time study or a new apprentice); or,
- JobSeeker Payment;
- have notified the relevant business employer that they satisfy the above requirements;
- are not already being paid for work by another eligible business under the JobMaker scheme for the JobMaker period; and,
- are not otherwise excluded – for example, ineligible for JobMaker because the business is a sole trader, partnership, trust, company (other than a widely held company), the individual was recently engaged as an employee elsewhere, or was employed for more than 12 months before 7 October 2020.
A JobMaker Hiring Credit may be claimed in respect of an eligible employee for a maximum of 12 months from the start of their employment.
Registering and Claiming JobMaker
To receive the JobMaker Hiring Credit for a relevant JobMaker period, an eligible employer must:
- register an eligible employee for the JobMaker period at any time before the end of the related claim period; and,
- claim JobMaker payments (in arrears) within the claim period.
Claim periods are three (3) months in duration, commencing on the first day of the month after a JobMaker period. For example, for the JobMaker period ending 6 January 2021, the claim period is 1 February 2021 until 30 April 2021. The final claim period ends on 31 January 2023.
The Australian Taxation Office (ATO) has indicated that the current deadlines are strict and no extensions will be granted. An employer will not be able to amend a claim once the claim period has ended.
Employers who have claimed JobMaker have an obligation to report this to the ATO via STP. The deadline for reporting is 3 days before the end of a relevant claim period. This allows for STP reporting to be processed and used to populate a claim before the claim deadline.
JobMaker reporting obligations do not impact an employer’s ordinary STP reporting obligations. The aim of administering JobMaker through the STP system to reduce compliance costs going forwards.
Employers should register for, report and claim JobMaker as early as possible in accordance with the framework of JobMaker rules to receive its maximum benefit. Employers who fail to comply with the rules may be required to repay credits received and may be fined.
As the JobMaker rules are complicated, expert legal advice should be sought where there is uncertainty in any instance where an employee has been dishonest about their eligibility, for example, by lying about their recent engagement with another employer, or the employer thinks another mistake may have been made. No doubt as with other stimulus measures, such as the cash flow boost and JobKeeper, the ATO will already have an audit program in the wings to ensure that the scheme is claimed lawfully and in accordance with the above criteria.
Many of our clients have questions in relation to these new government initiatives and we are following them closely and able to assist you with your questions such as:
- Do I have to tell my employees when JobKeeper or JobMaker change? If so, when and how?
- Will I be able to mandate the COVID-19 vaccine for my employees?
- What happens if I think I’ve overpaid my employees their JobKeeper entitlement?
If you require assistance with any of the above, please don’t hesitate to contact a member of Coleman Greig’s Employment Law Team or Coleman Greig’s Taxation Team, who would be more than happy to assist you.