A number of Legislative Instruments have been registered over the past week in relation to the JobKeeper extension commencing on Tuesday 29 September.
This newsletter summarises the new rules as they relate to:
- The Timing of Supplies to determine a business’s GST Turnover;
- An Alternative reference period to determine whether an Employer is entitled to the higher or lower rate of JobKeeper subsidy for eligible employees;
- The Alternative tests to determine whether an employee has satisfied the 80 hour work test in a 28 day period; and
- The 7 Alternative Tests an employer can use to determine their Decline in Turnover.
Once the September BAS period ends next week your clients will only have 31 October 2020 to determine their eligibility and notify the ATO of their entitlement for the fortnight ending 12 October.
MKT will be hosting a JobKeeper webinar next Friday, 2 October at 10:00am. Click link for full details
- Timing of Supplies
An employer’s eligibility for JobKeeper 2.0 depends on satisfying the actual decline in turnover test from 28 September 2020. This requires the calculation of current GST turnover across the two test periods. The Determination sets out the method for determining when supplies are treated as being made during each test period when calculating an entity’s current GST turnover.
The Determination does this by providing what it says is a “simpler alternative” to the GST time of supply rules.
First, it treats the supplies that are not taxable as taxable in order to allocate these supplies to a test period to the same extent any GST payable on taxable supplies would be attributable to a tax period. This ensures GST-free supplies, supplies made by entities that are not registered or required to be registered for GST, and supplies that are made between GST group members can also be allocated to a test period, even though they are not taxable supplies.
Second, the Determination ensures the attribution rules apply to the supply by the entity even if the entity is not an entity that is subject to the attribution rules under the GST Act. For example, an entity that is part of a GST group or entities that are not registered.
Third, the GST attribution rules allocate supplies to a “tax period”. The Determination replaces tax period with the relevant test period that applies to the entity under the JobKeeper rules. This means that the turnover test periods for which the actual decline in turnover test has to be satisfied are the quarter ending 30 September 2020 (for Phase 1, being fortnights that begin on or after 28 September 2020) and the quarter ending 31 December 2020 (for Phase 2, fortnights that begin on or after 4 January 2021).
Finally, the Determination sets out rules regarding the basis of accounting that an entity is required to use (i.e. either a cash basis or non-cash [accruals] basis). For entities registered for GST, they must use the same basis they used for the first test period according to their BAS. For entities that are not registered for GST, it ensures they choose an accounting basis and so must apply the GST attribution rules for the purpose of determining when they are treated to have made their supplies. This also ensures that entities use a consistent accounting method for each relevant period in working out their actual decline in turnover.
If an entity has changed its accounting methods from one test period to another (i.e. cash to accruals), the entity needs to use the accounting basis from the first tax period of the relevant comparison period.
- Alternative Reference Period
From 28 September 2020, entities eligible for the extended JobKeeper will be entitled to the wage subsidy based on a higher and lower rate. The higher rate applies to an individual who is an:
- eligible employee, if the total hours of work, paid leave and absences on public holidays was 80 hours or more in the 28 day period ending before 1 March 2020 or 1 July 2020;
- eligible business participant, if the total number of hours the participant was actively engaged in the business was 80 hours or more during the month of February; and
- eligible religious practitioner, if the total hours spent on activities in the pursuit of their practice was 80 hours or more in the month of February 2020.
The Commissioner has recognised in the relevant Determination that there will be a class of individuals who cannot satisfy the test based on the reference periods outlined above due to the following factors:
- Hours worked were less than 80 hours in the reference period when compared to earlier periods; or
- Individuals were not employed, actively engaged etc. during all or part of the reference period;
The alternative test allows looking back to an earlier 28-day period in which any circumstances that affected the number of hours in the reference period did not exist to identify a typical 28-day period.
- Higher Rate Determination
The Commissioner has recognised that there will be instances where it is not readily ascertainable whether an eligible employee has worked 80 hours or more in a reference period (i.e. February or June 2020). This could be due to the employer not having any records or incomplete records of hours worked in the period
In the relevant Determination, the Commissioner has set out the following three alternative tests to work out whether the 80-hour requirement is satisfied:
- The higher rate will apply if, in either February or June 2020, the employer paid $1,500 or more to the eligible employee. Importantly, any JobKeeper top-up payments made during the chosen period will need to be excluded from this amount.
- The employee is under a contract, industrial award or enterprise agreement which requires the employee to work 80 hours or more in the reference period.
- The employer is satisfied, based on reasonable assumptions, that the eligible employee worked 80 hours or more in the reference period. Reasonable assumptions should be based on information that can be proved, such as:
- Average staffing level in a given week
- Common shift lengths for certain types of employees
- The average number of shifts of employees
- Alternative Decline in Turnover Tests
Similar to the existing JobKeeper scheme, the Commissioner has set out alternative tests for classes of entities that are unable to satisfy the basic decline in turnover test. Each of the alternative tests that are available in the existing scheme have been retained for the extended scheme.
The alternative tests will apply to the following classes of entities:
- The business commenced after the first day of the relevant comparison period in 2019.
- A business acquisition or disposal occurred at, or after, the start of the relevant comparison period in 2019.
- A restructure occurred at, or after, the start of the relevant comparison period in 2019.
- The business experienced a substantial increase in turnover in the 3, 6 or 12 month-period preceding either the test period or 1 March 2020.
- The entity has been affected by a drought or other natural disaster in the relevant comparison period in 2019.
- The entity has irregular current GST turnover.
- The entity is a sole trader or a partnership and the sole trader or the partner did not work for all or part of the relevant comparison period because they were sick, injured or on leave.
Each of the above tests then require the current GST turnover to be worked out in a specified manner.
- For a business that commenced after the first day of the relevant comparison period in 2019, the GST turnover for the comparison period is worked out as follows:
- The average monthly GST turnover since the commencement of the business multiplied by 3; or
- The current GST turnover for the 3 months immediately prior to 1 March 2020.
- For businesses where a business acquisition or disposal has occurred, the GST turnover for the comparison period is worked out as the current GST turnover for the month immediately after the month of acquisition or disposal multiplied by 3.
- For a business where a restructure occurred after the start of the comparison period, the GST turnover for the comparison period is worked out as the current GST turnover for the month immediately after the month of acquisition or disposal multiplied by 3.
- For a business that has had a substantial increase in turnover, this is determined based on any of the following:
- 50% or more in the 12 months immediately before either the applicable turnover test period;
- 25% or more in the 6 months immediately before the turnover test period; or
- 5% or more immediately before either the applicable turnover test period.
The GST turnover for the comparison period is then worked out as the GST turnover from the 3 months immediately before the test period.
- For an entity that has experienced drought or a natural disaster, the GST turnover for the comparison period is worked out as the current GST turnover for the same period in the year immediately preceding the year in which the drought or natural disaster occurred.
- Where the business has an irregular turnover, the GST turnover for the comparison period is worked out as the average monthly current GST turnover from the 12 months immediately before the turnover test period multiplied by 3.
- For businesses that are sole traders or partnerships, where the relevant person was sick, injured or on leave, the GST turnover is worked out as the current monthly GST turnover for the month immediately preceeding the event multiplied by 3.