JobKeeper Extension Q&A

 

As we move into the JobKeeper extension period, what has not changed from the JobKeeper Rules as they applied up until 27 September 2020?
A lot, for example:

  • Entities can still register for the JobKeeper scheme at any time provided they meet the eligibility criteria;
  • An entity still needs to have been carrying on a business in Australia as at 1 March 2020;
  • Entities that were registered for JobKeeper prior to 28 September 2020 do not need to re-enrol, however they do need to meet the additional eligibility tests such as the additional decline in turnover tests;
  • Entities still need to have satisfied the decline in turnover test under the "pre-28 September 2020" Rules, even if the entity did not actually access the JobKeeper scheme during that previous period;
  • The required decline in turnover is still 15%, 30% or 50% depending on the type of entity and aggregated turnover;
  • The 12 March 2020 tests still apply to eligibility as an eligible business participant;
  • Employees still need to have been employed as at 1 March 2020 or 1 July 2020 (subject to the special concessions for some 1 March 2020 employees);
  • Casuals still need to meet the test as a long-term casual as at 1 July 2020 to qualify as an eligible employee;
  • The wage condition for employees still applies, albeit at the new payment rates as determined for each employee;
  • The age conditions as at 1 July 2020 for employees still apply;
  • The residency conditions for employees as at 1 July 2020 still apply;
  • The monthly reporting obligation remains;
  • JobKeeper is still a reimbursement paid monthly in arrears.

 


I've also heard about a 10% test. What is that related to?
The 10% test refers to the ability of entities to continue to use JobKeeper Enabling Directions under the modifications made to FairWork at the introduction of the JobKeeper scheme.
The 10% test is not related to an entity's eligibility for the JobKeeper scheme.


What does the term Legacy Employer mean?
Legacy employers are employers that were entitled to a JobKeeper payment for an employee prior to, but not on or after, 28 September 2020. For FairWork purposes, legacy employers that satisfy the 10% decline in turnover test and hold a 10% decline in turnover certificate can give modified JobKeeper enabling directions.
https://www.fwc.gov.au/jobkeeper-benchbook/jobkeeper-enabling-directions-general-information


Do employees that have been stood down still qualify for JobKeeper for the post-27 September 2020 extension period?
Yes, provided that the other eligibility criteria, including the wage condition, are met.


How was turnover (and the turnover test) determined under the JobKeeper Rules for JobKeeper fortnights 1 - 13 (March - September 2020)? On a cash or accruals basis?
The Rules used the terms "projected GST turnover" for the test period and "current GST turnover" for the comparison period, as defined in the GST Act. The GST legislation, when referring to projected and current GST turnover, refers to the value of supplies made, or likely to be made in the period. The process was:

  • Determine what supplies have been made or are likely to be made during the period.
  • Determine the value of those supplies and sum the values.
The question of whether the amounts should be accounted for on a cash or accruals basis does not arise in the above process.
Despite this a previous version of the ATO document entitled "Applying the turnover test" (QC 62132) stated the following:
"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."
Further, the ATO indicated that entities which normally used the accruals basis, but for JobKeeper purposes elected to use the cash basis, may be asked to justify their choice.
Ultimately, as explained in LCR 2020/1, there were multiple ways that turnover could be calculated, including:
  • The supply method, as explained above;
  • Accrual accounting;
  • GST attribution basis:
    • cash basis;
    • accruals basis;
  • Income tax accounting (if not registered for GST.

 


How is turnover (and the turnover test) determined under the Rules for the JobKeeper extension period?
The decline in turnover test for the JobKeeper fortnights beginning after 27 September 2020 is based on the September 2020 quarter for JobKeeper fortnights 14 - 20 and the December 2020 quarter for JobKeeper fortnights 21 - 26.
The test is now a comparison of "current GST turnover", as defined in the GST Act, in both the turnover test period and the relevant comparison period. For JobKeeper fortnights 1 - 13 the test was a comparison of "projected GST turnover" in the turnover test period against "current GST turnover" in the relevant comparison period.
Similar to the first iteration of the JobKeeper scheme, alternative turnover tests are provided in the legislative instrument Coronavirus Economic Response Package (Payments and Benefits) Alternative Decline in Turnover Test Rules (No. 2) 2020.
The legislative instrument Coronavirus Economic Response Package (Payments and Benefits) (Timing of Supplies Made and Decline in Turnover Test) Rules 2020 (No. 1) specifies that supplies should be attributed to the same reporting period as would be the case when a business is completing its GST return.
Therefore supplies will be attributed to the same GST period (monthly, quarterly, annually) and on the same basis (cash or accruals), as the entity would normally do when preparing its BAS (i.e. the numbers on the BAS as lodged and the numbers used to calculate the decline in turnover, should align).
This may negatively impact the ability of some entities to meet the required decline in turnover. For example, where an entity prepares its BAS on a cash basis, receives a large outstanding payment from a debtor in August 2020, does not have similarly large receipts in the September 2019 quarter, and does not satisfy one of the alternative tests, the entity may fail to satisfy the required decline in turnover.
Entities on monthly or annual BAS cycles will need to calculate the value supplies that would be attributable to the September 2020 and December 2020 quarters in an appropriate manner.


Aren't "projected GST turnover" and "current GST turnover" basically the same thing?
No.
Supplies made by way of transfers of capital assets and the ceasing or substantially reducing an enterprise are specifically excluded from projected GST turnover.
This may negatively impact the ability of some entities to meet the required decline in turnover. For example, where an entity has endured cash flow shortages as a result of COVID-19 and as a result disposed of a capital asset in the September 2020 quarter without a comparable disposal in the September 2019 quarter, the entity may fail to satisfy the required decline in turnover.


What accounting method does an entity use when say comparing September 2020 to September 2019, but its accounting method has changed during that time?
The explanatory statement to the legislative instrument "Coronavirus Economic Response Package (Payments and Benefits) (Timing of Supplies Made and Decline in Turnover Test) Rules 2020 (No. 1)" specifies that: "If an entity changed their accounting basis during or after the start of the relevant comparison period - the entity needs to use the accounting basis from the first tax period of the relevant comparison period"


Which accounting method does an entity that is not registered for GST use?
An entity that is not registered for GST can choose between the cash or accruals method.


If an entity chooses one method (e.g. cash) for the September 2020 quarter test, can that entity swap to the accruals method when calculating the decline for the December 2020 quarter (or visa-versa)?
No.
Once an entity has chosen an accounting method the entity must consistently apply that method.


When making a calculation under an alternative decline in turnover test, is an entity required to use the same accounting method (cash or accruals) that it uses in its BAS (or as chosen, for entities that are not registered for GST)?
Yes.
The decline in turnover tests modify the relevant comparison period, they do not modify the timing at which supplies are deemed to have be made, as set out in Coronavirus Economic Response Package (Payments and Benefits) (Timing of Supplies Made and Decline in Turnover Test) Rules 2020 (No. 1).


What should an entity do if it discovers an error in a prior period BAS?
If an entity made a mistake (that fits the definition of a GST error) when reporting GST on an activity statement, the entity can correct that error on a later activity statement if it meets certain conditions. https://www.ato.gov.au/business/gst/in-detail/managing-gst-in-your-business/reporting,-paying-and-activity-statements/correcting-gst-errors/
Source: QC 16233


Is there any leeway for errors when calculating the entity's decline in turnover?
The JobKeeper Rules for JobKeeper fortnights up until 27 September 2020 used the terms "projected GST turnover" for the test period and "current GST turnover" for the comparison period, as defined in the GST Act.
As such, Treasury and ATO information indicated that there would be some tolerance where employers, in good faith, estimate a 30% or more or 50% or more fall in turnover but actually experienced a slightly smaller fall.
However, as the Rules for the JobKeeper extension period use "current GST turnover" for both the test period and the comparison period and these are intended to align with the entity's BAS lodgements, these amount should be actuals not estimates and therefore no error tolerance would be expected.


Does the decline in turnover need to have occurred as a result of COVID-19?
No.
It does not matter why an entity satisfies the decline in turnover test, just that it did satisfy the test.
For example, an entity may have sold (as a taxable or GST free supply) a large piece of equipment in 2019, but did not have a similar sale in 2020, which resulted in a decline in turnover of more than the required %. The sale in 2019 was not COVID-19 related, but the decline in turnover test is nevertheless satisfied.


Does a group of entities need to consolidate its turnover to determine if it meets the decline in turnover test?
No.
Initially the Group must calculate its aggregated turnover to determine which of the 50% or 30% decline in turnover is applicable to the Group members. Once this is determined on an aggregated basis, the required % decline in turnover is applicable to every member of the Group. The assessment against the required % decline is then made on an entity by entity basis unless the Group is using the modified test for groups with "employer entities" which principally provide "employee labour services" (JobKeeper Rules s8A).


Are the values of supplies for the purposes of calculating the decline in turnover inclusive or exclusive of GST?
The terms "current GST turnover" and "projected GST turnover" are both exclusive of GST.


How are grants treated?
Grants should be considered on a case by case basis as concessions around the treatment of grants are currently influenced by negotiations between the State and Federal Governments as part of COVID-19 relief measures.
However, grants will generally only constitute a taxable supply and therefore be included in "current GST turnover" or "projected GST turnover" where the grant is in consideration of the entity receiving the grant doing something, or not doing something.
For example, the following government payments are not consideration for a supply and therefore not included in GST turnover:

  • JobKeeper payment
  • cash flow boost payment
  • the Early Childhood Education & Care Relief Package paid to approved child care providers
  • payment of grants to an entity where the entity has no binding obligations to do anything or does not provide goods and services in return for the monies.
Source: LCR 2020/1 para. 25
As for the income tax treatment of various COVID-19 grants and supports, please see:
https://www.taxandsuperaustralia.com.au/TSA/Products_Services/Publications/COVID-19_Book/TSA/Publications/COVID-19-book.aspx

 








If an entity did not qualify for any of JobKeeper fortnights 1 - 13 (March - September) or JobKeeper fortnights 14 - 20 (October - December), can the entity still qualify for JobKeeper fortnights 21 - 26 (January - March)?
Yes, provided all the eligibility criteria is met.


If an entity fails to qualify for the JobKeeper extension period is the entity required to advise the Commissioner that the entity no longer wishes to participate in the JobKeeper scheme?
Unfortunately, this is uncertain.
It is made more uncertain by the fact that an entity that does not qualify for JobKeeper fortnights 14 - 20 (Oct - Dec 20) may still qualify for JobKeeper fortnights 21 - 26 (Jan - Mar 21). If that entity were to formally withdraw from the JobKeeper scheme in say October 2020, it would need to go through the entire registration process again in say January 2021.
It is hoped that, through the monthly reporting obligation pathway, there is an ability to suspend an entity's eligibility rather than entirely withdraw.


What periods (reference periods) are used in determining whether the 80 hours has been satisfied?
"1 March 2020 employees"

  • The 28-day period ending at the end of the most recent pay cycle for the employee that ended before 1 March 2020; or
  • The 28-day period ending at the end of the most recent pay cycle for the employee that ended before 1 July 2020; or
  • An alternative reference period as determined by the Commissioner;
  • Whichever gives the highest result.
"1 July 2020" employees"
  • The 28-day period ending at the end of the most recent pay cycle for the employee that ended before 1 July 2020; or
  • An alternative reference period as determined by the Commissioner;
  • Whichever gives the highest result.
Eligible Business Participants / Religious Practitioners
  • The month of February 2020; or
  • An alternative reference period as determined by the Commissioner;
  • Whichever gives the highest result.
Where a reference period for an employee is longer than 28 days for an employee or 29 days for an eligible business participant (where say the pay cycle is monthly or an alternative reference period as prescribed by the Commissioner is being used), the reference period will need to be pro-rated back to the 28 or 29 days as applicable.
The reference periods are the same regardless of whether an entity is considering the Oct - Dec 2020 extension period or the Jan - Mar 2021 extension period.
The alternative reference periods that the Commissioner may determine cover, in part, unpaid absences such as sick leave, parental leave or emergency services leave.

 


What "hours" go to make up the 80 hours for an employee?
The JobKeeper Rules specify that hours means total hours of:

  • Work;
  • Paid leave; and
  • Paid public holidays.
It is unclear whether the JobKeeper Rules intend hours of work to include unpaid overtime, however it appears to be the position of the ATO that unpaid overtime is not included.

 


Once the 80 hours calculation has been completed for all employees and therefore the payment rate for each employee has been determined, what are the next steps?
The next steps are:

  • The employer must notify the ATO of the rate applicable to the employee. It is expected that this would be done through MyGov or the Business Portal, as is the case with the monthly reporting obligation;
  • The employer must advise each employee of their payment rate. This must be done within 7 days of notifying the ATO. The ATO do not appear to have provided a standard form for this purpose.
Tax agents may undertake these tasks on behalf of the employer.

 


Are entities required to advise their eligible business participants or religious practitioners of their payment rate?
Yes (other than for sole traders), as with employees, entities must advise their eligible business participants or religious practitioners of their payment rate. This must be done within 7 days of notifying the ATO.


For the purposes of meeting the 80 hours test as an eligible business participant, what does the term "actively engaged in the business carried on by the entity" mean?
This term is not specially clarified, however there is some commentary in various sources:
The business participation requirements are that, at any time in the fortnight, the individual is actively engaged in the business carried on by the entity. The individual must be actively engaged in the operations and activities of the body.
Source: Coronavirus Economic Response Package (Payments and Benefits) Rules 2020 Explanatory Statement

The same two JobKeeper payment rates apply to qualifying entities that have nominated an eligible business participant. However, the test to determine eligibility is instead based on the hours of active engagement in the business carried on by the entity. This requires an assessment of the hours that the business participant was actively operating the business or undertaking specific tasks in business development and planning, regulatory compliance or similar activities in an applicable reference period.
Source: Coronavirus Economic Response Package (Payments and Benefits) Amendment Rules (No.8) 2020 Explanatory Statement
An individual will be actively engaged in the business carried on by the entity if they regularly:

  • perform, or manage the performance of, services the business provides
  • sell or manage the sale of goods of the business
  • perform other activities associated with managing the business
  • exercise control over activities related to business strategy and growth.
An individual will not be actively engaged in the business simply because they:
  • own an interest in the business or invest capital in it
  • provide advice or other assistance to the business from time to time.
The hours that an eligible business participant spent actively engaged in your business can include, but are not limited to, time spent on the following activities:
  • providing services, or selling goods
  • supervising and managing the performance of employees
  • negotiating contracts with suppliers and customers including providing quotes
  • drawing up business plans and planning or budgeting reports
  • managing the record keeping and accounts, including the use of the documents for analysis
  • making financial, legal and tax decisions, including time spent on obtaining professional advice (for example ensuring the business complies with legal and regulatory obligations)
  • managing commercial risks of the business
An eligible business participant would not be actively engaged in the business whilst doing personal (non-business) activities, merely because they think about your business during this time.
Source: QC 62814

It is interesting to contrast the above thoughts on "actively engaged" with the comments made by the Prime Minister in his press conference on 30 March 2020 where he said:
We will give millions of eligible businesses and their workers a lifeline to not only get through this crisis, but bounce back together on the other side.
This is about keeping the connection between the employer and the employee and keeping people in their jobs even though the business they work for may go into hibernation and close down for six months.
When the economy comes back, these businesses will be able to start again and their workforce will be ready to go because they will remain attached to the business through our JobKeeper payment.
It's uncertain how the above statements on "actively engaged" reconcile with "hibernation" as stated by the Prime Minister.

 


What are the pertinent deadlines as we move into the JobKeeper extension period?
From the ATO website at QC 63762:
The first JobKeeper Payment extension period starts on 28 September and there are some key dates to keep in mind.

From 28 September the JobKeeper extension starts and the payment rates change for your eligible employees, based on the total hours each employee worked during their reference period. You will need to pay your eligible employees at least the JobKeeper amount that applies to them each JobKeeper fortnight. This will be $1,200 per fortnight (Tier 1) or $750 per fortnight (Tier 2) before tax. Between 1 and 14 October complete your October JobKeeper monthly business declaration to be reimbursed for payments you made in September.

Between 1 and 31 October determine and submit your decline in turnover for the September 2020 quarter through our online systems.

Up to 31 October for JobKeeper fortnights 14 and 15 (starting 28 September 2020 and 12 October 2020) only, you have until this date to pay each of your eligible employees at least the JobKeeper payment rate that applies to them.

Between 1 and 14 November complete your November JobKeeper monthly business declaration to be reimbursed for payments you made in October - tell us which payment tier you are claiming for each eligible employee or business participant.


Can a parttime or long-term casual "1 March 2020" or "1 July 2020" employee, working for two employers and an eligible employee of one of the employers (the "first employer") become an eligible employee of the other employer (the "second employer") where the first employer does not qualify for JobKeeper in the extension period?
No.
Where the employee remains employed by the first employer the employee cannot give a valid nomination notice to the second employer.
Had the employee left the first employer after 1 March 2020 but before 1 July 2020 and joined the second employer on or before 1 July 2020, the employee could then give a valid nomination notice to the second employer and become an eligible employee of that employer.
Additionally, had the employee had never given a nomination notice to the first employer, then they could give a valid nomination notice to the second employer.


Can an individual who was previously an eligible business participant of one entity (the old entity) become an eligible employee of another entity (the new entity)?
Yes, provided that the other eligibility criteria are met, including, that the individual did not continue to be actively engaged in the business carried on by the old entity at any time from the start of 1 July 2020 to the time of giving the notice to the new entity.
If the individual gives the nomination notice to the new entity, the individual is excluded from being an eligible business participant for the old entity for any fortnight ending after giving the notice to the new entity.


Can an individual who was previously an eligible employee become an eligible business participant?
No.
As the individual has previously provided a nomination notice to their employer, they cannot provide a valid nomination notice as an eligible business participant.


Can an entity change eligible business participants?
No.
Once an individual has previously given the entity a valid nomination notice in satisfaction of the eligible business participant nomination requirements, no other individual is able to provide a valid nomination notice as an eligible business participant.
This is true even if the first eligible business participant dies.
However, if an entity had never previously nominated an eligible business participant and the proposed eligible business participant had never provided a nomination notice to any other entity, provided that the entity and the proposed eligible business participant meet all the eligibility criteria, the entity can nominate the individual as its eligible business participant at anytime during the JobKeeper scheme.


The JobKeeper reimbursement for August 2020 included three JobKeeper fortnights due to the way the calendar fell. Will this occur again during the extension period?
Potentially the reimbursement for January 2021 will cover three JobKeeper fortnights (JobKeeper fortnights 20 - 22) from 21st December 2020 (fortnight ended 3rd January 2021) - 31st January 2020.
However, as the JobKeeper payment rates will change between JobKeeper fortnight 20 and JobKeeper fortnight 21, it is uncertain at this stage how the ATO will deal with this.


Where a pay cycle straddles JobKeeper fortnights with different payment rates, how much should be employee be paid?
Where the employee is normally paid at or above their determined payment rate (without any JobKeeper top-up) they would continue to be paid at their normal salary level unless there is a change in the circumstances of their employment.
Where an employee's normal salary is below their prevailing JobKeeper rate in a given JobKeeper fortnight, to meet the wage condition the employee's salary will need to be topped-up to the JobKeeper payment rate applicable to that employee in that fortnight.
This may require extra attention where the pay cycle straddles JobKeeper fortnights 13 and 14 and/or JobKeeper fortnights 20 and 21.
It is important to remember that the wage condition must be satisfied for and within each JobKeeper fortnight. That is, at a minimum, the JobKeeper payment rate, whether that be $1,500 or one of the lower payment rates for JobKeeper fortnights after 27 September 2020, must be paid to eligible employees at sometime within that JobKeeper fortnight. This is regardless of the period actual covered by the pay cycle. The only exceptions being:

  1. where the pay cycle is longer than a fortnight and therefore apportionment is allowed; or
  2. where the Commissioner has allowed extra time to meet the wage condition, as he has done for JobKeeper fortnights 14 and 15 whereby employers have until 31 October 2020 to satisfy the wage condition.

 


Does the wage condition apply to eligible business participants?
No. Unlike for an employee, there is no "wage condition" to be satisfied for an eligible business participant. In fact, an eligible business participant cannot be an employee (other than a casual employee) of any entity.
The entity that receives the JobKeeper subsidy on behalf of the individual can choose to do what it likes with that amount.


In relation to the JobKeeper scheme, what is the situation where a business has closed?
If a business has closed and terminated all of its employees, it is not eligible to receive JobKeeper payments. If a business has closed, but will reopen at a later time, it is still necessary for its employees to remain "on the books" for the JobKeeper payments to be made to those employees. Also, an entity does not qualify for the JobKeeper scheme at a time if:

  1. where the entity is a company-a liquidator or provisional liquidator has been appointed in relation to the company; or
  2. where the entity is an individual-a trustee in bankruptcy has been appointed to the individual's property.

 


COVID-19 Essentials