JobKeeper Payment Update

Further Amendments to JobKeeper Eligibility Criteria – 6 August 2020

Changes have been announced to the Eligibility tests.

Eligibility Tests

Employees

Commencing JobKeeper fortnight 10 – 3 August to 16 August 2020, eligible employees employed at 1 July 2020 (previously 1 March 2020) can be included.

Full-Time and Active Business Participants

Reference to four weeks of pay period prior to 1 March 2020 or 1 July 2020 worked on average more than 20 hours / week.
Active Business Participant worked more than 20 hours / week on average.

Amounts

The amounts of the JOBKEEPER payment remain unchanged from the two tiers previously advised.

Extension of JobeKeeper Version 2

21 July 2020

Good news is all enrolled participants have certainty till the end of September based on the existing rules. The JobKeeper wage subsidy program has been extended until March 2021, albeit at lower rates and with additional eligibility testing for small businesses and sole traders.

This will go a long way in not eroding confidence with JobKeeper. The extension beyond September is also welcome for two reasons.

Firstly it provides ongoing support for industries that are still impacted either directly or indirectly by restrictions put in place to curb the spread of COVID-19.

Secondly it becomes more targeted to those in need as it re-establishes a decline in turnover eligibility test to maintain access to the fixed wage subsidy for both the December 2020 and March 2021 quarter.

Revised eligibility tests – forecast no longer acceptable

Businesses will need to re-test turnover eligibility. It will require businesses to demonstrate an actual decline in revenue against a comparable period rather than forecasts.

Employers will be required to demonstrate their requisite turnover declined by the required amount for both the June and September quarters to be eligible for JobKeeper payments covering the December quarter.

Additionally, employers will need to demonstrate they also meet the turnover decline across the December quarter to remain eligible for JobKeeper payments through to March 28, 2021.

The only thing I that is not clear is the term “actual GST turnover” referred to in the Treasury factsheets (see below). Hopefully there is no repeat of the turnover debacle we experienced as part of JobKeeper Version 1.

Under the existing rules turnover is the value of supplies made in the relevant period including GST-free supplies but excluding input-taxed supplies. Prior to the release of LCR 2020/1, the ATO’s website guidance, tweaked multiple times in a matter of weeks, failed to make it clear that the cash and accruals methods were concessionary methods, and did not make this clear until the release of the LCR. The LCR makes it abundantly clear that the law requires the taxpayer to allocate supplies made to each relevant period and then work out the value of the supply, and that accruals, cash and other accounting methods are practical, concessionary, fallback alternatives.

Two-tiered wage subsidy

With respect to the lower fixed wage subsidy, a two-tiered system removes some of the distortions particularly for casuals. There will now be two tiers of JobKeeper payments, delineated by how many hours eligible staff worked before the COVID-19 pandemic in February.

Some practical issues around what documentation is required to prove hours worked particularly for active participants will need to be provided in due course.

Lastly, no mention so far addressing improving eligibility for new businesses that report GST quarterly that commenced making sales after the first January 2020.

High level Summary

$1,500 / fortnight continues until 27 September 2020

*Full time

• Four weeks of pay periods prior to 1 March 2020 worked on average more than 20 hours / week
• Active Business participant in the month of February 2020 worked more than 20 hours / week

Eligibility Test

JobKeeper Payment Update - 1 May 2020 Rule Changes

Summary

• A modified test allows an employment entity to be eligible based on the turnover of the entities receiving employment services from the employment entity.

Note: The service entity extension is very narrow, and members may find their clients will not fall into the eligibility criteria. Members may find some comfort in PCG 2020/4 Schemes in relation to the JobKeeper payment in particular Example 4 – “employer entity that reduces a service fee”. This may be an option for certain service entity structures.

• An entity that elects to participate in the JobKeeper scheme must give written notice to each individual who is a relevant employee, thereby allowing each employee to agree to be nominated.
• ‘Limit the circumstances in which children that are 16 or 17 years of age as at 1 March 2020 can qualify as eligible employees and business participants’. Generally 16 and 17 year olds undertaking full-time study on 1 March 2020 cannot be eligible employees or business participants. Amendments are prospective.

The purpose of the amending rules is to ‘refine and clarify elements of the JobKeeper scheme in particular to:

• provide a modified decline in turnover test for certain group structures;
• adjust the way in which Commonwealth payments are treated when calculating a university’s turnover;
• extend the JobKeeper scheme to certain charities that undertake overseas aid and disaster relief;
• adjust the way in which payments made by the government and the United Nations are treated when calculating a charity’s turnover;
• include the notification requirement to confirm that all employees of a participating entity must be given the opportunity to agree to be nominated;
• impose additional requirements that must be met for children to be eligible nominees;
• extend the JobKeeper scheme to include religious practitioners that are not employees; and
• make various consequential and minor technical amendments.’

In this fact sheet we will cover three of the above amendments that are more relevant for members clients.

Provide a modified decline in turnover test for certain group structures:

The ‘basic decline in turnover test in Section 8 of the rules does not expressly provide for circumstances where the entity is an employer entity that operates in a group structure’.

An Employer entity is:

an entity in a group structure that employs most or all employees and whose principal activity is to provides the services of employees to other members of the group.

‘As such the employer entity do not typically have significant dealings outside the group and their turnover might not reflect the overall performance of the group.’

So even where there has been significant decline in turnover of the entities of the group, the JobKeeper payment may not be available to the employer entity’.

To address this, item 10 of the Amending Rules No. 2 provides a modified decline in turnover test. The modified decline in turnover test applies in addition to the basic test and alternative tests, meaning the Employer entity can use either one of the three tests.

Modified turnover test (subsection 8A (1)):

This is to ‘ensure that the decline in turnover test is applied to group members that predominantly undertake transactions with external entities on an arms-length basis.’

The modified test applies if all of the below are satisfied in relation to the Employer entity:

• is a member of a consolidated group, consolidatable group or GST group;
• principal activity is supplying other members of the group with services (employee labour services) and no more than incidental services to third parties;
• Commissioner has not determined that the modified decline in turnover test does not apply (unsuitable as significant restructuring that affects turnover in 2020; may pose risks to the integrity of the Commissioner’s administration of the JobKeeper scheme).

Additionally, in a turnover test period, the Employer entity:

• supplies employee labour services to one or more members of the group (each of which is a ‘test member’);
• only supplies employee labour services. If the employer entity is a member of more than one of: a consolidatable group, consolidated group or a GST group, it may satisfy the modified test in relation to its membership of any of the groups;

The modified turnover test is satisfied where:

• the sum of the projected GST turnover of each test member for the turnover test period falls short of the sum of the current GST turnovers of each test member for the relevant comparison period by the specified percentage (generally 30%).

Definitions:

• Consolidated group: ‘consists of a head company and all the companies, trusts and partnerships that are resident in Australia and are wholly-owned subsidiaries of the head company (Division 703 of ITAA 1997).
• Consolidatable group: ‘consists of the wholly owned group which is able to consolidate for income tax purposes’.
• GST Group: ‘exists (broadly where there is 90 per cent or more common ownership), one member of the group deals with all the GST liabilities and entitlements of the group and, in most cases, transactions within the group are excluded from GST (Division 48 of the GST Act).’

Include the notification requirement to confirm that all employees of a participating entity must be given the opportunity to agree to be nominated:

An entity that elects to participate in the JobKeeper scheme must give written notice to each individual who is a relevant employee, thereby allowing each employee to agree to be nominated.

The entity does not need to notify an individual if the entity reasonably believes that, on 1 March 202, the individual was aged 16 or 17 years, was undertaking full-time study, and was not independent (see below).

Impose additional requirements that must be met for children to be eligible nominees:

The amendments to the rules work to ‘limit the circumstances in which children that are 16 or 17 years of age as at 1 March 2020 can qualify as eligible employees and business participants’. It generally ensures that 16 and 17 year olds undertaking full-time study on 1 March 2020 cannot be eligible employees or business participants.

Children aged 16 or 17 years are only eligible if, in addition to the general requirements under the Rules, on 1 March 2020, they:

• Meet the definition of being independent within the meaning of section 1067A of the Social Security Act 1991.
• Not studying full-time as defined in the Social Security Act 1999.

Amendments are prospective and the limitations apply after commencement of the

Amending Rules No. 2 on 1 May 2020.

More information can be found at:

Coronavirus Economic Response Package (Payments and Benefits) Amendment Rules (No. 2) 2020 (AMENDING RULES NO.2)

• Legislative instrument
• Explanatory statement

Disclaimer:

The information in this document is for general information only. This is the IPA’s interpretation of the law as recently passed in the Australian Parliament. This may or may not align with the views of the ATO. Until our understanding has been confirmed by the ATO this remains the IPA’s interpretation only.

This should not be taken as constituting professional advice from the IPA. You should access other advice to check how the law relates to your unique circumstances. This information is offered in good faith and the IPA is not liable for any loss caused, whether due to negligence or otherwise arising from the use of, or reliance on, the information provided directly or indirectly, in this document.