How do entities that are not registered for GST calculate their decline in turnover
What if an entity's estimate of "projected GST turnover" is wrong?
The government has chosen to use two concepts in the GST law to determine decline in turnover. Whether a entity is registered for GST or not has no bearing on the meaning of these terms. These terms are “current GST turnover” and “projected GST turnover”. “Current GST turnover” and “projected GST turnover” are defined in sections 188-15 and 188-20 of the GST Act respectively (amended by the Rules such that the definitions only apply to the “test period”). Entities should use these definitions to determine their decline in turnover, regardless of whether they are registered for GST or not.
Some government information has indicated that there will be some tolerance where employers, in good faith, estimate a 30 per cent or more or 50 per cent or more fall in turnover but actually experience a slightly smaller fall. However, the JobKeeper rules and related legislation do not contain any such statement. Further, currently, the Commissioner is not given any discretion in relation to such things as “honest mistakes” or “inadvertent errors”, which is a feature of other legislation. By the strict letter of the law, where a business is not entitled to JobKeeper payments, the business will need to repay the amount with General Interest Charge.
What is the turnover test period?
A “turnover test period” must be (a) a calendar month that ends after 30 March 2020 and before 1 October 2020; or (b) a quarter that starts on 1 April 2020 or 1 July 2020.
What is the situation for service entities where the service entity itself does not meet the decline in turnover, but the entities to which the services are provided do meet the decline in turnover?
The rules have been amended to allow an employer entity to possibly qualify for
the jobkeeper where it supplies employee labour services to one or related
entities. However, the employer entity must be a member of a consolidated group,
consolidatable group, or GST group. Further, the employer entity must not supply
employee labour services to entities that are not members of the group.
The decline in turnover test is modified for the employer entity so that it refers to the
current and projected turnover of each test member of the group (being those entities
that receive labour services from the employer entity) rather than using its own
Can an entity, in April, estimate projected GST turnover for July and satisfy the decline in turnover test now?
No. The decline in turnover test needs to be satisfied before an entity becomes eligible for the JobKeeper payment. The JobKeeper scheme operates on a prospective basis only. Entitlement only arises for those JobKeeper fortnights and later fortnights in which eligible employers are registered under the scheme prior to the end of a JobKeeper fortnight. The only exception to this is for the month of April 2020. In April 2020 employers may register prior to the end of April and if they meet the eligibility rules receive JobKeeper payments for eligible employees for JobKeeper fortnights in the two JobKeeper fortnights commencing from 30 March 2020.
With regard to the 1 March 2020 test period, what if the employment contract was signed before that date, but the employee did not commence work until after that date?
If the contract is such that the employee was employed before 1 March 2020, but was simply not required to attend work until after that date, and all other test criteria are satisfied, then the employee should be eligible for JobKeeper assistance.
However if, as is more likely the case, employment was not deemed to have commenced until the employee attended work, and this was after 1 March 2020, then the 1 March 2020 test will not be satisfied and the employee will not be eligible for JobKeeper assistance.
If an employee is on annual leave, long service leave or sick leave is that person still an employee?
If an individual supplements his paid employment with another casual position and also from sole trader activities, and the casual work and his sole trader work has dropped off but the paid employment continues, can he still apply for job keeper from either his casual work or his sole trader activities?
An individual can only create an entitlement for one entity. A business is not
entitled to a JobKeeper payment for an individual if another business is also
entitled for the same individual. For example, where an individual is an eligible
participant of two businesses – only one of those businesses is entitled to the
JobKeeper payment in respect of that individual. Also, for example, where an
individual is an eligible participant of a business and is entitled to a JobKeeper
payment as an employee of another business–the business is not entitled to a
JobKeeper payment in respect of the individual.
Can Temporary Activity Visa subclass 408 holder access JobKeeper assistance?
An eligible employee must be an Australian resident (within the meaning of section 7 of the Social Security Act 1991), or was a resident of Australia for the purposes of the Income Tax Assessment Act 1936 and was the holder of a Subclass 444 (Special Category) visa as at 1 March 2020.
Where can Employee Nomination Notices be found?
Employee Nomination Notice templates are available on the ATO website.
Who can be a nominated eligible business participant?
Provided the eligibility criteria are met, one non-employee individual from the following entities can be nominated as the eligible business participant:
- Sole trader: the individual;
- partnership: a partner;
- trust: an adult beneficiary;
- company: either a director or shareholder in the company.
Can an individual who is receiving workers compensation be an eligible employee?
No, if the following conditions apply.
An individual is excluded from being an eligible employee of an entity for a fortnight if all of the following apply:
- the individual is totally incapacitated for work throughout the fortnight;
- an amount is payable to the individual under, or in an accordance with, an Australian workers' compensation law in respect of the individual's total incapacity for work; and
- the amount is payable in respect of a period that overlaps with, or includes, the fortnight.
Can the JobKeeper assistance be used to fund the operations of the business?
No, the JobKeeper assistance must be passed on to the employee. In fact the payment to the employee will come first, in the JobKeeper Fortnight, and the JobKeeper assistance will be received later.
Practically however, as the Government is picking up part or all of the salary cost, this may free up cashflow to be used in the business operations.
Can employer choose not to include employees who earned less than $1500 per fortnight?
The JobKeeper scheme is an “one in, all in” scheme. If the employer has elected to be part of the JobKeeper scheme, all eligible employees, no matter what they are paid, must be included in the scheme and be paid a minimum of $1,500 per fortnight.
What if the entity has employees but pays themself a distribution or dividend?
Payment of a dividend or distribution will not impact eligibility to JobKeeper assistance for employees or a nominated eligible business participant, provided the other eligibility criteria are satisfied.