Start Up Business
A business commenced in October 2019. How is the decline in turnover test calculated for this business?
The business will have to rely on the alternative decline in turnover test(s) that will be issued, by legislative instrument, by the Commissioner of Taxation. If the Commissioner of Taxation makes a legislative instrument, it will apply to a certain class of entities. The ATO information nominates the commencement of a new business as an event where it may be appropriate to make a legislative instrument. At the time of writing, none have been issued.
Apprentices and JobKeeper
Is a business that receives the 50% wage subsidy for apprentices and trainees also eligible for JobKeeper in relation to the apprentice or trainee?
“Eligible small businesses can receive the 50% wage subsidy for apprentices
and trainees in the Supporting Apprentices and Trainees measure from 1
January to 31 March 2020, and the JobKeeper Payment. Where small businesses
receive the JobKeeper Payment, they are not eligible to receive the apprentice and
trainee wage subsidy from 1 April 2020 onwards”. It is noted that this is not referred
in the JobKeeper Rules. (From Treasury information)
Employees Paid Less than $1,500 per fortnight
Normally, a business pays one of its employees $800 per fortnight. What must it do under JobKeeper?
If the employee is eligible, the employer must pay the employee $1,500 per fortnight, before tax, while JobKeeper is in operation.
Active participation in a Business
Mum and Dad are in partnership. Mum does a lot less work in the partnership than Dad. Neither of them are employed by the partnership. Dad is covered by JobKeeper for another business. Can I make a JobKeeper claim for Mum?
Yes, provided mum can satisfy all of the conditions. One of those conditions is that mum is "actively engaged in the business". This is a question of fact. There is currently no guidance on what this term means.
When calculating the decline in turnover test, are all members of a consolidated group included in the calculation?
No. The turnover test is undertaken on an entity by entity basis. An entity is not
defined to include a consolidated group. However, the existence of the “single
entity” rule for the purposes of the consolidations tax provisions will confuse people.
This matter should be clarified by the ATO.
Note, however, that in determining whether the turnover of an entity is above or
below $1 billion, it is the entity’s aggregated turnover that is used.
Note, however, that in determining whether the turnover of an entity is above or below $1 billion, it is the entity’s aggregated turnover that is used.
Restructure of Business
A business was about to go through a restructure, should we continue with this? Alternatively, a business needs to restructure due to the coronavirus.
Exercise great caution with restructures. These are possible but a restructure will cause a number of issues to arise such as change of employer, inability to directly compare turnovers with prior periods, employment law issues and so forth. Restructures will very likely require the exercise of the Commissioner’s discretions so as not to lose the JobKeeper benefit.
Trust Beneficiary Placed on the Payroll
A trust operates a business. There are some arm’s length employees. Some of the beneficiaries of the trust have been paid salary or wages in the past but it is somewhat sporadic. Is it OK to put the beneficiaries working in the business on the regular payroll so that the JobKeeper payment can be obtained for them?
The first requirement is that the individuals were employees as at 1 March 2020. That will be a question of fact. If the way in which these individuals are remunerated is changed for the sole or dominant purpose of obtaining the JobSeeker payments for them or increasing the amount, the actions will fall foul of the anti-avoidance provision. The ATO has released some limited information on this issue. Go to the ATO website and search for QC 62201.
Personal Services Income
My client operates a personal services business through a company. No wages are paid to the individual involved but all of the income is attributed to him due to the PSI rules. What is the position with JobKeeper in relation to this individual?
The individual should be able to be classed as an eligible business participant and the company should be able to claim the JobKeeper payment, provided all necessary conditions are met.
Poor Payroll Records
My client has poor, informal pay-roll records. Can the client claim the JobSeeker payment for his employees?
Yes, but with difficulty. The client must get their record keeping up to the standard required or miss out. Certain information must be supplied to the ATO for each JobSeeker fortnight. If this is not supplied, the business is ineligible. Also, there are record keeping requirements that have been legislated. If the ATO discovers that these records have not been kept, the entity is not entitled, and is taken never to have been entitled, to the JobKeeper payment.
The Commissioner can request an entity to produce the records within 28 days.
If a business has a number of branches, is each branch assessed in relation to the decline in turnover or is the whole entity assessed?
The whole entity is assessed.
Cancellation of Election
Can a business cancel its involvement with the JobKeeper program if an election has been made?
Downturn Estimation Error
If a business elects to be involved in the JobKeeper scheme because it projects that its turnover will fall by more than 30%, what happens if the fall in turnover turns out to be something less than this?
The answer to this is not entirely clear. The ATO needs to give specific information about this.
What we can say is that the Payments and Benefits Act contains a number of provisions that deals with overpayments of the JobKeeper payments. The entity will need to repay the amount and also be charged General Interest Charge.
We note that there is not a general discretion given to the Commissioner in relation to the calculation of the 30% downturn. The Commissioner is given the power to make legislative instruments about this requirement. There is nothing that refers to “honest mistakes or inadvertent errors” as is found in some other legislation.
 Sections 9, 10, 11 of the Payments and Benefits Act
If a business has both business income and passive income (e.g. interest and dividends) is the passive income taken into account when calculating the decline in turnover test?
No. The passive income is very likely to be input taxed income. Input taxed income is not taken into account when undertaking the decline in turnover test. It is specifically excluded from the definitions of “projected GST turnover” and “current GST turnover”.
Cash Flow Boost and JobKeeper
Can a business be eligible for both the cash flow boost and JobKeeper?