As part of its 2020-21 Federal Budget, the Government announced a new JobMaker Hiring Credit to incentivise businesses to hire additional employees.
The regime provides eligible employers a payment of up to $200 per week for each eligible additional employee aged 16 to 29 years (a higher rate employee) and up to $100 per week for each additional employee aged 30 to 35 years (a lower rate employee) hired between 7 October 2020 to 6 October 2021. The credits are available for up to one year per employee and with significant complexity in the calculations, employers may not obtain the full credit per eligible employee. Registrations are now open with the first JobMaker period ending on 6 January 2021.
Who is an eligible employer?
Employers are eligible for a JobMaker payment for a JobMaker period if they:
- operate a business in Australia, are a not-for-profit organisation that operates principally in Australia or a particular type of deductible gift recipient (DGR)
- have an Australian Business Number (ABN),
- are registered for pay as you go (PAYG) withholding and, subject to limited exceptions, report through Single Touch Payroll (STP) (unless subject to an exemption)
- are up-to-date with income tax and GST lodgement obligations for the last 2 years, and
- have not claimed a JobKeeper payment for any employee for a fortnight that started during the JobMaker period.
Certain entities are specifically excluded from participation in the regime. These include entities to which a liquidator or provisional liquidator has been appointed and sole traders for whom a trustee in bankruptcy has been appointed.
What are the JobMaker periods?
The JobMaker scheme commenced on 7 October 2020 and ends on 6 October 2022. That period is divided into eight JobMaker periods with each being 3 months as follows:
Periods 1-4 |
Periods 5-8 |
|---|---|
7 October 2020 to 6 January 2021 |
7 October 2021 to 6 January 2022 |
7 January 2021 to 6 April 2021 |
7 January 2022 to 6 April 2022 |
7 April 2021 to 6 July 2021 |
7 April 2022 to 6 July 2022 |
7 July 2021 to 6 October 2021 |
7 July 2022 to 6 October 2022 |
Who is an eligible employee?
An employee is eligible if they:
- start employment with the employer on or after 7 October 2020 and on or before 6 October 2021
- are between 16–35 years old (inclusive) when they started employment
- received certain income support payments, including the JobSeeker Payment, Youth Allowance (other than as a full-time student or new apprentice) or Parenting Payment for a minimum period prior to starting employment
- have worked (including paid leave and public holidays) for at least an average of 20 hours per week during the JobMaker period
- provided the employer notice confirming the requirements in b) and c) and that they have not provided such a notice to another employer which is still in effect.
An employee that satisfies all the above criteria will be an eligible employee in the JobMaker period in which they commenced employment and the next four JobMaker periods. Even though eligible employees are only those hired within the first 12 months, the JobMaker scheme runs for 24 months such that those hired in the fourth JobMaker period (ending on 6 October 2021) may remain eligible employees until the end of the eighth JobMaker period ending on 6 October 2022 with the employer potentially receiving payments for up to a year for those employees.
Registering for and claiming JobMaker
Employer registration
To participate in the regime, an employer must satisfy certain eligibility requirements and register with the Australian Taxation Office (ATO) to indicate that it elects to participate in the regime. The ATO began accepting registrations on 6 December 2020.
Employers considering participation in the scheme should consider enrolling even if they do not ultimately make a claim. Employers can elect to register during later JobMaker periods, but they may miss out on making claims if they register after the end of the relevant claim period (set out below).
When registering, an eligible employer will be required to report their baseline headcount and payroll amount. An employer’s baseline headcount is the total number of employees as at 30 September 2020 with each employee, whether full-time, part-time or casual, counted as one.
An employer’s baseline payroll is the total payroll paid within the three months up to and including 6 October 2020. This is determined on a cash basis and looks at gross wages (including salary sacrificed amounts) paid in that period. Note that it is possible that the baseline payroll may differ depending on which JobMaker period is being considered as the baseline payroll is determined using the same number of days as the JobMaker period which may be either 90, 91 or 92 days.
Therefore, the baseline payroll may be the total payroll in the:
- 92-day period commencing 7 July 2020
- 91-day period commencing 8 July 2020 or
- 90-day period commencing 9 July 2020.
If no pay dates occurred on 7 July or 8 July 2020 then the baseline payroll will be the same for all JobMaker periods.
Nominating employees
Before making a claim for a JobMaker payment in respect of an eligible employee, the employer must identify them to the ATO and provide their full name, date of birth, TFN, and the date they commenced employment. This must be done prior to a claim for a JobMaker payment can be made.
Claiming JobMaker & STP requirements
In making a claim, the employer will be required to confirm details of nominated employees, identify each as either a higher or lower rate employee, and provide details of actual headcount and payroll for the period. The full list of information required to be reported to the ATO is contained here. It is critical that employers check with their payroll software providers that they are able to satisfy the STP reporting obligation for the purposes of claiming JobMaker.
JobMaker entitlements are claimed in arrears after the end of each JobMaker period. The period within which a claim for each JobMaker period is set out below.
Period |
JobMaker period |
Claim period |
|---|---|---|
1 |
7 October 2020 – 6 January 2021 |
1 February 2021 – 30 April 2021 |
2 |
7 January 2021 – 6 April 2021 |
1 May 2021 – 31 July 2021 |
3 |
7 April 2021 – 6 July 2021 |
1 August 2021 – 31 October 2021 |
4 |
7 July 2021 – 6 October 2021 |
1 November 2021 – 31 January 2022 |
5 |
7 October 2021 – 6 January 2022 |
1 February 2022 – 30 April 2022 |
6 |
7 January 2022 – 6 April 2022 |
1 May 2022 – 31 July 2022 |
7 |
7 April 2022 – 6 July 2022 |
1 August 2022 – 31 October 2022 |
8 |
7 July 2022 – 6 October 2022 |
1 November 2022 – 31 January 2023 |
Calculating the JobMaker entitlement
The calculation of an eligible employer’s JobMaker entitlement is fact specific and can become complex. Employers are not expected to calculate their entitlement; this will be done by the ATO based on the information reported to it. For those wishing to estimate their entitlement, the ATO has made available a JobMaker Hiring Credit payment estimator available here.
Pitcher Partners has also developed a tool to assist in forecasting and calculating the amount of the credit.
Complexity of calculation
The amount of any entitlement is a global amount per employer rather than an amount per eligible employee. Unlike JobKeeper, the amounts do not need to be paid or passed on to eligible employees.
An employer could receive up to $10,428.57 for higher rate employees (52.14 weeks at $200 per week) or $5,214.29 for lower rate employees (52.14 weeks at $100 per week). Note that a higher or lower rate employee cannot change its status (e.g. by the employee turning 31 years old or 36 years old) as this is tested at the day of commencing employment rather than on an ongoing basis.
The complexity in the calculations is due to the requirement that a participating employer must increase their overall headcount and payroll from its baseline amounts throughout the JobMaker periods in which it has eligible employees. If not, the headline entitlement of $200 per week for higher rate employees or $100 per week for lower rate employees will be scaled back or denied entirely.
Headcount requirement
As an example of the headcount requirement, if an employer with twenty employees on 30 September 2020 hires an eligible employee on 1 November 2020, but one of the pre-exiting employees resigns prior to 6 January 2020, the overall headcount at the end of the JobMaker period is 20 and has not increased from the baseline such that there will be no entitlement to a JobMaker payment that period, If two employees were instead hired on 1 November 2020 such that there is a net headcount increase of one, the entitlement will may be scaled back to effectively limit the JobMaker entitlement to the equivalent of only one eligible employee for the period.
There is further complexity from the fifth JobMaker period onwards as adjustments may be required to the baseline headcount to take into account any eligible employees previously hired. For example, if an employer with twenty employees at 30 September 2020 hires five eligible JobMaker employees on 7 October 2020, the baseline headcount will be adjusted to 25 in the fifth JobMaker period. Therefore, to continue to maximise any JobMaker claim in the fifth period and beyond, the employer would need to hire further eligible staff (prior to 6 October 2021) as well as maintain all existing staff and the five new eligible employees hired on 7 October 2020.
Payroll requirement
As an example of the payroll requirement, if the employer’s total payroll in the JobMaker period is less than its baseline payroll (e.g. by reducing work hours for existing staff despite increasing overall headcount) then it will also not have an entitlement to JobMaker payments for the period. If there is only a small increase in the payroll from the baseline, then the JobMaker payment for the period may be limited by this net increase (e.g. a headline entitlement of $30,000 in the JobMaker period would be scaled back to $10,000 if the total payroll for the period only exceeded the baseline payroll by $10,000).
What are the next steps?
Clients that are contemplating hiring additional employees should consider their position and how the JobMaker rules might apply. Clients wishing to discuss their particular situation can contact their Pitcher Partners representative.
