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  • Insufficient records – higher tier 1 payment rate

    In some situations, you may not have sufficient records to work out if your employee has satisfied the 80-hour threshold in their 28-day reference period (which can also include an alternative reference period).

    For example, you may not have sufficient records because:

    • you paid your employees salary, wages, commission, bonus or allowances that are not related to an hourly rate, or
    • your records have been destroyed.

    If you do not have sufficient records, there are 3 circumstances that you can claim the tier 1 rate for:

    1. You paid your employee $1,500 or more during their 28-day reference period (subject to an exception if you have paid JobKeeper top-up amounts).
    2. You had a written agreement for your employee to work 80 hours or more during their 28-day reference period.
    3. A reasonable assumption can be made that your employee worked at least 80 hours during their 28-day reference period.

    Note: If you are unable to satisfy one of the 3 circumstances above, you should consider whether one of the other two circumstances apply.

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    $1,500 test

    The $1,500 test is satisfied if you paid your eligible employee $1,500 or more in their 28-day reference period. This includes PAYG withholding and any amounts provided under an effective salary sacrifice agreement. You cannot include JobKeeper top-up amounts in the $1,500 test.

    Example 1 – work out if the higher tier 1 rate applies

    Baruti runs an orchard and has two full-time eligible employees, Richard and Kirra which he pays them based on the amount of fruit they pick. He did not maintain records of the number of hours his employees worked.

    However, Baruti did keep records of the amounts he paid to each employee.

    Baruti paid Richard $1,400 in wages, and also made a superannuation contribution of $200 under an effective salary sacrifice agreement in his 28-day reference period. As these two amounts total $1,500 or more in the employee's 28-day reference period, Baruti can claim the tier 1 payment rate for Richard.

    Baruti paid Kirra $1,100 in wages but had no effective salary sacrifice agreement with Kirra in her 28-day reference period. As this amount does not total $1,500 or more in the employee's 28-day reference period, this circumstance does not apply.

    Although this circumstance does not apply for Kirra, Baruti may still be able to claim the tier 1 rate for them if either of the two other circumstances applies.

    End of example

    Exception to the $1,500 test

    For JobKeeper fortnights up until 27 September 2020, employers must have paid eligible employees at least $1,500 in gross wages to receive JobKeeper payments. This includes any amounts provided under an effective salary sacrifice agreement.

    This means that some employees received more gross wages from the employer than the employer would ordinarily be required to pay them. The additional amount the employer paid is referred to as a JobKeeper ‘top-up’ amount. This amount is not counted in the $1,500 test.

    Example 2 – JobKeeper top-up amounts

    Simon runs a small private observatory. His only eligible employee generally works for 4 hours each night for 5 nights a week, but this can often vary depending on weather conditions. Simon has no record of the hours the employee actually worked, including those for their 28-day reference period.

    Ordinarily, Simon would pay the employee a standard $1,400 per fortnight, being $2,800 over their 28-day reference period (regardless of the exact number of hours of work they performed). However, since April 2020, Simon has been receiving JobKeeper payments for them. Due to this, he has paid the employee $1,500 each fortnight, which means he paid them $3,000 in their 28-day reference period.

    In this case, the JobKeeper top-up amount for their 28-day reference period is $200 – that is, $3,000 less $2,800.

    For the purposes of the $1,500 test, Simon does not take into account the JobKeeper top-up amount of $200 he paid the employee.

    End of example

    Written agreement to work 80 hours or more

    This circumstance is satisfied if there was a written requirement for an eligible employee to work (or be on paid leave or paid public holidays) for 80 hours or more in their 28-day reference period. This includes employees under:

    • an industrial award
    • an enterprise agreement
    • an individual contract, or
    • other similar instruments governing the employment relationship.

    Example 3 – Written agreement to work 80 hours or more

    Istas runs a sports centre. Although she prepared computer records of the hours worked by all her 3 eligible employees during their 28-day reference periods, the files became corrupted and could not be read.

    Istas checked the original employment contracts which each employee signed upon starting employment with her. In each agreement, it was written that the employee would work five 4-hour shifts per week.

    This equated to 20 hours per week, or 80 hours for their 28-day reference periods. As there were no records to indicate that the required hours had not been worked, this circumstance is met. As a result, Istas can claim the higher tier 1 rate for her three employees.

    End of example

    Reasonable assumptions

    This circumstance is satisfied if it can be determined – based on reasonable assumptions – that an eligible employee worked 80 hours or more in their 28-day reference period.

    Reasonable assumptions should be based on information that can be proven and could relate to how an employer’s business usually operates, such as:

    • average staffing level in any given week
    • common shift lengths for certain types of employees
    • the average number of shifts of employees.

    Another way this can be done is to consider the employee’s output.

    Example 4 – Making reasonable assumptions

    Jiemba runs a business selling bicycles, which are assembled at his shop by a part-time eligible employee. Jiemba has no records of the employee’s working hours during their 28-day reference period.

    According to his stocktake figures, Jiemba had 31 bicycles on hand at the beginning of the employee's 28-day reference period, and 37 at the end of it. His sales records show that the business sold 42 bicycles during the period. From this, Jiemba was able to determine that his employee had assembled 48 bicycles.

    Jiemba knows from experience that it takes about 2 hours to assemble a bicycle. From this, it can be determined based on reasonable assumptions that his employee worked 96 hours during their 28-day reference period. As a result, Jiemba can claim the higher tier 1 rate for his employee.

    End of example

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    Last modified: 21 Sep 2020QC 63721