JOBKEEPER EXTENSION

Legislation and Rules have been passed to implement the JobKeeper extension from 28 September 2020 to 28 March 2021.

ACTUAL DECLINE IN TURNOVER TEST

In addition to the current decline in turnover test, a new ’actual decline in turnover’ test applies.
– For fortnights from 28 September 2020 to 3 January 2021 the new test must be met for the 30 September 2020 quarter.
– For fortnights from 4 January 2021 to 28 March 2021 the new test must be met for the 31 December 2020 quarter.

The test will compare the current GST turnover for the quarter with the relevant comparable quarter to determine if there has been the requisite decline. The comparable quarter can be under either:
– The basic test—which would compare with either the September or December 2019 quarter; or
– An alternative test. The existing alternative tests will continue to apply, where applicable. Additional alternative tests are also expected to be issued shortly.

The percentage decline in turnover required is the same as required under the current scheme.

Current GST turnover

For the purposes of the actual decline in turnover test, current GST turnover will be calculated for both quarters based on when the entity would report the supply in a BAS for the relevant period (assuming the supply was a taxable supply and ignoring the fact that the entity may be part of a GST Group). Input-taxed supplies and supplies that are not connected with Australia will not be included in turnover.

If an entity is not registered for GST, they can choose to account for GST for these purposes on either a cash or accruals basis. Otherwise, they must generally use the accounting basis for which they are registered. Specific rules apply to determine the relevant basis where an entity has registered for GST or changed accounting basis during the relevant period. This differs from the current position where a cash basis taxpayer could generally choose to use either the accruals or cash attribution basis.

Original decline in turnover test

If an entity has not previously enrolled for JobKeeper they are also required to meet the original decline in turnover test. The period this test can be applied has therefore been extended to December 2020.

An entity that meets the actual decline in turnover test for a period would generally be expected to also meet the original decline in turnover test for the same period.

PAYMENT RATE

From 28 September a two-tiered payment rate will apply based on an hours test.

For employees, hours includes actual hours worked as well as paid leave and public holidays. For business participants, this refers to hours of active engagement in the business. Business participants must be able to demonstrate the basis on which they determined they were actively engaged.

Reference periods

There are two standard 28-day reference periods that can be used for employees and, if both apply, the higher number of hours worked is used. The periods comprise the last two consecutive fortnightly pay periods or the last 4 weekly consecutive pay periods, ending:
– Prior to 1 March 2020; or
– Prior to 1 July 2020.

For a monthly pay cycle the hours are pro-rated to determine the hours attributable to the 28 day period.

The standard reference period for business participants is the month of February and is therefore 29 days

The ATO has determined alternative reference periods that can be used in certain circumstances:
– Employee hours not representative of a typical 28-day period (for example, the employee took unpaid leave) — can look back at the most recent 28-day period before the standard reference
period where the circumstances that affected the number of hours did not exist.
– Employees not employed during all of the standard reference period—can look forward to the first 28-day period after the standard reference period where they were employed for the whole period.
– Employee of a business which changed hands—can look forward to the first 28-day period after the standard reference period where they were employed by the employer for the whole period.
– Business participants—Similar alternative reference periods will apply to business participants where relevant (noting it is a 29 day reference period). An alternative reference period can also apply if a business was affected by drought or other natural disaster.

Higher rate determination

Where there are no records or incomplete records of hours, including where remuneration is not tied to hourly or contracted rates  (e.g paid on commission) the following alternative methods are available to determine whether an employee qualifies for the higher rate:
– Wage paid for the reference period was at least $1,500 (excluding amounts paid to meet the ‘wage condition’)
– Employee was required to work for at least 80 hours under their employment contract or award.
– Can be determined based on reasonable assumptions that the employee’s hours were 80 or more.

OTHER REQUIREMENTS

Entities do not need to re-enrol for the scheme, but do need to notify the ATO of eligible employees or business participants and their payment rate. Business participants will also need to make a declaration if their active engagement exceeds 80 hours. Entities must notify the employee or business participant, within 7 days, of the payment rate that has been advised to the ATO.

The other eligibility requirements remain the same, including meeting the wage condition. Entities will have until 31 October 2020 to meet the wage condition for the fortnights starting 28 September and 12 October. Guidance is also expected on how to calculate the wage condition where different payment rates apply to a pay period.

The information contained in this bulletin is intended to  provide  general information only and is not intended to serve as tax advice. Specific advice should always be sought regarding a taxpayers’ particular circumstances. Please contact MC Tax Advisors if you would like assistance with the issues identified in this bulletin.