Something you may not know about me, is I’m a registered BAS Agent with the Tax Practitioners Board.
When new legislation for business relating to the ATO and tax matters come up, we’re usually one of the first to know and understand how it works!
The goal of this post is to help you understand the new JobKeeper stimulus package for sole traders, and help you figure out if you’re eligible.
Below I’ll explain:
- What JobKeeper is and how it relates to you
- How to know if you’re eligible
- When it starts
- How to register if you’re eligible
- Whether the stimulus received is taxable income
- What to do if you’re an employee as well as a sole trader
- Examples of eligible and non-eligible sole traders
- Who can help you if you’re still confused
The process for employers and the self-employed is slightly different. Ultimately, the end result is the same. If eligible, you as an employee or self-employed business owner will receive $1500/fortnight to help you if your business has suffered a downturn under COVID-19 conditions.
This post is designed to help sole traders (who don’t employ staff). I’ll be sharing information for employers in another post, so stay tuned.
If you’ve been wondering what type of support is available for you as a sole trader and you’ve lost income due to cancelled services, this is a must read!
It has quite a lot of information, so grab a cuppa and snug in!
What is the JobKeeper Payment Scheme?
The scheme was designed to assist businesses that have experienced a downturn in income, pay their eligible employees during COVID-19. The scheme also extends to paying sole traders/partnerships and trusts as a business participation entitlement.
The scheme pays eligible employees/sole traders $1500 per fortnight to supplement their loss of income.
Am I eligible for the JobKeeper scheme?
There are two criteria to be eligible for the scheme as a sole trader:
- Are you (as an individual business participant) eligible?
- Is your business eligible?
Are you eligible as an individual business participant?
You are eligible as an individual if:
- You are an individual not employed by your business
- You were actively engaged in the business activities at 1 March 2020 (and for the fortnight you’re claiming the benefit)
- You are one of the following:
- A sole trader
- A partner in a partnership
- An adult beneficiary of the trust
- A shareholder or director in the company
- You were aged at least 16 years old at 1 March 2020
- You are an Australian resident for tax purposes as at 1 March 2020 (more details)
- You are not currently receiving government parental leave, dad and partner pay
- You are not currently receiving workers’ compensation
- You are not an employee (other than a casual employee) of another business
- You have not given another business a JobKeeper nomination form
Please note: you must meet these criteria for each fortnightly payment. If at any time you don’t meet the criteria, you’re not eligible for the payment that fortnight.
* Another Note: After you enrol, there will be other notification conditions which you will need to meet. More information will be available soon. ATO website – Sole Traders
Is my business eligible to register for JobKeeper?
Your business is eligible if:
- On 1 March it was operating as a business
- It satisfies the ‘fall in turnover’ test for the relevant period (more on that below)
- On 12 March 2020 it had an active ABN
- You were in business in the 2019 year and have comparison data for March – September (eg, profit & loss statement/invoices for months March – September 2019)
- You had lodged, on or before 12 March 2020, at least one of the following:
- 2018-2019 income tax return showing an amount of assessable income
- A BAS (business activities statement), IAS (instalment activity statement) or GST return after 1 July 2018 and before 12 March showing you made a taxable sale
If you haven’t lodged your 2018-2019 sole trader tax return and are not registered for instalment activity statements or GST, you may not be eligible. Please check with your bookkeeper/accountant to be sure.
* Note: A discretion to give further time after 12 March 2020 may apply in limited circumstances. More information will be available soon. ATO website – Sole Traders
Fall in Turnover – this is the real deal breaker! You must prove or provide reasonable evidence, that your business income has reduced by 30% from last year!
At the time you enrol for JobKeeper, you need to confirm that your business, in a relevant period, had or is likely to have a decline in income. For businesses with a turnover of $1 billion or less, yep you read right 😊, $1 billion or less (all of us!), it’s a decrease by 30%.
April 2019 income was $4,500 for the month
Expected income for April 2020 is $3,000 for the month
$4,500 – $3,000 = $1,500
$1,500 divide $4,500 = 0.33 = 33%
In this example, your business income has decreased by at least 30% and is eligible to register for the JobKeeper scheme for April (if you meet the other criteria).
You only need to do this calculation once to register for the entire scheme, however you will have ongoing monthly reporting requirements once in the scheme.
Your business is not eligible if:
- You’re a not for profit
- You’re currently in liquidation
- You’ve entered bankruptcy
When does it start?
The program started on 30th March and will end on 27th September.
The payments are made in fortnightly instalments. To be eligible to receive the payment for 30 March to 13 April, you’ll need to register by 30th April. I believe the ATO will start making payments mid-May, but is yet to be confirmed. Information on how the ATO will pay sole traders is still to be released. Keep track of new information here on the ATO website.
How to register?
Registration started on 20th April. To register, you can nominate yourself as the eligible business participant during the online enrolment process in the Business Portal or in online services via MyGov.
If you don’t have a MyGov ID yet, click here to follow the instructions on how to set one up. You’ll need 100 points of ID and be able to download an app to your phone or device. Once you’ve linked your MyGov ID to your ATO account, you’ll be able enrol through the portal for the JobKeeper wage subsidies.
If you’re still struggling, please contact one of the bookkeepers below for help.
Is the money I receive through the JobKeeper scheme taxable income?
Yes. Please ensure you separate this income as an individual item in your profit and loss statement for your bookkeeper/accountant. The money you receive through the JobKeeper scheme will be included as taxable income in your 2020-2021 tax return.
What do I need to do to get started?
- Check your individual eligibility, if eligible
- Check your business eligibility, if eligible
- Register with the ATO
What if I’m an employee as well as a sole trader?
Firstly, you need to determine if you’re an eligible employee. If eligible, you can only register once. You either register as an employee or a sole trader.
You’re an eligible employee if you:
- Are currently employed by an eligible employer and were employed before 1 March 2020 (even if you were stood down)
- Were employed on a full-time or part time basis
- Were a long-term casual employee (employed on a regular basis) for at least 12 months
There are a few other conditions you can check out on the ATO website – Employees but these are the main three conditions.
Note: If you’ve been employed as a casual employee for less than 12 months, you’re not eligible to register as an employee under the JobKeeper scheme.
If you meet the above employee criteria and choose to register as an employee rather than a sole trader, please talk to your employer. If they’re an eligible business, they’ll ask you to fill in the JobKeeper employee nomination notice, notifying them of your agreement to participate in the scheme. Once registered, you’ll be eligible to receive the top up fortnightly payment of $1,500.
Note: If you’re already being paid ordinary hours of work as an employee and your gross wages are less than $1500/fortnight, the JobKeeper payment will top up your income to $1500/fortnight. It will not be paid on top of your ordinary gross wages. It’s also gross income, and tax will be deducted by your employer giving you a net pay for the fortnight.
Here are a few examples to help you understand the eligibility process:
Linda has been providing social & community services to six NDIS participants under her Sole Trader ABN since September 2018. She’s an Australian resident for tax purposes and lodged her 2018-2019 tax return in October 2019. Three of Linda’s participants decided to cancel services due to social isolation restrictions in March 2020. Linda has calculated the value of all her invoices for April 2019 to be $5,200 and estimated the value of her invoices for April 2020 to be $3,000. Linda estimates a 42% drop in income since last year. Linda is eligible to register for JobKeeper under the business participation entitlement.
Mitchell is an Australian resident for tax purposes and resigned from a disability service organisation in February 2019. He then registered his ABN and started providing services as a sole trader to three NDIS participants. Mitchell has not lodged his 2018-2019 tax return and is not required to lodge a BAS due to not being registered for GST. Mitchell has also estimated a decline in business income but has no proof of business income for financial year 2018-2019 and is therefore not eligible to register for JobKeeper under the business participation entitlement.
Stacey is an Australian resident and has been providing NDIS services under her sole trader ABN since August 2018. She pays and lodges quarterly instalment activity statements (her last statement was lodged 28 Feb 2020 for the December 2019 quarter). She also works part time for a disability support provider and has been employed since 20 January 2020. Stacey’s income has decreased in both her employment and her business. If Stacey’s employer is an eligible business, as a part-time employee, Stacey can ask her employer to register her as an employee under JobKeeper and fill in the JobKeeper Employee Nomination Notice. If Stacey’s employer is not eligible, Stacey can register as a sole trader through the business participation entitlement if she can prove her business only income has decreased by 30% on last years figures.
There are also some really great examples on the ATO Website – Sole Trader Examples that will give you more clarification.
I’m still super confused! Who can I contact to help me understand my eligibility and registration?
Below are a couple of amazing bookkeepers I work with who’ll be thrilled to help you! They can advise you on your eligibility and help you calculate your fall in turnover.
These brilliant ladies have already been helping employers navigate and register for JobKeeper and other stimulus packages, so if you’re still confused, please, with all my heart, touch base with one of them, it’ll be well worth your time and money!
Katrina (Beachside BAS Consultant) – email@example.com 0408 982 788 – $77 sign-up fee to assess eligibility and initial registration, then if eligible $35/month for ongoing ATO reporting (no cancelation fees if you choose to cancel services)
Kerri (The Bookkeeping Practice) – firstname.lastname@example.org – $100 sign-up fee to assess eligibility and initial registration, then if eligible $40/month for ongoing ATO reporting (no cancelation fees if you choose to cancel services)
Alternatively, please contact the ATO directly or your Accountant for advice.
Note: I don’t receive any commissions for referrals to my amazing bookkeeper partners.
This legislation is HUGE! I’ve tried super hard to condense the information and make is as easy to understand as possible, but of course, more information is due to be released soon, and if you need more detail, please pop over the ATO website or contact your bookkeeper/accountant.
If you have a question or comment, please leave it in the comments below rather than emailing your queries directly to our team. Responding in an open platform will assist others with similar questions. If there’s anything I can’t answer, I’ll be honest and refer you to the appropriate person.
I’m here to help in any way I can!
Love Jude x
PS. If you know anyone running their own business as a sole trader and struggling with a decrease in income, please share this post with them. I’m happy to help as many people as I can, even outside the NDIS community!
* Directly quoted from the ATO website