Carrying on an entity from 1 March 2020
An entity will still need to have carried on a business in Australia on 1 March 2020 to qualify for JobKeeper under the original rules or the expanded rules (the rules are a bit different for non-profit entities). An entity that commenced carrying on a business after this date will not generally be able to access JobKeeper.
Eligibility for December if failed previous decline in turnover test periods
An entity can potentially access JobKeeper for the period between 4 January 2021 and 28 March 2021 even if it didn’t qualify for JobKeeper for the period between 28 September 2020 and 3 January 2021 (e.g., because it failed the decline in turnover test for the September 2020 quarter).
An entity can potentially access JobKeeper on or after 28 September 2020 even if it was not eligible for JobKeeper prior to this date or it chose not to enrol in JobKeeper before this date. However, these entities will need to pass the original decline in turnover test in addition to the new decline in turnover test(s), although the original decline in turnover test is modified so that it can take into account the months of September, October, November and December 2020 as well as the December 2020 quarter.
Applying the two tier payment rates
When working out the payment rate that applies to an employee, you will be looking at the actual hours worked by the employee during the test period plus the hours they received paid leave or there was a paid absence for public holidays. The higher payment rate should apply if the employee worked at least 80 hours in the 28 day period ending at the end of the most recent pay cycle for the employee before 1 March 2020 or 1 July 2020. Both of these reference points are applicable to all eligible employees, regardless of whether their eligibility is based on a 1 March 2020 or 1 July 2020 test date.
The power of the Tax Commissioner
The Commissioner is given the power to:
- Set out alternative tests for determining whether the new decline in turnover test is satisfied
- Set out timing rules for determining when supplies are treated as having been made
- To determine that the higher payment rate applies to a class of employees and to determine alternative reference periods for testing whether the higher payment rate applies for employees.
GST reporting method
The ATO has clarified that when applying the new turnover reduction tests for the September 2020 quarter and December 2020 quarter, entities that are registered for GST must use the same method that is used for GST reporting purposes. That is, if the entity is registered for GST on a cash basis then a cash basis needs to be used to calculate current GST turnover for the purpose of these new tests. Entities that are not registered for GST can choose whether to calculate GST turnover using a cash or accruals basis, but must use a consistent method.
Current GST turnover
Current GST turnover is based on actual sales that have been made rather than an estimate / prediction of sales. Current GST turnover also includes proceeds from the sale of capital assets, unless the sale is input taxed. Current GST turnover includes taxable and GST-free supplies, but should exclude input taxed supplies such as residential rental income and financial supplies like dividends, interest etc. JobKeeper and ATO cash flow boost payments should be excluded from the calculation along with other payments that don’t represent consideration for a supply made by the entity.
Jobkeeper payment rates – alternative tests for the 80 hour requirement
If an individual did not work for at least 80 hours in the ‘standard’ reference periods for working out whether the higher or lower payment rate applies from 28 September 2020 onwards, it is necessary to determine whether this threshold could be satisfied in connection with some alternative reference periods. In broad terms, these are available if the employee’s total hours of work and paid leave in the standard reference periods were not representative of the total number of those hours in earlier periods; the individual was not employed during all or part of the standard reference periods; the first pay cycle ended after the reference time; or where an employee has been transferred to a new employer as part of a business sale. Similar rules apply to eligible business participants and religious practitioners.
Employees not tied to hours worked
Some employees will automatically qualify for the higher JobKeeper payment rate. Broadly, this applies if the employer has incomplete records of total hours of work and paid leave, including where salary, wages, commissions, bonuses etc are not tied to an hourly rate or contracted rate. The employee must also fall within specific categories, including where they were paid at least $1,500 in the reference period; they were required to work at least 80 hours under an industrial award, enterprise agreement or contract; or it is reasonable to assume that they worked at least 80 hours during the applicable period.
Wage condition extended to 31 October 2020
For the JobKeeper fortnights starting 28 September 2020 and 12 October 2020 the ATO is allowing employers until 31 October 2020 to meet the wage condition for all employees included in the JobKeeper scheme.
The Commissioner of Taxation has the power to set out alternative tests that establish eligibility in specific circumstances where it is not appropriate to compare actual turnover in a quarter in 2020 with actual turnover in a quarter in 2019. The Commissioner provided a number of alternative tests that could be used for passing the original decline in turnover test and the ATO has indicated that similar tests are likely to be available for the additional decline in turnover tests for the September 2020 and December 2020 quarters, but these have not been released as yet.