The treasurer released the detailed rules that deal with the extension mentioned in the JobKeeper scheme till March 28th, 2021.The guidance by ATO and the explanatory statement flesh out the previous wordings of the treasury on the manner in which the JobKeeper Scheme will be applicable.
Furthermore, the modified series released on August 14th, 2020 that altered the rules meant for eligible employees from August 3rd, 2020 onwards. According to these alterations, the employees who were not eligible for JobKeeper have now the eligibility from the mentioned date.
We will discuss the previous JobKeeper scheme and the expanded one
The rules have faced certain changes, so it could be not easier to find the operation of the JobKeeper scheme at certain times. Summary of phases of JobKeeper scheme:
- Original JobKeeper scheme with a 1 March 2020 test date for employees: March 30th, 2020 to 2 August 2nd, 2020
- Original JobKeeper scheme with an additional July 1st, 2020 employee test date: August 3rd, 2020 to September 27th, 2020
- The first phase of the extended JobKeeper scheme period with 1
July employee test date: September 28th, 2020 to January 3rd, 2021
- The second phase of the extended JobKeeper scheme period with 1 July employee test date: January 4th, 2021 to March 28th, 2020
Retrieving Jobkeeper 2.0
We also require focusing on certain rules that determine the eligibility to access the JobKeeper after September 27th, 2020.
- The entity or individual must have carried business in Australia on March 1st, 2020.
- The individual should have passed the reduction in turnover test
- The individual is required to clear an additional reduction in the turnover test.
Original Reduction In Turnover Test
While considering passing the original decline in the turnover test, it includes a comparison of projected GST turnover for a month or a quarter in 2020 having GST turnover for the corresponding period of 2019.
For a certain month or quarter, if the test has been passed, it is not required to get examined again. Previously, the reduction in the turnover test was required to satisfy anyone amongst the following period:
Monthly test: April, May, June, July, August, or September.
Quarterly test: June quarter or September quarter.
In the JobKeeper 2.0 new rules, the entities are required to pass the test for the following periods:
Monthly test: April, May, June, July, August, September, October, November, December.
Quarterly test: June quarter, September quarter, or December quarter.
However, the turnover reduction thresholds remain the same and are not altered. These are:
- 50% for entities with an aggregated turnover of more than $1 billion
- 30% for entities with an aggregated turnover of $1 billion or less
- 15% for ACNC registered charities (except schools and universities)
Additional Reduction In Turnover Tests
After passing the original decline in the turnover test, the next step is to analyze whether they can clear additional reduction in turnover tests:
- For the period from September 28th, 2020 to January 3rd, 2020, to be qualified for JobKeeper payments, the individual or entity should show that the current GST turnover for the September 2020 quarter has dropped by the required amount compared with current GST turnover for the September 2019 quarter.
- For the period from September 28th, 2020 to January 3rd, 2021, to be qualified for JobKeeper payments, the entity must be able to show that current GST turnover for the September 2020 quarter has dropped by the required amount compared with current GST turnover for the September 2019 quarter.
For new rules, the following examples are considered as explanatory statements:
During the JobKeeper Extension period, requalifying for the JobKeeper scheme
Dean Enterprises had been receiving payment of JobKeeper since the beginning of the scheme for their six employees. However, Dean Enterprises did not stand qualified for JobKeeper extension for JobKeeper fortnights initiating on September 28th, 2020 as he did not meet the reduction in an actual decline in turnover requirements for the quarter ending September 30th, 2020 by certain required percentage. Dean Enterprises assesses in early January 2021 that it had a 45 percent decline in turnover for the quarter ended December 31st, 2020 compared to the relevant comparison period (that is the corresponding quarter in 2019) so satisfies the actual decline in the turnover test for JobKeeper fortnights beginning on and after January 4th, 2021. As Dean Enterprises has previously participated in the JobKeeper scheme, it does not need to specifically retest its qualification based on the original decline in the turnover test (Dean Enterprises would have met this requirement previously).
Current GST Turnover
The original reduction in turnover test needed comparison between the projected GST turnover for the test period in 2020 and current GST turnover for the period 2019, the additional reduction in turnover tests concentrates only on current GST turnover.
It concludes that we will make use of actual GST turnover figures instead of predicted ones. Moreover, the method in which you calculate projected GST turnover is quite different from the method of calculation of current GST turnover.
The basic difference is that proceeds from the sale of capital assets are ignored when you calculate projected GST turnover but these are included when you calculate current GST turnover unless the sale is input taxed.
The ATO has been powered with modifying the rules of timings to analyze when supply is treated as having been made. The legislative instrument by commissioner deals with this area. While applying for new turnover test reduction for September and December 2020 quarter, the individuals are those who are registered for GST should make use of the same method that is used for GST reporting purposes. The scenario covered by particular rules is as follows:
- Use the accounting basis that first applied to the entity, if the entity became registered for GST during the relevant comparison period
- Use the accounting basis from the first tax period of the relevant comparison period, if the entity changed its accounting basis during or after the start of the relevant comparison period
- Use the accounting basis from the first tax period of the relevant comparison period, if the entity canceled its GST registration during or after the relevant comparison period
- Use the accounting basis at the beginning of the turnover test period, if the entity registered for GST after the end of the relevant comparison period
When these are not appropriate, ATO has the power to set alternative tests. ATO has not released any details of these alternative tests.
On the official website, these comments can be read that “Alternative tests for determining actual decline in turnover will be available in some circumstances. These will apply in a similar way to the alternative tests for the original decline in the turnover test. However, they must be applied on the basis that the turnover test period is a quarter. We will publish further guidance on the alternative tests for the actual decline in the turnover test soon”.
Test dates for individuals
The original JobKeeper rules stated that the employee needed to have been employed by the entity on March 1st, 2020 and must meet some conditions to qualify as an eligible employee. The Government has directed that July 1st, 2020 is a much relevant date than March 1st, 2020 from August 3rd, 2020 onwards.
This concludes that some of the additional employees could stand eligible for JobKeeper. The employees who have met the specific conditions on March 1st, 2020 shall be continued to be eligible by assuming that they are still employed by the entity. This means:
- If a person initiated employment with an entity after March 1st, 2020 but by July 1st, 2020 and were an employee of an entity on such date then they could be potentially eligible for JobKeeper from August 3rd, 2020 onwards with the assumption that other conditions are met.
- Individuals who failed the conditions related to age or residency on March 1st, 2020 could be eligible employees from August 3rd, 2020 if they meet conditions on July 1st, 2020.
The payment rate of $1500 will be applicable to employees till September 27th, 2020 irrespective of whether they are eligible employees using the March 1st, 2020, or July 1st, 2020 test date.
2. Business Participants
The new test date of July 1st, 2020 means that some employees have become eligible for JobKeeper from 3 August 2020 onwards; no alterations seem to have been made to the test date that applies for eligible business participants. You still need to check whether an individual can meet the relevant conditions on March 1st, 2020 to be nominated as an eligible business participant.
While some flexibility has been added into the rules to enable an individual to be nominated for JobKeeper with a second entity as an employee, it doesn’t look like the rules contain the same level of flexibility when seeking to nominate someone as an eligible business participant. That is, the rules still seem to prevent an individual from being nominated as an eligible business participant if they have previously been nominated for JobKeeper with another entity as an employee or business participant.
The basic change amongst others t the JobKeeper ryles from September 28th, 2020 is the decline in the rate of payment for JobKeeper. This is at a high level, between September 28th, 2020, and March 28th, 2021.
- The rate of payment will get split into two fragments
- The employee payment rate relies on hours worked in February 2020 or June 2020.
- The rate of payment for eligible business participants relies on if the participant was actively engaged in business or not for a minimum of 80 hours in February 2020.
Summary of payment rates:
- March 30th, 2020 to September 27th, 2020
- $1,500 per fortnight regardless of the number of hours worked
- September 28th, 2020 to January 3rd, 2021
- A higher payment rate is $1,200 per fortnight
- The lower payment rate is $750 per fortnight
- January 4th, 2021 to March 28th, 2021
- The high payment rate is $1000 per fortnight
- The lower payment rate is $650 per fortnight
The way JobKeeper 2.0 new rules will operate from 28 September 2020 onwards is that the higher rate applies if the employee’s total hours of work, paid leave, and paid absence on public holidays were at least 80 hours in any reference period.
If the pay cycle is longer than 28 days, a pro-rata calculation needs to be done to determine the average hours worked and on paid leave across an equivalent 28 day period.
For example, if the relevant monthly pay cycle has 31 days, you take the total hours for the month and multiply this by 28/31. There are two standard reference periods that apply for employees. If the employee worked at least 80 hours in either of these periods, then the higher rate should apply. The explanatory statement for the rules confirms that both reference periods can apply, regardless of which employee test date is used (i.e., 1 March 2020 or 1 July 2020).
The first reference period is the 28 day period ending at the end of the most recent pay cycle for the employee ending before March 1st, 2020.
The second reference period is the 28 day period ending at the end of the most recent pay cycle for the employee ending before1 July 2020.
If the employer has fortnightly pay cycles you would be focusing on the last 2 fortnightly pay periods ending before the relevant date. If the employer has weekly pay cycles you would be focusing on the last4 weekly pay periods ending before the relevant date.
According to JobKeeper 2.0 new rules, From 28 September 2020, the higher payment rate will apply to eligible business participants, if:
- In the month of February 2020, the individual has engaged actively in business for a minimum of 80 hours (29 days).
- A declaration is presented to ATO confirming this.
The assistance by ATO in this area states:
“If the tier 1 rate applies to you as an eligible business participant, you must keep records. These records will show how you made your assessment of the hours that you were actively engaged in your business”.
These records consist of:
- Log Books
- Hours Billed
- Business Diaries
- Invoices Issued
- Attendance Records of Time Sheets
- Records prepared for other business motives
Alternative Test Periods
ATO has yet not released any details of alternative tests. At the official Government website, it can be read, “Alternative tests for determining actual decline in turnover will be available in some circumstances. These will apply in a similar way to the alternative tests for the original decline in the turnover test. However, they must be applied on the basis that the turnover test period is a quarter. We will publish further guidance on the alternative tests for the actual decline in the turnover test soon”.
The Government has confirmed that the updated versions of alternative tests must be used to analyze whether the entity passes the original decline in the turnover test for JobKeeper fortnights starting on or after 28 September 2020 along with determining either the entity passes new additional reduction in turnover tests to access JobKeeper extension from September 28th onwards. If the entity has already passed the original decline in the turnover test for JobKeeper fortnight before September 28th, 2020 then there will be no requirement to apply the original test again.
The altered tests released by the Commissioner of Taxation are quite similar to alternative tests released in connection to the original decline in the turnover test, but there are certain differences.
“Projected” GST Turnover Is Applicable No Longer
These tests don’t make use of projected GST turnover. The comparison makes use of only the current GST turnover. This is consistent with the basic version of the additional decline in the turnover test for the relevant test period. The basic key difference between the concept of current GST turnover as compared to projected GST turnover is that the proceeds from the sale of capital assets are involved in current GST turnover calculations, while the proceeds from the sale of capital assets are ignored while calculation of projected GST turnover. It is expected to make it more difficult for individuals to access JobKeeper extension if they have sold plant and equipment, property, vehicles, etc. during the test period.
Supply Timings Inconsistent with Commissioner’s Determination
The legislative instrument has made it confirmed that the rules released by Commissioner in connection to determining the timing supplies for JobKeeper reduction in turnover tests are applicable to new alternative tests also. It means that if an entity is registered for GST, it is required to calculate current GST turnover using the same accounting method used for GST reporting purposes.
Modified Substantial Increase in Turnover Test
To provide an additional level of flexibility in accessing the test, the substantial increase in the turnover test has been altered. Under the original version of the rules, one had to start by checking if there was an increase in turnover of a minimum of 50%, 25%, or 12.5% in the 12, 6, or 3 months before the test period. While this is still possible under the updated version of this test, an entity can also access the test if there was an increase in turnover of at least 50%, 25%, or 12.5% in the 12, 6, or 3 months before 1 March 2020.
Modified Irregular Turnover Test
The modification has also been made to the “irregular turnover” test and the wording used for this test has been updated. In the original version of this rule, it was considered that whether the individual’s lower turnover quarter was not more than 50% of the highest turnover quarter for the quarters ending in 12 months before the applicable turnover test period. In the updated version, it is considered that whether the individual’s current GST turnover for a consecutive 3-month period before the applicable test period or March 1st, 2020 is not more than 50 % of the highest of the entity’s current GST turnover for a period of 3 months.
Changes to Sole Trader or Small Partnership Test
When applying the test for sole traders or small partnerships where the sole trader or a partner could not work for at least part of the comparison period because of sickness, injury, or leave, the updated version of the test requires you to look at the current GST turnover for the month immediately before the month in which the sole trader or partner did not work. The original version of the test looked at the turnover for the month immediately after the month in which they returned to work.