Support for Sole Traders
INCOME SUPPORT FOR SOLE TRADERS
A sole trader is a business structure where the individual owner is legally responsible for all aspects of the business, including any debts and losses and day-to-day business decisions. A sole trader may or may not employ other people in their business.
Sole traders may be eligible to receive the JobKeeper Payment if their turnover has fallen or will likely fall by 30 per cent or more, assuming they have a turnover of less than $1 billion. Following registration by the eligible business, the Government will provide $1,500 per fortnight per eligible employee until 27 September 2020. This will support the income of sole traders and maintain connection with their employees. To support self-employed people, eligible businesses will be able to nominate one eligible person (such as an owner) to receive the JobKeeper Payment. For businesses with employees, this is in addition to receiving the JobKeeper Payment for any eligible employees.
The Government is also temporarily expanding the eligibility criteria for the JobSeeker Payment to support sole traders if their income is negatively affected by the economic impact of the Coronavirus. For example, as a member of a couple you could receive up to $1,060.80 per fortnight through the JobSeeker Payment and Coronavirus supplement, although the precise amount will depend on the amount of income you and your partner continue to earn. Receiving the JobSeeker Payment may also make you eligible for other Government payments like Rent Assistance and the Energy Supplement. However, if you receive the JobKeeper Payment, this will affect your eligibility for payments from Services Australia as you must report your JobKeeper Payment as income to avoid incurring a debt.
Eligibility for JobKeeper Payment
Sole traders will be eligible for the JobKeeper Payment if, at the time of applying, they:
• estimate their business’ GST turnover has fallen or will fall by 30 per cent or more (assuming their business’ aggregated turnover (for income tax purposes) is less than $1 billion);
• had an ABN on or before 12 March 2020, and either had an amount included in their assessable income for the 2018-19 year and it was included in their income tax return lodged on or before 12 March 2020 (or such later time as allowed by the Tax Commissioner), or made a supply during the period 1 July 2018 to 12 March 2020 and provided this information to the Tax Commissioner on or before 12 March 2020 (or such later time as allowed by the Tax Commissioner);
• were actively engaged in the business;
• are not a permanent employee of any other employer;
• are not entitled to another JobKeeper Payment (either a nominated business participant of another business or as an eligible employee);
• were aged at least 16 years of age as at 1 March 2020; • were an resident for Australian tax purposes on 1 March 2020; and
• were an Australian citizen, the holder of a permanent visa, or a Special Category (Subclass 444) Visa Holder at 1 March 2020.
To establish that a business has faced or is likely to face a 30 per cent or more fall in turnover, most would be expected to establish that their turnover has fallen or will likely fall in the relevant month or quarter (depending on their Business Activity Statement reporting period) relative to their turnover in a corresponding period a year earlier. Turnover is calculated as it is for GST purposes, and is reported on Business Activity Statements. It includes all taxable supplies and all GST free supplies but not input taxed supplies.
Where a business was not in operation a year earlier, or where their turnover a year earlier was not representative of their usual or average turnover, (for example, because there was a large interim acquisition, they were newly established, were scaling up, or their turnover is typically highly variable) the Tax Commissioner will have discretion to consider additional information that the business can provide to establish that they have been adversely affected by the Coronavirus. Businesses that are in liquidation are not eligible for this payment.
The Tax Commissioner will also have discretion to set out alternative tests that would establish eligibility in specific circumstances (for example, eligibility may be established as soon as a business ceases or significantly curtails its operations). There will be some tolerance where employers, in good faith, estimate a 30 per cent or more or 50 per cent or more fall in turnover but actually experience a slightly smaller fall.
Sole traders and other self-employed people
Self-employed individuals will be eligible to receive the JobKeeper Payment where they have experienced the required fall in turnover. To receive the JobKeeper Payment, self-employed people will need to make an application to the Australian Taxation Office (ATO). Businesses without employees will be eligible to receive one JobKeeper Payment, and businesses with employees can receive one payment in addition to the payments for their eligible employees. This means that:
• where the business operates through a sole trader structure — one owner can be nominated to receive the JobKeeper Payment;
• where the business operates through a partnership — one partner can be nominated to receive the JobKeeper Payment;
• where the business operates through a company — one director can be nominated to receive the JobKeeper Payment;
• where the business has shareholders who provide labour to the company and receive dividends in lieu of wages — one such shareholder can be nominated to receive the JobKeeper Payment; and
• where the business operates through a trust — one individual beneficiary (that is, not a corporate beneficiary) can be nominated to receive the JobKeeper Payment. The nominated individual must be at least 16 years of age and an Australian citizen, the holder of a permanent visa, or a Special Category (Subclass 444) visa holder and a resident for Australian tax purposes on 1 March 2020. Payments will be made to the nominated individual monthly in arrears by the ATO.
Sole traders with employees
Eligible sole traders with employees will receive the payment for each eligible employee that was on their books on 1 March 2020 and continues to be engaged by that sole trader — including part-time and stood down employees. Eligible employees are employees who:
• are currently employed by the eligible employer (including those stood down or re-hired);
• were employed by the employer at 1 March 2020; • are full-time, part-time, or long-term casuals (a casual employed on a regular and systematic basis for longer than 12 months as at 1 March 2020);
• are permanent employees of the employer, or if a long-term casual employee, not a permanent employee of any other employer;
• are at least 16 years of age at 1 March 2020; • are an Australian citizen, the holder of a permanent visa, or a Special Category (Subclass 444) Visa Holder at 1 March 2020;
• were a resident for Australian tax purposes on 1 March 2020; and
• are not in receipt of a JobKeeper Payment from another employer.
Eligible sole traders who have stood down their eligible employees before the commencement of this scheme will be able to participate. Employees that are re-engaged by a business that was their employer on 1 March 2020 will also be eligible. In circumstances where an employee is accessing support through Services Australia, including the JobSeeker Payment, and the employee will be eligible for the JobKeeper Payment, the employee will need to advise Services Australia of their change in circumstances to avoid incurring a debt. Where employees have multiple employers, only one employer will be eligible to receive the payment. Payment process Eligible sole traders will be paid $1,500 per fortnight per eligible employee. Eligible employees will receive, at a minimum, $1,500 per fortnight, before tax, and employers are able to top-up the payment. Where employers participate in the scheme, their employees will receive this payment as follows.
• If an employee receives $1,500 or more in income per fortnight before tax, they will continue to receive their regular income according to their prevailing workplace arrangements. The JobKeeper Payment will assist their employer to continue operating by subsidising all or part of the income of their employee.
• If an employee would otherwise receive less than $1,500 in income per fortnight before tax, their employer must pay their employee, at a minimum, $1,500 per fortnight before tax.
• If an employee has been stood down, their employer must pay their employee, at a minimum, $1,500 per fortnight before tax. It will be up to the employer if they want to pay superannuation on any additional wage paid because of the JobKeeper Payment. Payments will be made to the employer monthly in arrears by the ATO.
The subsidy will start on 30 March 2020, with the first payments to be received by sole traders in the first week of May. Sole traders will be able to register their interest in participating in the JobKeeper Payment from 30 March 2020 at ato.gov.au.
EARLY ACCESS TO SUPERANNUATION
While superannuation is intended to help people save for retirement, the Government recognises that for those affected by the adverse economic effects of the Coronavirus, receiving some superannuation today may outweigh the benefits of maintaining those savings until retirement.
Eligible individuals will be able to apply online through myGov for access of up to $10,000 of their superannuation before 1 July 2020. They will also be able to access up to a further $10,000 from 1 July 2020 for approximately three months.
They will not need to pay tax on amounts released and the money they withdraw will not affect Centrelink or Veterans’ Affairs payments.
To apply for this category of early release as a sole trader, your business must have been suspended or there has been a reduction in your turnover of 20 per cent or more.
How to apply
If you are eligible for this category of early release, you can apply directly to the ATO through the myGov website to release your superannuation at my.gov.au. You will need to certify that you meet the above eligibility criteria.
After the ATO has processed your application, they will issue you with a determination. The ATO will also provide a copy of this determination to your superannuation fund, which will tell them to release your superannuation payment. Your fund will then make the payment to you, without you needing to apply to them directly. However, to ensure you receive your payment as soon as possible, you may wish to contact your fund to check that they have your correct details, including your current bank account details and proof of identity documents.
Separate arrangements will apply if you are a member of a self-managed superannuation fund (SMSF). Further guidance will be available on the ato.gov.au.
You will be able to apply for early release of your superannuation from mid-April 2020.