JobKeeper Payment – the devil is in the detail
|By Andrew O'Bryan and Adam Dimac
Legislation to implement a framework for the JobKeeper Payment measures has received Royal Assent.
Broadly, a business that has suffered a requisite decline in turnover may be entitled to a JobKeeper payment of $1,500 per fortnight for each eligible employee.
However, the devil is in the detail; or in this case, Treasurer’s rules which will be administered by the Commissioner of Taxation. An Exposure Draft of the Treasurer’s rules has been released, which will be subject to the full process of Parliamentary scrutiny.
The efforts to date by the Government have been monumental, and are worthy of praise, but as expected there are many outstanding questions. Some of the burden is now on the tax profession and industry bodies to take up the call to arms to assist the Government in filling in the gaps. It’s also expected that some of the gaps will be filled by ATO guidance, which we understand will be released shortly.
Importantly, entities must consider their eligibility for JobKeeper payments together with their employment law obligations. These obligations are paramount, and may impact the viability and availability of JobKeeper payments.
For a detailed insight about JobKeeper related changes and obligations for employers, and changes to the Fair Work Act, click here.
From an administrative and practical point of view, there are a number of reporting obligations which entities need to keep in mind, and meet, on an ongoing basis.
What we don’t know?
While the draft Treasurer’s rules provide some much needed clarity on the eligibility requirements, there remain a number of questions to be considered, some of which are set out below.
We ask that tax agents and businesses be mindful that it is not acceptable to backdate or artificially change a business structure or employment arrangements, including changing the characterisation of payments, in order to obtain a benefit or payment that would not otherwise have been paid. The TPB and ATO will take firm and swift action should this be the case.
What you need to do
4. Prepare details of eligible employees to be sent to the ATO each fortnight, which will be assisted by the use of Single Touch Payroll data.
Basic conditions for employers, including not-for profits
As at 1 March 2020, the entity must have carried on a business in Australia or, in respect of a non-profit body, pursued its objectives principally in Australia.
The entity must also satisfy the ‘decline in turnover test’, meet various reporting obligations and have eligible employees.
A company will be ineligible if a liquidator has been appointed to the company, and an individual will be ineligible if a trustee in bankruptcy has been appointed to the individual’s property.
Decline in turnover test
An entity with an aggregated turnover of under $1 billion will satisfy the test if its projected GST turnover for:
at least 30% less than its current GST turnover for a period in 2019 that corresponds to the turnover test period (ie a month or quarter, as the case may be).
Entities with an aggregated turnover of more than $1 billion in the 2019 income year, or which is likely to exceed $1 billion in the current income year, must show a comparative decline in turnover of at least 50%.
For the purpose of calculating an entities aggregated turnover, its turnover will be combined with the turnover of all connected entities and affiliates (including Australian and non-Australian resident entities).
ACNC-registered charities (other than schools and Type A and Type B providers under the Higher Education Support Act 2003) must show a comparative decline in turnover of at least 15%.
Importantly, the turnover test needs to be met before an entity becomes eligible for the JobKeeper payment. Once this occurs there is no requirement to retest in later months, and the monthly reporting requirement (discussed below) will not impact eligibility.
The Commissioner can also determine that an alternative decline in turnover test applies to a class of entities where there is no appropriate relevant comparison period.
Modifications to the meaning of projected and current GST turnover
There are a number of modifications to the ordinary meaning of projected and current GST turnover, as defined in the GST Act.
Importantly, the projected and current turnover of a member of a GST group will not include supplies made by other members of the group. So, for the purpose of the decline in turnover test, an entity is tested on a stand-alone basis (unlike the aggregated turnover test).
For an entity that is a deductible gift recipient (DGR), each gift that is received or likely to be received is treated as a supply for the purpose of calculating projected and current GST turnover. This is intended to provide a practical means for a DGR entity to meet the decline in turnover test.
An individual is an eligible employee for a fortnight if:
Reporting from employers
Employers must meet the following reporting obligations:
Reporting for employees
Employees must give a notice to their employer stating that:
Wage condition obligation
For an entity to be eligible for a payment in respect of an employee, it must satisfy a wage condition which broadly requires that the amount paid to the employee (or at their direction) is $1,500 less ordinary PAYG withholding and salary sacrificed super contributions.
The case is not so clear for superannuation guarantee obligations. Specifically:
The Treasurer’s rules contain provisions which will allow a:
This includes a non-profit body.
To qualify, an entity must have held an ABN on 12 March 2020 (or a later time allowed by the Commissioner) and:
Entities will still also need to meet the decline in turnover test.
Assessability and deductibility
Unless changes are made to the Treasurer’s rules, payments received by an entity will be assessable income and payments made to employees will be deductible. There are no modifications proposed to the existing tax legislation which will impact this.
Businesses that change hands
The Treasurer’s rules contain provisions that will allow an entity to treat a current employee as having also been employed at an earlier point in time where the individual was employed:
As an example, this may assist entities who have begun contemplating, or entered into, a restructure. However, taxpayers should be mindful that the anti-avoidance provision may apply to schemes entered into for the sole or dominant purpose of obtaining a payment, or an increased amount of payment. This could apply to restructures designed in ensure access to JobKeeper payments, or to increased payments.
ATO discretion in key areas
Some important areas have been left to the discretion of the ATO, which is understandable given the speed at which the draft legislation and rules have had to be released, the scope of which includes determining:
Our update on the other Federal tax measures announced in response to COVID-19 can be found here.
Our update on the State and Territory tax measures announced in response to COVID-19 can be found here.
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