Author: Tony Rule, Partner, TAG Financial Services
As deadlines hang over businesses trying to get their JobKeeper ducks all in a row, here is the latest news in relation to the JobKeeper announcements out of Canberra.
Decline in Revenue Test
A business may be eligible for JobKeeper if it has suffered a decline in revenue due to COVID-19. The first test that was announced was the basic test.
Basic Test
If the GST turnover of a business has declined by more than 30% (where turnover is less than $1b) in 2020 when compared to a month (between March and September) or quarter (June or September) from last year, then the entity will be entitled to consider the JobKeeper scheme.
From the announcement of JobKeeper, alternative tests have been promised to businesses where the basic test was deemed to be unfair or inappropriate. After some delay, the alternative tests are now available for consideration.
Alternative Tests
- Business started – if the business started before 1 March 2020 and after the relevant comparison period in 2019, you can compare your projected GST revenue with average monthly current GST turnover.
- Business part bought or sold – if part of the business was bought or sold after the relevant comparison period in 2019 and before the turnover test period in 2020, you can compare the projected GST revenue with the month immediately after the acquisition or disposal.
- Business restructured – if the business entity was restructured after the relevant comparison period in 2019 and before the turnover test period in 2020, you can compare the projected GST revenue with the month immediately after the restructure.
- Business turnover increasing – if the business turnover increases by 50% in 12 months, 25% in 6 months or 12.5% in 3 months immediately before the turnover test period and the 2019 is not comparable due to that rapid growth, you can compare the projected GST revenue with the monthly average from the previous 3 months.
- Business affected by natural disaster – if the business was conducted in a drought or natural disaster zone during the relevant comparison period in 2019, you can compare the projected GST revenue with the same period in 2018 (i.e. the year before).
- Business irregular turnover – if the business has irregular, but not seasonal turnover and the relevant comparison period in 2019 is not comparable and the lowest turnover quarter in the previous 12 months was not less than 50% of the highest turnover quarter, you can compare the projected GST revenue with the average monthly current GST turnover.
- Business key person absent – if the business is a sole trader or a small partnership that has no employees and that sole trader or at least one partner (out of a maximum of 4) did not work for all or part of a comparison period in 2019 due to sickness, injury or leave, you can compare the projected GST turnover with the GST turnover in the month immediately after their return to work.
If you think one of the alternative tests might apply to you, please do not hesitate to contact us to consider your situation.
Extensions
The Australian Taxation Office have announced the following extensions to your JobKeeper obligations.
Late Top-Ups
The ATO have advised that as part of paying your employees at least $1,500 before tax each fortnight, late top-ups paid by 8 May 2020 (previously 30 April) will be accepted for the fortnights ending 12 April and 26 April 2020.
Enrolments
The ATO have extended the time for employers to enrol for JobKeeper to 31 May 2020. If you enrol your business by 31 May 2020, you will still be able to claim the fortnights ending 12 April 2020 and 26 April 2020.
Action Needed
We note that the longer you take to comply with your JobKeeper requirements, the longer it will take for the ATO to commence reimbursing your business for wages already paid. We urge you to ensure that all steps have been completed. Those steps are:
- Enrol as an eligible employer now
- Pay your eligible employees $1,500 per fortnight now
- Flag your eligible employees through your STP system now
- Declare your entitlement from 4 May
One for All and All for One
Remember that one of the key requirements of being eligible for JobKeeper is that once an employer enrols, all eligible employees should receive $1,500 per fortnight.
“Once an employer decides to participate in the JobKeeper scheme and their eligible employees have agreed to be nominated by the employer, the employer must ensure that all of these eligible employees are covered by their participation in the scheme. This includes all eligible employees who are undertaking work for the employer or have been stood down. The employer cannot select which eligible employees will participate in the scheme. This ‘one in, all in’ rule is a key feature of the scheme.”
We already note that many employees are taking the view that they will stay home and will collect the $1,500 per fortnight regardless of whether there is work to be done or not. We see this as a brewing concern for a number of business owners.
You Want To Audit Me?
Please expect that you will be selected for audit by the ATO when the JobKeeper scheme is well and truly behind us. The rushed and vague nature of the rules and how they may apply to your business may put you at risk if your situation and eligibility are reviewed in the future. (Did you really think that the Government were going to hand out $130b without asking a few questions?)
Ensure that you document the figures you have relied on to justify your decline in revenue (or the alternate tests if applicable). In particular, if you used a projected figure and the actual figure ended up higher – what were the reasons for this. Ensure that all invoices that could be raised in a given period are raised in that period. If for some reason (e.g. lack of staff, social distancing rules, working from home) your normal work flows were not able to be maintained, ensure that these circumstances are documented now.
Document the difficulties your business, clients, employees and suppliers have faced through the Coronavirus pandemic. These things should help set the scene for your friendly, neighbourhood, ATO auditor and will help show that you were truly impacted (even when it is a distant memory).
Of course, your file should also include the employee nomination forms, payments made to employees and everything lodged with the ATO. You may need to keep this information for a number of years and remember that most tax audit insurance policies will not cover JobKeeper (it is a grant, not a tax).
If you have any questions, please contact us on 03 9886 0800 or via email.
Disclaimer: The information contained is general in nature. Professional advice should be sought before acting on any aspect on this page. Financial planning services provided by TAG Financial Advisors Pty Ltd (ABN 77 154 205 017 AFSL 415632), a wholly owned subsidiary of TAG Financial Services Pty Ltd (ABN 67 075 374 686). Copyright 2020. Please do not reproduce without the expressed written consent of the author.