The road to economic recovery: Registrations are now open for the JobMaker Hiring Credit

22 December 2020 

In brief

On 6 October 2020, as part of the 2020-21 Australian Federal Budget and road to economic recovery from the impacts of COVID-19, the Australian Government announced the JobMaker Hiring Credit, an incentive for employers to create new jobs for young job seekers aged 16 to 35 years. 

Following consultation on exposure draft materials (Draft Rules), the Final Rules and supporting Explanatory Material were registered on 4 December 2020 and now apply to give legal effect to the JobMaker Hiring Credit.  

In addition, the Australian Taxation Office (ATO) has provided guidance with respect to the administration process, such as registrations, claims and the reporting requirements.

In detail

The JobMaker Hiring Credit scheme aims to create new jobs for young job seekers. For eligible positions created between 7 October 2020 to 6 October 2021, eligible employers can claim either AUD 200 or AUD 100 a week (employee age dependent) for each eligible employee for up to 12 months. To attract the JobMaker Hiring Credit, the additionality criteria, employer eligibility criteria and employee eligibility criteria must be satisfied.

Credits are calculated on a quarterly basis for each “JobMaker period”. There are eight JobMaker periods in which employers can lodge claims for eligible employees, with the first period being 7 October 2020 to 6 January 2021 and the eighth and final quarter from 7 July 2022 to 6 October 2022. 

Although the Final Rules have largely remained the same as the Draft Rules, the Treasury has made a number of subtle changes reflecting feedback from the consultation process. The main changes reflected in the Final Rules as compared to the Draft Rules, are summarised below. 

Calculating the weekly average hours worked or paid by an eligible employee

It was initially proposed that to be deemed an eligible employee, employers were required to demonstrate that the employee worked an average of 20 hours (or more) per week, based on hours worked (not hours paid) during the quarterly reporting period. This potentially required an out-of-cycle calculation where payments are made in arrears or advance and therefore the payments in the period may be misaligned to actual hours worked. 

The Rules have been revised and employers now have the choice to use either hours worked during the JobMaker period or hours paid during the period to determine whether the employee has met the weekly average hours requirement. Enabling employers to use hours for which an employee was paid simplifies the calculation process as this allows employers to use existing information in their payroll system in respect of hours paid, rather than filtering hours worked data through time and attendance systems or roster artefacts.

Determining whether the weekly average hours requirement has been met for an eligible employee

Previously, when calculating the average weekly hours worked by an employee in a JobMaker period, only the hours worked in “whole weeks” during the period were to be included, and any hours worked in a partial week were excluded. This method caused complexities and confusion for employers, particularly around determining which hours to include or exclude where employees were hired or terminated part-way through a JobMaker period, or where the period included partial weeks.

Treasury has simplified this in the Final Rules through two steps:

Step 1. Calculate the hours threshold – The threshold is based on the number of whole weeks (the number of days the employee was employed in the JobMaker period rounded down to the nearest multiple of 7), multiplied by 20 hours.

Step 2. Determine whether the employee has met the threshold – This is based on the total number of hours worked or paid by the employee for the full quarterly period (including hours worked in any partial week).

The revised methodology results in a more simplified approach, as employers no longer need to exclude any hours worked or paid in partial weeks when determining the number of hours the employee has worked or was paid for in the period (however, the threshold calculation itself only includes whole weeks and excludes any days in relation to a partial week).

Calculating the payroll increase

To be eligible for a credit, employers must demonstrate that the payroll amount for the JobMaker period has increased from the payroll amount in the baseline period. Previously, to calculate the baseline payroll amount, employers were required to match the number of pay cycle end dates in the baseline period with the number of pay cycle end dates that fell within a quarterly period.

However, the revised approach is to match the number of days in the baseline period to the number of days within a quarterly period, and any pay cycles that ended within the matched baseline period are included in the baseline payroll amount.

It is important to note that, whilst the revised approach may reduce administrative requirements for employers (particularly where employers have multiple pay cycles (e.g. weekly, monthly) or out of cycle payruns), this simplified method may result in instances where the baseline payroll is disproportionate to the payroll for the JobMaker period (for example, if the baseline payroll amount consists of 7 fortnightly cycles but the payroll for the JobMaker period consists of only 6 fortnightly cycles).

Administration for employers

The ATO has provided guidance with respect to the administration process and reporting requirements for employers. In summary:

• Employers can register for the JobMaker Hiring Credit program via ATO Online Services, the Business Portal or via their registered tax or BAS agent. To participate in the program, the employer must notify the Commissioner of Taxation via the approved participation form by the last day of the first JobMaker period for which the employer elects to participate. For example, employers must register by 6 January 2021 to participate in the first quarterly reporting period from 7 October 2020 to 6 January 2021.
• To nominate an employee, the employee is required to complete a JobMaker employee notice. 
• The employer is then required to nominate the employee via Single Touch Payroll (STP) by the relevant due date.
• Employers are required to provide their “baseline headcount”, “baseline payroll” as well as the headcount and payroll amount for the relevant quarterly reporting period online, by the relevant due date.
• To report whether an eligible employee has worked on average 20 hours (or more 20) per week, employers declare that the threshold has been met by running a payroll event through STP.
• The ATO will calculate the claim entitlement based on the information entered online and reported through STP. Eligible JobMaker Hiring Credits are paid to the nominated bank account specified at the end of the claiming process.
• For the first quarterly reporting period from 7 October 2020 to 6 January 2021, employers must nominate employees through STP by 27 April 2021. Claims must be lodged between 1 February 2021 and 30 April 2021.
• The ATO has advised that it may take up to 72 hours to process certain information reported via STP. Therefore, we recommend employers allow sufficient to nominate employees, register and lodge claims, in advance of the ATO deadlines.

Further information on the administration and reporting requirements, including key dates, are detailed in the ATO guide and ATO website.

The takeaway

For any employer who is currently hiring or intending to hire young jobseekers and is likely to meet the eligibility criteria, it is important to consider the processes and procedures that are in place to monitor, track, record, report and claim credit entitlements, as well as meet the quarterly administration requirements.

In addition, as employers are unable to lodge claims for retrospective JobMaker periods, employers who may be eligible for the Credit should ensure potentially eligible employees are provided with approved nomination forms to verify that they meet the eligibility requirements, and complete the registration process for those eligible employees in advance of the due dates.