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JobKeeper Payments Package – Rules Now Registered

Commences from fortnight starting 30 March 2020 until fortnight ending 27 September 2020.

The much reduced and socially distanced Parliament passed a raft of enabling legislation on Wednesday 8th April for the third round of Coronavirus stimulus.

This information focuses solely on the JobKeeper Payment Scheme – for details of other areas of government assistance please see our COVID-19 Resource Centre for links.

The added complexity with the detail of this legislation is that only the broad enabling law package was passed by parliament. These laws then delegated the specific details of the package to the Treasurer. The Treasurer has the power to make very significant changes to almost all aspects of the JobKeeper initiative. This of course adds flexibility for the government during uncertain times but can mean the sands shift more often for those of us trying to make sense and indeed make use of, the assistance available.

Key Points

  • $1,500 per employee per fortnight.
  • Business decline of at least 30% of turnover if less than $1 billion or 50% if greater than $1 billion.
  • Not-for-profits (ACNC registered charities) decline of at least 15% of “turnover”
  • Businesses with no employees can nominate 1 individual business participant for the payment.
  • Once off turnover test and fortnightly requirements to be eligible.
  • Paid monthly in arrears for JobKeeper Fortnights ending in the month prior.
  • First payments to be made first week of May 2020.
  • Assessable income to employer and payment to employee will be deductible.
  • Employee will be assessable as per wages and salaries.
  • Turnover amounts will be calculated using GST Turnover figures with some modification.
  • There are additional reporting requirements before, during and after the JobKeeper Program ceases.

Employers with Employees

Eligible Employers

  • Carried on a business in Australia, or was a non-profit body operating principally in Australia on 1 March 2020.
  • Business must satisfy the decline in turnover test at or before the test time.
  • A JobKeeper Fortnight starts on a Monday and ends on Sunday from 30 March 2020 to 27 September 2020.
  • Qualified for JobKeeper scheme on or before the end of a JobKeeper Fortnight.
  • Employer must choose to participate.
  • Individual nominated is an eligible employee and has notified the employer of their eligibility.
  • Employer must notify ATO of each eligible employee by the end of the fortnight.
  • Employer must notify Individual within 7 days of notifying ATO.
  • Only one business can nominate an eligible individual if the employee qualifies under more than one employer.
  • Employer must pay an employee a minimum of $1500 per fortnight to qualify, this will include any payments made to top-up a wage/salary payment that are attributed back to a particular fortnight.
  • Employers with a pay cycle greater than a fortnight must attribute the payroll via a reasonable method to a fortnightly cycle when reporting under the JobKeeper program.
  • “One in all-in” employers must include all eligible and consenting employees.
  • Must be registered within a JobKeeper fortnight to receive assistance in that fortnight, will not be retrospective. Employers can register now if they expect to be eligible.

Please note for the first two fortnights the timing requirements of notification are altered to be the end of the second fortnight, to allow the ATO to put systems in place – so the first date for notification is likely to be 20 April 2020.

Excluded Employers

  • Banks, or any consolidated groups that has a bank as a member
  • Australian government agencies
  • Local governing body
  • Entities owned by any of the above
  • Foreign government owned enterprises
  • Companies in liquidation or administration
  • Individual who is an employer who has had a trustee in bankruptcy appointed.

Decline in Turnover Test

Your business need only to satisfy the turnover test once during the JobKeeper six month period, once satisfied there is no need to continue to test turnover. You can test and satisfy at any time within a fortnight if you failed in a previous fortnight.

Actual turnover will need to be supplied to ATO by the 7th of each month for all participating employers. However, curiously, this will not be used to deny access to the scheme and is purely a statistical collection exercise.

Basic Test

  • GST turnover (gross income minus GST) must decrease by 30% for business with group turnover of less than $1 billion.
  • GST Turnover must decrease by 50% for businesses with group turnover of greater than $1 billion.
  • GST Turnover is tested each fortnight on a projected basis; using a projection of GST turnover versus same period in previous year. Quarterly lodgers test for the quarter and monthly lodgers test for a month.
  • Businesses can choose to use a monthly period or a quarterly period for the current and projected GST turnover test.
  • Relevant comparison period – for example if April 2019 turnover was $10 million and April 2020 turnover is projected to be $6 million this would be a decrease of 40% and this would be the relevant comparison. The period must be in 2019 and correspond to the turnover test period which must be a period after 30 March 2020 but before 1 October 2020. Period chosen can be monthly or quarterly.
  • A business can qualify at any time during the 6 months based on turnover as long as they pass the other eligibility rules mentioned above and will be eligible to receive payments from the fortnight they qualify until the end of the program.
  • Not-for-profits (ACNC registered charities) to use an amended definition of GST turnover to ensure donations and gifts are captured for comparison purposes – “turnover” for NFP’s only needs to decrease by 15%.
  • There are modifications to the definitions of Current GST Turnover and Projected GST turnover in regards to GST groups, however as yet it is uncertain how these modifications will work.

Example 1: Satisfying the basic decline in turnover test

Burke Industries assesses its eligibility for JobKeeper payments on 11 May 2020 based on a projected GST turnover for May 2020 of $10 million from its business activities. The corresponding period is the month of May 2019 for which it had a current GST turnover of $20 million. The alternative turnover test does not apply as the month of May 2019 is an appropriate relevant comparison period. The May 2020 turnover falls short of the May 2019 turnover by $10 million, which is 50% of the April 2019 turnover. This exceeds the specified percentage of 30% that applies to business entities with less than $1 billion aggregated annual turnover, so the decline in turnover test is satisfied.

Example 2: Failing to satisfy the basic decline in turnover test

Nguyen Industries assesses its eligibility for JobKeeper payments on 3 July 2020 based on a projected GST turnover for the quarter beginning on 1 July 2020 of $80 million from its business activities. The corresponding period is the quarter beginning on 1 July 2019 for which it had a current GST turnover of $100 million.

The alternative turnover test does not apply as the quarter beginning on 1 July 2019 is an appropriate relevant comparison period. The July 2020 quarter turnover falls short of the July 2019 quarter turnover by $20 million, which is 20% of the July 2019 quarter turnover. This does not exceed the specified percentage for such entities of 30%, so the decline in turnover test is not satisfied.

[Source: Authorised Version Explanatory Statement registered 09/04/2020 to F2020L00419]

Alternative Test

There are 7 tests under the alternative tests:

  1. New Business (1a and 1b)
  2. Acquisition or Disposal of Business Unit
  3. Restructure – (test 2 and 3 are the same)
  4. Rapid Growth Leading up to Covid Impacted Turnover Test (test 4 and 1b are essentially the same)
  5. Drought or Natural Disaster
  6. Irregular Non-Cyclical Turnover
  7. Sole-trader/Small Partnership Absence

You do not need to use these tests if you already qualify under the basic test, additionally if one applies to you, you can stop there – you pass if you pass one of the tests.

New Business Entity - commenced business after the relevant comparison period in 2019

    • 1a- Average total turnover test– relevant 2020 period projected GST turnover compared against average turnover since entity started business

OR

    • 1b - Average most recent 3 months test – relevant 2020 period projected GST turnover compared against the 3 months average  immediately before test period
  • Applies if new business started after the relevant comparable period.
  • Event or circumstance outside usual business setting for the entity.
  • Does not apply to existing business that has added new businesses.

Acquisition or Disposal of part of business or business unit after the relevant comparison period in 2019

  • Substitute month after the last acquisition or disposal occurs test – relevant 2020 period projected GST turnover compared against next whole month after the last acquisition or disposal, if no whole month after then use the month prior to test period.
  • Acquisition or disposal of a business has changed the turnover of the entity.
  • Event or circumstance outside usual business setting for the entity.
  • In effect not the same business and not a valid comparison.

Restructure occurred after relevant comparison period in 2019 – same test as above

  • Substitute month after last restructure occurs test - relevant 2020 period projected GST turnover compared against next whole month after the last restructure, if no whole month after then use the month prior to test period.
  • One or more restructures has changed the entity’s turnover.
  • Event or circumstance outside usual business setting for the entity.
  • In effect not the same business and not a valid comparison.

Turnover increase was > 50% over 12 months immediately before test period

  • Average most recent 3 months test – relevant 2020 period projected GST turnover compared against the 3 months immediately before test period
  • > 25% or more in 6 months immediately before test period.
  • > 12.5% or more in 3 months immediately before test period.
  • Event or circumstance outside the usual business setting.
  • This test can be used when periods of rapid growth make the relevant comparable period a lower amount than would otherwise be without the rapid growth between then and the test time.

Drought or natural disaster within the relevant comparison period

  • Period prior to natural disaster test – if relevant comparison period is natural disaster period than use year prior, so 2018 rather than 2019. If 2018 was also declared natural disaster affected you would go back another year.

Natural disaster is an event or circumstance outside the usual business setting and means they fail the basic test.

Irregular turnover that is not cyclical

Average 12 months turnover test – relevant 2020 period projected GST turnover is compared against a 12 month average starting immediately before the test period

  • For example building and construction but not for businesses where the irregular turnover is cyclical or seasonal.
  • Event or circumstance outside the usual business setting.

Sole Trader or Small Partnership (up to 4 partners) – turnover impacted by absence

  • Average month or quarter turnover after person returned to work test – use current GST turnover of the month the person returned to work and convert to quarterly if relevant period is quarterly. Apply this to Basic Test for comparison purposes.
  • Absence caused by leave, illness or injury which affects turnover in relevant comparison period.
  • If usual business setting or circumstances are that sole trader or partner would normally work in that period and generate turnover,
  • Absence would be an event or circumstance outside the usual business setting.

The Commissioner of Taxation may determine an alternative test for any class of taxpayers where the basic test cannot apply as there is not an appropriate relevant comparison period available. We expect this will cover newer businesses commenced after October 2019 that will not have a relevant comparison period under the basic test.

Additionally, seasonal and unpredictable businesses will most likely be covered by the Commissioner’s discretion expressed as applying to either an industry class of taxpayers or those characterised by unpredictable turnover in general. For example if an agricultural business’s 2019 calendar year turnover was affected by drought that business may be able to use an earlier period of turnover for comparison

Example 3: Satisfying the alternative decline in turnover test

Camille’s Farms carries on a farming business and retail flower sales in Australia. It was subject to a severe drought from 2018 until September 2019 that reduced the amount of flowers it could grow. It returned to normal crop output in January 2020. Its retail flower sales became significantly affected in March 2020.

It assesses its eligibility for JobKeeper payments on 3 July 2020 based on a projected GST turnover from its farming activities for the quarter beginning on 1 July 2020 of $2,000,000. The corresponding period is the quarter beginning on 1 July 2019 – a period in which Camille’s Farms was severely affected by drought. Because of the effects of the drought, Camille’s Farms had a much lower than usual current (2019) GST turnover of $2,500,000. The July 2020 quarter turnover falls short of the July 2019 quarter turnover by $500,000, which is 25% of the July 2019 quarter turnover. This does not exceed the specified percentage of 30%, so the decline in turnover test is not satisfied.

However, because of the effects of the drought on farming businesses, the Commissioner is satisfied that there is not an appropriate relevant comparison period for an entity that carried on a farming business. Instead, for these entities, the Commissioner determines an alternative test for which the relevant comparison period is the corresponding quarter in 2017. The Commissioner determines that the alternative test will be satisfied in these circumstances where the entity can show a 30% shortfall in turnover (for entities with less than $1 billion aggregated annual turnover) when compared to one of these alternative periods.

In the quarter beginning on 1 July 2017, Camille’s Farms had a current GST turnover of $4,000,000. This represents a shortfall of 50% when compared to its projected GST turnover for the quarter beginning on 1 July 2020. This exceeds the specified percentage of 30%, so the alternative decline in turnover test is satisfied.

Example 4: Satisfying the alternative decline in turnover test

Seb Tech is a start-up technology company that began carrying on a business on 1 October 2019 selling its product to a range of businesses including cafes and restaurants. Despite strong initial sales, its sales declined substantially from March 2020. It assesses its eligibility for JobKeeper payments on 15 April 2020 based on a projected GST turnover for April 2020 of $15,000 from its technology business. However, because Seb Tech did not begin to carry on a business until 1 October 2019, there is no corresponding period in 2019 that applies.

As there is no corresponding comparison period in 2019, the Commissioner determines an alternative test under which the relevant comparison period is the average of the actual GST turnover in all of the months in which the business was being carried on prior to the turnover test period.

In October 2019 to March 2020, Seb Tech had an average monthly current GST turnover of $30,000. This represents a shortfall of 50% when compared to its projected GST turnover for April 2020 of $15,000. This exceeds the specified percentage of 30%, so the alternative decline in turnover test is satisfied.

[Source: Authorised Version Explanatory Statement registered 09/04/2020 to F2020L00419]

Eligible employee

Is or was an employee as at 1 March 2020

  • Not a casual unless a Long-Term Casual.
  • Long Term Casual has been employed for 12 months as at 1 March 2020; on a regular and systematic basis during that year.
  • Aged 16 and over as at 1 March 2020.
  • Employed anytime in the fortnight.
  • Was an Australian resident according to the Social Security Act 1991, or
    • was a resident under the Income Tax Assessment Act 1936 and held a Subclass 444 (Special Category) Visa as per the Migration Act 1958.

Employee Nomination Requirements

  • Employee notifies employer that they are eligible as per above and that they consent to being an eligible employee of the Employer for the JobKeeper scheme.
  • Only one employer can be notified.
  • The employee must not be an excluded employee.

Excluded employees

  • Paid parental leave, dad and partner pay, incapacitated employees or recipients of workers compensation amounts are ineligible for the JobKeeper payments if they are received or occur within a JobKeeper Fortnight.

Business sales

  • Special provisions allow employees of businesses that change hands but remain the same business, to have access to JobKeeper

Payments

  • The amount is $1,500 per fortnight per eligible employee, if this is above the employee’s usual salary the additional “top-up” does not require superannuation guarantee to be paid on the excess.
  • Amounts included are all salary amounts excluding Superannuation Guarantee amounts, however salary sacrifice super amounts will of course be included as they are part of the employee’s gross payments.
  • Payments will be made monthly in arrears by the ATO; first payments to be made early May 2020.
  • Forms and additional reporting requirements will be available soon.
  • The first two fortnights will require streamlined nomination and notification processes in order to facilitate rapid assistance.
  • Payments for the first two fortnights does not bind the Commissioner in regards to eligibility and those who turn out to be ineligible will be required to return the payments.
  • Commissioner must pay within 14 days of the end of the month.
  • Integrity measures include the usual penalties and sanctions available to the ATO however in addition to these the Criminal Code was also invoked for those businesses and individuals that seek to artificially gain access to the JobKeeper Program.

Businesses without employees and owners without “wages”

  • Entities must have had an ABN at 12 March 2020, there are exceptions for businesses operating in the external territories to apply for an ABN as they weren’t required to have an ABN but will require one for JobKeeper.

    And either:
    • The entity must have had assessable income for the 2018-19 income year in relation to its business – this includes businesses running at a loss as the requirement is not taxable income.

      or
    • The entity must have made a GST supply (a sale included on their BAS for example) between 1 July 2018 and 12 March 2020.
  • Entity must not be a not-for-profits (ACNC registered charities).
  • All of other eligibility requirements for businesses in the sections above are the same in terms of being in business, turnover and notifications etc, with the exception that a sole trader does not have to notify themselves.
  • All 1 March 2020 requirements for eligible employees apply to the Eligible Business Participant below.
  • The same exclusions are also applicable

Eligible Business Participant – 1 individual per business entity

  • Individual cannot also be employed by the entity.
  • Sole trader – individual must be the sole trader.
  • Partnership – Individual must be a partner in the partnership.
  • Trust – individual must be an adult beneficiary in the trust.
  • Company – individual must be a shareholder or a director of the company

Interaction with other Coronavirus Stimulus Measures.

  • Apprentice Assistance scheme will not be available on top of JobKeeper payments – it will be a choice for the business, one or the other.
  • Some industry or large employer specific packages will be provided on condition that they waive the recipients waive their access to the JobKeeper program.

Important Note

Finally, as stated above the treasurer has very broad powers under the enabling legislation for the JobKeeper subsidy, we expect the rules to be modified as the program progresses. The commissioner of taxation also has powers to amend the alternative turnover test and will be issuing guidance on all aspects of JobKeeper.

Please keep checking in we will update this information once treasury and the ATO has finalised the forms and guidance – in the meantime, for the ATO's first round of guidance and to register for the JobKeeper program please click here.

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