The road to economic recovery: JobMaker Hiring Credit

10 November 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. On 30 October 2020, Treasury released for comment, exposure draft legislation and draft explanatory material supporting the proposed JobMaker Hiring Credit Rules (Draft Rules).

Under the proposed measures, for eligible positions created between 7 October 2020 to 6 October 2021, eligible employers will be able to claim $200 a week for each additional eligible employee hired aged 16 to 29 years old and $100 a week for each eligible employee aged 30 to 35 years old. Eligible employees will be eligible for the JobMaker Hiring Credit for up to 12 months from the date each new position is created.

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 $200 or $100 a week (employee age dependent) for each eligible employee for up to 12 months.

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 applicable from 7 July 2022 to 6 October 2022. To attract the JobMaker Hiring Credit, the additionality criteria, employer eligibility criteria and employee eligibility criteria must be satisfied.

In respect of the additionality criteria, an employer is required to demonstrate that a new employee will increase overall employee headcount and payroll amount. This is determined for each JobMaker period by reference to a comparative “baseline headcount” and “baseline payroll amount”.

Eligible employers are those that:

• have an Australian Business Number (ABN),
• are registered for Pay-As-You-Go (PAYG) withholding,
• are up to date with relevant income tax and goods and services tax (GST),
• lodgment obligations,
• reporting through Single Touch Payroll, and
• are not claiming JobKeeper payments. 

Certain employers are specifically carved out from participating in the JobMaker Hiring Credit program, in spite of meeting the above criteria. Excluded employers include government entities, foreign incorporated sovereign entities, those subject to the Major Bank Levy, and entities that have entered bankruptcy or liquidation.

Eligible employees are those who:

• commence employment between 7 October 2020 and 6 October 2021,
• are aged between 16 to 35 years at the time they are hired,
• meet the “pre-employment” condition of receipt of certain government payments (JobSeeker, Youth Allowance, Parenting payment) for at least four weeks of the 12 weeks prior to hire, and
• have worked an average of 20 paid hours per week (or more). 

Once the “pre-employment” condition is met for an employee, the JobMaker Hiring Credit presents three complexities that Payroll will need to consider:

• Headcount numbers: Claimants may experience challenges tracking whether headcounts had increased across the business. To access the Credit, claimants will need to test quarterly whether employee headcount numbers have increased compared to the reference date (which will move throughout the life of the scheme).
• Hours worked by an eligible employee: Payroll will need to advise whether eligible employees worked more than an average of 20 hours per week for each quarterly reporting period. As this is based on an average hours basis and will not apply to all employees, it may require an out-of-cycle calculation by payroll. For those with large casual workforces, this could become quite a significant impost.
• Payroll increase: Claimants will need to assess the payroll amount for each period against an equivalent number of pay cycles in a baseline period. This metric will likely be based on existing reporting, however may need manipulation and tracking where multiple payrolls of different cycles are run across the business.

There are a number of integrity measures built into the Draft Rules that disqualify certain employees including that the individual must not be an employee of another employer claiming the Credit, must not be a partner (of the partnership employer), the trustee or beneficiary (for a trust employer) or a shareholder or director (of a company, other than a widely-held company) or a relative of any of those as applicable, must be an actual employee (i.e. contractors will not qualify), and must not have been engaged by the employer as a contractor or subcontractor in a substantially similar role at any time between 6 April 2020 and 6 October 2020.

Eligible employees are also required to complete a nomination form declaring that at the time of hiring, they meet the age requirement, “pre-employment” condition and that the employee is not nominated by another employer at the same time.

The JobMaker Hiring Credit scheme will be administered by the Australian Tax Office (ATO). To participate in the scheme, 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. Employers will not be able to submit a retrospective participation form and lodge claims for historical JobMaker periods.

Further details on the reporting requirements to the ATO, such as the information required, how the information is to be provided and the timing of the reporting will be specified by the Commissioner.

The takeaway

The JobMaker Hiring Credit is an incentive for employers and is designed to support and create new employment for young job seekers as part of Australia’s road to economic recovery from the impacts of COVID-19.

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 potential eligible employees have completed the approved nomination forms and submit the employer participation form as soon as possible, with the first JobMaker period end date of 6 January 2020 fast approaching.

Submissions on the exposure draft of the JobMaker Hiring Credit Rules are due on 27 November 2020. PwC will be preparing a submission and would welcome your feedback. If you would like to contribute, please contact your PwC contact.