JobKeeper extension questions from practitioners answered

by Neville Birthisel

Tax & Super Australia recently hosted a webinar on the JobKeeper extension. The webinar was free for members but was also available to non-members. The webinar was recorded, and the recording, along with the extensive notes, is still available (see here).

Naturally JobKeeper 2.0, as it has been dubbed, generated a lot of questions from practitioners about the practicalities of the extended scheme but also about the various client-specific conundrums that it generated. The tax technical team at Tax & Super have answered all of these queries (see link at the bottom of this page).

The following are samples of the questions and answers that may have wider application for you and your clients.

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Q: As we move into the JobKeeper extension period, what has not changed from the JobKeeper rules as they applied up until 27 September 2020?

A: Quite a lot. For example:

  • Entities can still register for the JobKeeper scheme at any time provided they meet the eligibility criteria;
  • An entity still needs to have been carrying on a business in Australia as at 1 March 2020;
  • Entities that were registered for JobKeeper prior to 28 September 2020 do not need to re-enrol, however they do need to meet the additional eligibility tests such as the additional decline in turnover tests;
  • Entities still need to have satisfied the decline in turnover test under the “pre-28 September 2020” rules, even if the entity did not actually access the JobKeeper scheme during that previous period;
  • The required decline in turnover is still 15%, 30% or 50% depending on the type of entity and aggregated turnover;
  • The 12 March 2020 tests still apply to eligibility as an eligible business participant;
  • Employees still need to have been employed as at 1 March 2020 or 1 July 2020 (subject to the special concessions for some 1 March 2020 employees);
  • Casuals still need to meet the test as a long-term casual as at 1 July 2020 to qualify as an eligible employee;
  • The wage condition for employees still applies, albeit at the new payment rates as determined for each employee;
  • The age conditions as at 1 July 2020 for employees still apply;
  • The residency conditions for employees as at 1 July 2020 still apply;
  • The monthly reporting obligation remains;
  • JobKeeper is still a reimbursement paid monthly in arrears.

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Q: How was turnover (and the turnover test) determined under the JobKeeper rules for JobKeeper fortnights 1-13 (March–September 2020)? On a cash or accruals basis?

A: The rules used the terms “projected GST turnover” for the test period and “current GST turnover” for the comparison period, as defined in the GST Act. The GST legislation, when referring to projected and current GST turnover, refers to the value of supplies made, or likely to be made in the period. The process was:

  • Determine what supplies have been made or are likely to be made during the period.
  • Determine the value of those supplies and sum the values.

The question of whether the amounts should be accounted for on a cash or accruals basis does not arise in the above process.

Despite this, a previous version of the ATO document entitled “Applying the turnover test” (QC 62132) stated the following:

“As a practical matter, we expect that you will use the GST accounting method that you normally use. In other words, you may use a cash or accruals approach to determining the value of your sales in the relevant month or quarter.”

Further, the ATO indicated that entities which normally used the accruals basis, but for JobKeeper purposes elected to use the cash basis, may be asked to justify their choice.

Ultimately, as explained in LCR 2020/1, there were multiple ways that turnover could be calculated, including:

  • The supply method, as explained above;
  • Accrual accounting;
  • GST attribution basis:
    • cash basis;
    • accruals basis;
  • Income tax accounting (if not registered for GST.

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Q: Is there any leeway for errors when calculating the entity’s decline in turnover?

A: The JobKeeper rules for JobKeeper fortnights up until 27 September 2020 used the terms “projected GST turnover” for the test period and “current GST turnover” for the comparison period, as defined in the GST Act.

As such, Treasury and ATO information indicated that there would be some tolerance where employers, in good faith, estimate a 30% or more or 50% or more fall in turnover, but actually experienced a slightly smaller fall.

However, as the rules for the JobKeeper extension period use “current GST turnover” for both the test period and the comparison period, and these are intended to align with the entity’s BAS lodgements, these amounts should be actuals not estimates, and therefore no error tolerance would be expected.

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Q: What periods (reference periods) are used in determining whether the 80 hours has been satisfied?

A: “1 March 2020 employees”

The 28-day period ending at the end of the most recent pay cycle for the employee that ended before 1 March 2020; or

The 28-day period ending at the end of the most recent pay cycle for the employee that ended before 1 July 2020; or

An alternative reference period as determined by the Commissioner;

Whichever gives the highest result.

“1 July 2020” employees”

The 28-day period ending at the end of the most recent pay cycle for the employee that ended before 1 July 2020; or

An alternative reference period as determined by the Commissioner.

(Whichever gives the highest result)

Eligible Business Participants / Religious Practitioners

The month of February 2020; or

An alternative reference period as determined by the Commissioner.

(Whichever gives the highest result)

Where a reference period for an employee is longer than 28 days for an employee or 29 days for an eligible business participant (where say the pay cycle is monthly or an alternative reference period as prescribed by the Commissioner is being used), the reference period will need to be pro-rated back to the 28 or 29 days as applicable.

The reference periods are the same regardless of whether an entity is considering the Oct–Dec 2020 extension period or the Jan–Mar 2021 extension period.

The alternative reference periods that the Commissioner may determine cover, in part, unpaid absences such as sick leave, parental leave or emergency services leave.

There are many more questions answered on the JobKeeper extension. See all of them here.

Website Comments

  1. JIA YU
    Reply

    What if GST turnover declines 29%. Is the employer still eligible to apply for Jobkeeper 2.0?

  2. Neville
    Reply

    The test for JobKeeper 2.0 is based on actual turnover (current GST turnover) rather than estimated turnover (projected GST turnover) as was the case with JobKeeper 1.0 Therefore the value of the supplies for the purposes of calculating the decline in turnover should be known prior to undertaking the calculation.

    Indeed, the registration process requires entities to submit their turnover for the September 2020 quarter and the relevant comparison period (rather than just indicating whether or not they have met the requisite decline in turnover). Therefore, if the decline is less than 30% the ATO system will not accept the registration.

  3. Steve
    Reply

    For alternative test, business with substantial increase in turnover would choose 12 mon (50%), 6 mon(25%) or 3 mon(12.5), but in ATO test, which quarter turnover should put in? as ATO system still shows September 2019 quarter turnover when ticked substantial increase in turnover of alternative test.

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