Eligibility – JobKeeper: what’s changed?

JobKeeper continues to evolve. Employers need to be aware of the changes.

The JobKeeper Payment (JKP) scheme has been a major focus of the Government, media, advisers, businesses/employers and employees since it was first announced on 30 March 2020.

Under the JKP scheme, employers (including not-for-profit (NFP) entities and charities) who have suffered a prescribed downturn in turnover are able to access a wage subsidy of $1,500 per eligible employee per fortnight for a maximum of six months, to assist entities to retain staff.

The objective of the scheme is simple in concept and reflected in the title – to keep people employed.

Initially hailed as a game changer for businesses/employers, however the reality, for many, is different. There has been much confusion since the original announcement, partially due to the slight delay in the release of the Treasurer’s Rules (which provide the specific terms of the JKP scheme), the alternative decline in turnover tests only being released on 23 April 2020, and the numerous clarifications and amendments required from the Treasurer and the ATO.

To help clear some of the confusion for entities regarding the JKP scheme, in our recent special update we provided access to TaxBanter’s detailed blog on the JKP scheme. However, there have been a number of updates, clarifications and concessions announced and released by Treasury and the ATO. We highlight some of these below.

Excluded entities

As outlined in the aforementioned blog, while many NFP entities and charities may be eligible for the JKP scheme, there are a number of entities that are excluded from accessing the scheme. Especially relevant to our readership, the following entities are considered to be ineligible:

• Australian government agencies (i.e. the Commonwealth, State or Territory, or an authority of the Commonwealth, State or Territory);
• Local governing bodies; and
• Entities wholly owned by an Australian government agency or local governing body.

Basic decline in turnover test – special rules for ACNC-registered charities and DGRs

One of the eligibility requirements for employers to access the JKP scheme is that they must have suffered a specified downturn in GST turnover based on a comparison of the projected GST turnover for the relevant turnover test period (either a specified month or quarter) and the current GST turnover for the equivalent period in 2019.

The specified downturn in GST turnover depends on the size and type of entity, as follows:

• 15% for ACNC-registered charities other than schools and universities;
• 50% for other employers with aggregated turnover of greater than $1 billion;
• 30% for all other employers.

There are several modifications to the calculation of ‘GST turnover’ for JKP purposes. Particularly relevant for ACNC-registered charities and DGRs, the following are treated as consideration for supplies (equal to either the amount received or the market value of the asset received) and are required to be included in the GST turnover calculation:

• For DGRs: each gift described in an applicable item of the table in section 30-15 of the ITAA 1997 received, or likely to be received, by the entity in the period;
• For ACNC-registered charities that are not DGRS: gifts of money, property with a market value of more than $5,000 and listed Australian shares.

Alternative decline in turnover tests

As outlined above, the basic decline in turnover test requires comparison of the relevant turnover test period and the equivalent comparison month or quarter in 2019.

For various reasons, this comparison may not be appropriate (e.g. the entity may not have been in existence in the equivalent period in 2019). The Treasurer’s Rules provided that in certain circumstances, the Commissioner of Taxation would be able to determine an alternative test (specifically, to determine an alternative comparison period).

On 23 April 2020, the Commissioner released a legislative instrument outlining the circumstances in which an alternative test could be applied and what the alternative would be. There are seven circumstances:

1. the entity commenced business after the relevant comparison period;
2. the entity acquired/disposed of part of the business after the relevant comparison period;
3. the entity undertook a restructure after the relevant comparison period;
4. the entity’s turnover substantially increased by a prescribed percentage in either the 12 month, 6 months or 3 months prior to the turnover test period;
5. the entity was affected by drought or another declared natural disaster during the relevant comparison period;
6. the entity has a large irregular, non-cyclical and non-seasonal, variation in their turnovers for the quarters ending in the 12 months before the turnover test period; or
7. the entity is a sole trader or a small partnership (i.e. a partnership with no more than four individual partners) with no employees where sickness, injury or leave have impacted an individual’s ability to work which has affected turnover.

The Commissioner has noted that he is unable to make discretionary decisions regarding alternative tests for individual entities. Accordingly, for entities that do not satisfy the basic decline in turnover test and also do not fall into any of the above circumstances, there is not any ability to access any other alternative test.

Further guidance (including examples) on the above tests has been released by the ATO.

24 April 2020 announcements from the Treasurer

On 24 April 2020, the  Treasurer announced a number of ‘clarifications’ to the operation of the JKP scheme. These announcements were subsequently codified in amendments to the Treasurer’s rules. In essence, these clarifications include:

• The ‘one-in, all-in’ principle has been confirmed – if an employer decides to participate in the JKP scheme, they cannot select which eligible employees will participate in the scheme – all eligible employees are to be included.
• An alternative decline in turnover test will be available for special purpose service entities that provide employees to other members of their consolidated, consolidatable, or GST group, who derive business income from unrelated third parties. Where such entities do not satisfy the basic decline in turnover test, they will be able to apply an alternative test based on the combined GST turnovers of those grouped entities using the services of the special purpose entity.
• Charities (other than schools and universities) will be able to choose whether they apply the decline in turnover test based on their total turnover or their total turnover less any government revenue they receive.
• JKPs will be able to be made to religious institutions in respect of non-student religious practitioners.
• Full time students aged 17 years old and younger who are not financially independent will not be eligible for the JKP. As many employers have already paid such individuals for the first two fortnights, and the clarification was introduced in the third fortnight, this clarification will apply prospectively from the fourth fortnight so that eligible employers who have already met the wage conditions will not be disadvantaged.
• Entities that are endorsed under the Overseas Aid Gift Deductibility Scheme or for developed country relief are now included in the types of entities that qualify as eligible employers. However, there is no change to the requirement for employees to be Australian residents in order to be eligible employees.
• For universities calculating their decline in turnover, they must ensure that they include their core Commonwealth Government financial assistance in their turnover. Additionally, their turnover test period is extended to the six months commencing 1 January 2020.

Concessions from the ATO

There was much consternation from employers over the requirement to pay each of their employees $1,500 before 26th April 2020 in order to be eligible for the JKP for the first two fortnights (i.e. the fortnights commencing 30th March 2020 and 13th April 2020). This was predominantly due to the confusion for various employers regarding their eligibility for the JKP scheme, as well as due to cash flow restrictions (the JKP amounts were only to be received from the Government in arrears by no later than 14 May 2020).

The ATO has recognised this and has extended the final date for employers to pay their employees the requisite $1,500 per fortnight for the first two fortnights a number of times. As at 1 May 2020, the ATO had extended the relevant payment date to 8 May 2020.

In addition, the ATO has also extended the date employers are required to enrol for the JKP scheme until 31 May 2020. However, the earlier an employer enrols in the JKP scheme and provides the requisite information to the ATO, the sooner they are able to receive the JKP from the ATO.

The ATO has also provided some clarification for the decline in turnover test calculations. Based on the latest information available, it appears to be providing entities with the ability to use GST attribution methods as a practical proxy for calculating GST turnover. Refer to the following commentary from the ATO (noting this is the third iteration of the ATO’s position and is current as of 1 May 2020):

Cash or accruals basis

The turnover calculation requires you to include sales that you have made, or are likely to make, in the relevant month or quarter. The calculations are based on the time you make the sales.

There are different ways of calculating turnover that may be reasonable in your circumstances.

As a practical matter, we expect that you will use the GST accounting method that you normally use. In other words, you may use a cash or accruals approach to determining the value of your sales in the relevant month or quarter. If you do this, typically, turnover for the relevant period will equal your GST exclusive sales less your input taxed supplies.

If you use GST calculations to determine turnover, don’t forget to include GST-free sales.

If you normally account for GST on an accruals basis, but seek to calculate on a cash basis (or vice versa), we may seek to understand your circumstances to ensure that the calculation achieves an appropriate reflection of your turnover.

If you aren’t registered for GST, we would expect you to use the same accounting method you use for income tax purposes.

Importantly, whichever basis you use must be used consistently in comparing the month or quarter in 2020 with the comparison month or quarter in 2019.

This article provides a general summary of the subject covered and cannot be relied upon in relation to any specific instance. It is not intended to be, nor should it be relied upon as, a substitute for professional advice. TaxEd Pty Ltd and any person connected with its production disclaim any liability in connection with any use.

This article provides a general summary of the subject covered as at the date it is published. It cannot be relied upon in relation to any specific instance. TaxEd Pty Ltd and any person connected with its production disclaim any liability in connection with any use. It is not intended to be, nor should it be relied upon as, a substitute for professional advice.