The JobKeeper wage subsidy has generated lots of interest and lots of confusion. This list of frequently asked questions has been produced to deal with some of the common issues, particularly in relation to guidance issued by the ATO over the past few months.
We assume that the person is potentially an eligible business participant in relation to the business. First, in relation to the entity, it is a condition that the entity carries on business in Australia on 1 March 2020. This will be a question of fact. Second, in relation to the individual, he or she must be, on 1 March 2020, an Australian resident (within the meaning of section 7 of the Social Security Act 1991) or a resident of Australia for the purposes of the tax legislation and also a holder of a special category visa (Subclass 444). If both of these conditions are satisfied and all other relevant conditions are met, the business will be able to obtain JobKeeper payments. There is no requirement in the JobKeeper rules that the individual, who is being subsidised by JobKeeper payments, need be conducting their work in Australia.
Technically, the business will not qualify for JobKeeper in relation to the month being reported on. The business would need to contact the ATO to see if it will permit the business further time to make the declaration.
The question of whether a business is being conducted has been discussed extensively in case law. Refer to TR 97/11 and TR 2019/1.
The individual would have been required to give a nomination notice to the business (or the Commissioner) stating, among other things, that the individual is not an employee (other than a casual employee) of another entity. However, this condition needs only be satisfied at the time the individual gave that nomination notice.
In relation to each JobKeeper fortnight, one requirement is that the individual is actively engaged in the business “at a time in the fortnight”. It will be a question of fact as to whether the individual meets this test if the individual also maintains full-time employment. In our view, the ATO is likely to adopt a position that the individual cannot be actively engaged in a business while they maintain full-time employment. There is not much information on what the ATO considers being “actively engaged” means. Please refer to ATO document QC 62814.
The term “full-time casual” is difficult to understand. If a person is engaged in full-time work they are usually not treated as casual employees. However, we will assume that the person is remunerated as a casual employee but is employed on a full-time basis. We also assume that the individual was not entitled to annual leave pay.
If the person is a long-term casual employee, this should not have any effect on the employee’s eligibility to have their wages subsidised by the JobKeeper payment. As long as she satisfies the necessary conditions on 1 March 2020, their wages will be able to be subsidised by JobKeeper payments.
In relation to JobKeeper 2.0, there will be an issue as to how to calculate the average number of hours that she worked during February 2020. We will not know how to do this until the applicable Legislative Instrument issues.
It should first be understood that there is no requirement under the JobKeeper rules to make a payment out of the company to any person. That is, there is no “wage condition” in relation to eligible business participants like there is for employees.
If you do wish to make the payment to the eligible business participant, this could be by way of directors’ fees or a bonus payment. A dividend could also be paid, provided the shareholding of the company permits the payment of the dividend to a single individual. An amount could be lent to the individual and the debt forgiven, but this is very likely to cause a deemed dividend to arise under Division 7A ITAA 1936.
For an eligible business participant in relation to each JobKeeper fortnight, the individual must be actively engaged in the business carried on by an entity at a time in the JobKeeper fortnight. There is not much information on what the ATO considers being “actively engaged” means. Please refer to ATO document QC 62814.
This is a difficult question because we do not know what attitude the ATO takes towards a person who is not able to actively engage in a business due to medical reasons but who otherwise would have engaged actively in the business. We trust that the ATO would take an expansive view of what it means to be actively engaged in a business in this scenario. We would recommend that you contact the ATO to clarify this. However, we should note, that the JobKeeper rules do not contain any discretion in relation to the question of whether an individual is actively engaged in a business or not. It is an objective test.
The answer to this question is not currently known. We expect that under the alternative tests for determining whether an employee has engaged in 20+ average hours per week in the four weeks of pay period prior to 1 March 2020, the average hours will be computed based on the shorter time period that the employee has worked in the month of February. We will need to wait to see the Legislative Instrument that will set out these tests.
Yes. Once an entity has become eligible for JobKeeper, under the original scheme, there is no further testing in relation to the decline in turnover before the end of the original scheme on 27 September 2020.
No. To continue receiving JobKeeper for the fortnights between 28 September 2020 and 3 January 2021 it will be necessary to satisfy the decline in turnover tests, using actual supplies, for the June 2019/2020 quarters and the September 2019/2020 quarters. Further, to continue receiving JobKeeper for the fortnights between 4 January 2021 and 28 March 2021, it will be necessary to satisfy the decline in turnover tests using actual supplies, for the December 2019/2020 quarters.
No. An employee must have been employed by the business on 1 July 2020 (previously 1 March 2020, now moved forward to July) to be eligible to have their wages subsidised by the JobKeeper payments.
At the time of writing (29 July 2020), this is unclear. Announcements by the Treasury states that the eligibility requirements for the JobKeeper fortnights commencing 28 September 2020 will need to be satisfied prior to the due date of lodgment of the September 2020 quarter BAS. This may mean that the eligibility requirements must be satisfied prior to the JobKeeper fortnight that commences on 28 September 2020 and ends on 11 October 2020. Nevertheless, there is a suggestion in the information that the ATO may permit the wage condition for that first fortnight to be satisfied later than 11 October 2020. However, it seems that the time period for determining eligibility is going to be short unless the ATO adopts an administratively concessional approach.
This issue is dealt with extensively in Law Companion Ruling LCR 2020/1.
The JobKeeper rules already contain a set of alternative decline in turnover tests which cater for this situation. We expect these will need to be adjusted to cater for JobKeeper 2.0. It should be noted if a business commenced after 31 December 2019 and has elected to lodge its business activity statement on a quarterly basis, that the current ATO view is that the business is not eligible to receive JobKeeper.
Generally, no. Employees must be engaged as at 1 March 2020 for their wages to be subsidised by JobKeeper payments. If the entity registering for PAYG is doing so because of the acquisition of a business that was operating on 1 March 2020, the JobKeeper payments may be available.
This should not matter. The JobKeeper rules state “If there is a regular period for which the employer would usually pay employees in relation to the performance of work by the employees, and that period is longer than a fortnight, then in applying this section [the wages condition section] those payments are to be allocated to a fortnight or fortnights in a reasonable manner.”
For JobKeeper 2.0, the tier that relates to an employee will depend on the average number of hours worked in the four-week pay periods prior to 1 March 2020. It is highly likely that these employees worked for greater than an average of 20 hours per week in the four-week pay periods prior to 1 March 2020 and will therefore be on the top tier ($1,200 per fortnight commencing 28 September 2020 or $1,000 per fortnight commencing 4 January 2021).
If you are using Single Touch Payroll enabled payroll software, in theory, the issue should be taken care of through the use of that software. The information you are presented with in the monthly reporting should take account of the fact that the employee’s employment has been terminated. If the company is not using Single Touch Payroll enabled payroll software, there is an option in the monthly reporting to only claim for one of the JobKeeper fortnights.
It is expected that the monthly reporting date will not change under JobKeeper 2.0.
No. This is so even if all previous decline in turnover tests have been satisfied.
At the time of writing (29 July 2020), this is not known. We are informed that the eligibility test must be passed prior to the time at which the activity statement for September 2020 needs to be lodged. Hopefully, the ATO will inform us of this date shortly.
You may be correct in this assessment, but it will largely depend on the precise terms of the Legislative Instrument that will enact JobKeeper 2.0. If the ATO permits its current rules to be used to determine turnover (LCR 2020/1), you likely to be able to use the methods in that law companion ruling to satisfy the basic decline in turnover test. Also, there may be scope for you to use the alternative decline in turnover tests.
When advising on eligibility for the JobKeeper subsidy you need to ensure that you don’t give up until you have exhausted all of the various methods of determining whether the decline in turnover test has been satisfied.
Broadly, GST grouping of businesses is irrelevant for the decline in turnover test. That is, the test is applied to each individual entity and not to the overall turnover of the group. However, the turnover of a GST group can be relevant if an employer entity is part of a GST group and the principal activity of that employer entity is to supply other members of the group with employee labour services.
Firstly, it may be possible to claim JobKeeper for the 12 employees that are transferring to your business. Please refer to subsection 9(6) of the JobKeeper rules.
The alternative decline in turnover tests contain an alternative test where a business has been acquired. We expect if your business, prior to the acquisition, would have satisfied the decline in turnover test that it will continue to be able to receive the JobKeeper subsidy. However, you will not be able to determine this for JobKeeper 2.0 until the Legislative Instrument issues setting out the alternative decline in turnover tests for JobKeeper 2.0.
Under the current JobKeeper rules, there is no compulsion for a business that is lodging BASs on a cash basis to be forced to use the accruals basis.
How is the decline in turnover calculated if a client has lodged a BAS on an annual basis in the prior year and this year has lodged a BAS on a quarterly basis?
It is expected that the Legislative Instrument will have something that will cater for this situation. Presumably the client will be asked to take, for example, the April, May and June 2019 supplies and add them together as if a quarterly BAS had been lodged for that quarter.
Yes, the actual GST turnover does include the value of taxable supplies of assets.
This issue does confuse some people because in determining the projected GST turnover, you disregard supplies that are by way of transfer of ownership of a capital asset. Projected GST turnover will not be used for the decline in turnover test under JobKeeper 2.0.
If the business was not initially eligible for JobKeeper, it will not be eligible for JobKeeper 2.0. We note in the question that the business did not pass the “basic test”. Please ensure that the business does not pass the alternative decline in turnover test and thus make it eligible for JobKeeper.
Also, if a business satisfies the decline in turnover test in relation to either the June 2020 quarter or September 2020 quarter under JobKeeper 2.0, it will be virtually certain that the business will have satisfied the decline in turnover test for the current JobKeeper scheme in some manner.
The test determines whether the employee or eligible business participant worked 20+ hours a week (or not), on average, in the four weeks of pay period prior to 1 March 2020. The precise details of how this will be calculated will only be known when the Legislative Instrument is made.
This situation is specifically mentioned in the Treasury information. Although there are no specific details, it is said that there will be an alternative method of determining the average hours that such people have worked in February 2020. Very likely, another time period where the individual is working as normal will be used as a proxy for the work undertaken in February 2020.
There has been no change to the cash flow boost as announced in March 2020. The first part of the cash flow boost should now have been received by eligible entities and instalments in relation to the second cash flow boost should now start to be flowing by way of credits on an entity’s account with the ATO.
This is not currently known and will not be known until the relevant Legislative Instrument is made. We consider it unlikely that the level of sales will be used as a proxy for the amount of work that a person has undertaken, however, it is a possibility particularly where the sales are based on services provided.
The answer to this question is currently unknown. The JobKeeper Act requires that records be kept that can substantiate the information needed to qualify for the JobKeeper subsidy. When the applicable Legislative Instrument issues, there may be further information about this. However, we expect that the ATO will probably place information on its website or issue a law companion ruling/practical compliance guideline that will discuss the record keeping requirements and what compliance resources will be committed by the ATO to auditing this area. We trust that the ATO will continue to use a reasonable and commercial approach to the eligibility of businesses for JobKeeper.
Details of this are currently unknown. The inference we obtain is that there will be an examination of the pay periods applicable to an entity that cover the four weeks prior to 1 March 2020. We are unclear whether this refers to the whole weeks prior to 1 March 2020 all the weeks that immediately proceed that date.
We note that 1 March 2020 was a Sunday. It may be that for many employers the pay period finished on the prior Saturday and so the question of whole or part weeks may not arise. Nevertheless, we will not be able to resolve this until the Legislative Instrument is made.
This is unknown but the ATO is aware of the issue and it is understood that rules will be developed to assist with this issue.
This will depend on how the alternative tests are framed in relation to the determination of whether the person has worked, on average, 20 hours per week in the four weeks prior to 1 March 2020. We suspect that you will be able to use the hours worked in January 2020 as a proxy for the hours worked in February 2020, but we will not know this until the applicable Legislative Instrument issues.
The information from Treasury is that the only hours that will be counted for an individual are in relation to the work performed by the individual for the business that is seeking to claim the JobKeeper subsidy. That is, only the hours for one business will be counted.
It is highly recommended that you amend the applicable BAS to ensure that the information is correct. No doubt, the ATO will be running integrity checks based on the information that has been submitted to it. If the information indicates that there has not been a sufficient decline in turnover, presumably it will cease to pay the JobKeeper subsidy.
Information from the Treasury says: “Partner income testing – the partner income test cut out will increase to $3,086.11 per fortnight, or $80,238.89 per annum, for individuals with no personal income, from 25 September 2020. The taper rate will increase from $0.25 – $0.27, with the higher income cut-out a result of changes to income testing for JobSeeker Payment. No one will be worse off under these temporary changes.”
No, it is not too late. The business will only be able to claim JobKeeper for the fortnights after it has enrolled. Eligibility for the original JobKeeper subsidy will remain until the JobKeeper fortnight ending 27 September 2020.
No, unless the Legislative Instrument makes this permissible. The announcement by the Government does not indicate that this will be the case.
It must be the case that on 1 March 2020, the individual was considered to be a long-term casual. That will be a question of fact. If the employee was not rostered on during the month of February, there may be some difficulty in concluding that the employee was a long-term casual.
We assume that the Legislative Instrument applicable for the JobKeeper 2.0 changes will contain provisions that deal with employees that are employed on a casual basis for the purpose of determining the number of hours that have been worked in the four weeks prior to 1 March 2020.
The question implies that the JobKeeper subsidy has not been claimed for this employee to date. This suggests that there is something that has made this particular employee ineligible. If that is the case, the employee will remain ineligible.
Alternatively, the employee may have had their employment terminated after 1 March 2020 and the employee is to be reinstated as at 1 September 2020. If that is the case, the JobKeeper subsidy should be able to be claimed from those fortnights in which the employee was re-employed.
Yes. It will also be necessary to show that there has been a greater than 30% decline in turnover for the September 2020 quarter compared with the September 2019 quarter. This appears highly likely as you state that no income has been earned since 1 April 2020.
There is an issue that needs to be raised in relation to this question. If this individual is claiming as an eligible business participant, there is a requirement that the individual is actively engaged in the business in each JobKeeper fortnight. Why does the individual have nil income since 1 April 2020? Has the individual been actively engaged in conducting the business?
The business can validly claim the JobKeeper subsidy in relation to the JobKeeper fortnights between 28 September 2020 and 3 January 2021 if there has been a 30% decline in turnover in relation to the June 2020 and September 2020 quarters. The notion of projected GST turnover will no longer be applicable and therefore having a situation that results in there not being a decline in turnover of more than 30% in relation to the December 2020 quarter will not be relevant for the JobKeeper fortnights that end on 3 January 2021. This will be relevant for the JobKeeper fortnights that commence on 4 January 2021 and conclude on 28 March 2021.
You have identified a very time sensitive piece of work that accountants, tax agents and BAS agents will be involved with. Unless the applicable Legislative Instrument provides otherwise, it will obviously not be possible to determine whether the decline in turnover test for actual supplies in the September 2020 quarter has occurred until that quarter ends. The first JobKeeper fortnight for JobKeeper 2.0 is from Monday, 28 September 2020 to Sunday, 11 October 2020. If the requirement to satisfy the wage condition in the JobKeeper fortnight continues, it will be necessary for a business to have determined that it has satisfied the decline in turnover between 1 October 2020 and 11 October 2020 (provided the ATO systems are operating on Sunday, 11 October 2020).
We trust that the ATO is acutely aware of the enormous amount of work that will need to be done in this very short timeframe and will administer the JobKeeper system in a reasonable manner. Standby for further ATO announcements.
The fact that an eligible business participant is outside Australia does not necessarily preclude the business from claiming the JobKeeper subsidy in respect of that individual.
The business must have been carried on in Australia on 1 March 2020. That will be a question of fact. Also, on 1 March 2020 the individual 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 law and was the holder of a special category visa (Subclass 444).
It must also be the case, for an eligible business participant, that the individual is actively engaged in the business at some time in each JobKeeper fortnight. If the income of the business is nil, you will need to be ready to provide evidence that the individual is actively engaged in the business.
The length of time that the individual spends overseas does not, of itself, have any immediate impact on the ability to claim the JobKeeper subsidy. However, while the individual remains overseas and the business is not deriving any income, there is an evidentiary issue in relation to proving that the individual is actively engaged in the business.
The question of whether an individual is actively engaged in a business is an objective test. That is, would an independent observer determine that the individual is actively engaged in the business. Unfortunately, there seems to be no allowance in the rules in relation to the situation where an individual is prevented from actively engaging in their business due to a reason that is beyond their control, including being stuck in an overseas location due to COVID-19. No discretion is given to the Commissioner of Taxation in this regard.