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The Banter Blog article titled The JobKeeper Payment, published on 17 April 2020, outlined the operation of the Government’s $130 billion JobKeeper Payment scheme which was enacted on 9 April 2020 (the Coronavirus Economic Response Package (Payments and Benefits) Act 2020 (the Act)). On the same day, the Treasurer registered a Legislative Instrument titled the Coronavirus Economic Response Package (Payments and Benefits) Rules 2020 (the Rules), which set out the Treasurer’s rules to give effect to the JobKeeper scheme.
Since the previous Banter Blog article was published, the landscape has been rapidly changing, with substantial amendments to the JobKeeper payment rules registered on 1 May 2020, and as the ATO continuously issues new guidance.
This article provides links and brief details of the new information to assist practitioners and their clients to locate these resources.
This article does not provide technical analysis and is not an exhaustive reference to ATO guidance.
Changes to the rules
Amending Rules No. 2
On 1 May 2020, the Treasurer registered a Legislative Instrument titled the Coronavirus Economic Response Package (Payments and Benefits) Amendment Rules (No. 2) 2020 (Amending Rules No. 2).
The Amending Rules No. 2 refine and clarify elements of the JobKeeper scheme. In particular, they:
- provide a modified decline in turnover test for certain group structures (see below) involving the use of employer entities (service entities);
- adjust the way in which Commonwealth payments are treated when calculating a university’s turnover;
- extend the scheme to certain public funds that undertake overseas aid and disaster relief;
- adjust the way in which payments made by the government and the United Nations are treated when calculating a charity’s turnover;
- include a notification requirement to confirm that all eligible employees of a participating entity must be given the opportunity to agree to be nominated;
- impose additional requirements that must be met for individuals who were 16 or 17 years old on 1 March 2020 to be eligible nominees;
- extend the JobKeeper scheme to include religious practitioners that are not employees; and
- make various consequential and minor technical amendments.
Modified test for employer entities
The modified decline in turnover test will apply to an employer entity that is a member of a consolidated group or a consolidatable group (for the purposes of Div 703 of the ITAA 1997), or a GST group (for the purposes of Div 48 of the GST Act). Very broadly, in calculating its decline in turnover, the employer entity may choose to replace its turnover figures with the sums of the turnovers of the group members to which it supplies employee labour services. The ATO has also released an online fact sheet titled Modified basic test for group employer entities (QC 62132) to provide guidance on how to apply the modified test.
New ATO guidance
The Commissioner’s alternative decline in turnover tests
On 23 April 2020, a Legislative Instrument titled Coronavirus Economic Response Package (Payments and Benefits) Alternative Decline in Turnover Test Rules 2020 was registered. The Legislative Instrument sets out alternative decline in turnover tests (the alternative tests) where there is not an appropriate relevant comparison period in 2019. There is a separate alternative test for each of seven classes of entities.
If an entity satisfies the basic test, it does not need to also satisfy an alternative test. Further, an alternative test cannot make the entity ineligible, if the entity is eligible under the basic test.
The ATO’s updated web guidance on the alternative tests provides worked examples for some of the alternative tests.
Each alternative test has eligibility criteria that must be met in order for the entity to apply the test.
One of the alternative tests applies to a scenario where the entity’s turnover has ‘substantially increased’ over a period of three, six or 12 months. In determining the increase in turnover over a 12-month period, where the test month is April 2020, the ATO states:
[t]o test if your entity’s current GST turnover increased since the start of April 2019, compare the current GST turnover for March 2019 with the current GST turnover for March 2020.
This clarifies common questions about which months to compare to determine eligibility (i.e. whether the March 2020 turnover should be compared to the turnover for April 2019 or March 2019).
PCG 2020/4 — Schemes in relation to the JobKeeper payment
Practical Compliance Guideline PCG 2020/4 (the Guideline) provides guidance on how the ATO will apply their compliance resources to schemes to obtain access to the JobKeeper payment, or an increased amount of a JobKeeper payment.
Section 19 of the Act, under the heading ‘Contrived Schemes’, provides that the Commissioner may determine that an entity was never entitled to a JobKeeper payment or was entitled to a different amount, where any entity entered into or carried out a scheme for the sole or dominant purpose of enabling the entity claiming JobKeeper to obtain or increase its entitlement to the JobKeeper payment.
The Guideline indicates that the Commissioner will particularly be concerned in circumstances where:
- the entity’s business is not significantly affected by external factors beyond its control; and/or
- the entity access or increases JobKeeper payment entitlements in excess of those that would maintain pre-existing employment relationships.
The eight examples in the Guideline cover:
- the types of schemes to which the Commissioner would be likely to apply his compliance resources — Examples 1, 2, 3 and 8; and
- the types of schemes in relation to which there is a low risk that the Commissioner would apply his compliance resources — Examples 4, 5, 6 and 7
PS LA 2020/1 — Commissioner’s discretion to allow further time to register for an ABN or provide notice of assessable income or supplies
Law Administration Practice Statement PS LA 2020/1 (the Practice Statement) applies for the purposes of satisfying the eligibility criteria for the cash flow boost or the JobKeeper payment in respect of an eligible business participant.
Relevantly, for both purposes, the entity must have:
- had an ABN on 12 March 2020 (or a later time allowed by the Commissioner);
- had an amount included in its assessable income in the 2018-19 income year in relation to it carrying on a business, or
- made a taxable supply in a tax period starting on or after 1 July 2018 and ending before 12 March 2020; and
- given the Commissioner notice on or before 12 March 2020 (or a later time allowed by the Commissioner) that the amount of income should be so included, or that the entity had made the taxable supply.
The Practice Statement provides guidance on the relevant circumstances that should be taken into account when the Commissioner is considering whether to grant further time for an entity.
The Practice Statement assists in answering common questions in respect of those entities that had not lodged a 2019 income tax return by 12 March 2020 — e.g. where they commenced business after 30 June 2019, or are subject to a tax agent extension for lodgment until 15 May 2020 — and also had not lodged a BAS by 12 March 2020 or are not required to (for example, because they are not required to be registered for GST).
The Commissioner does not have the discretion to extend the date by which an entity can derive an amount of assessable income or make a taxable supply. The Commissioner can only extend the date by which notice is provided. Therefore the Commissioner cannot exercise the discretion in respect of all entities who do not satisfy the notification requirement.
If an entity needs to speak to the ATO about their eligibility, more information about this in relation to the cash flow boost is on the ATO website at the below links. Essentially, you need to contact the ATO and provide more information.
There is currently no corresponding information in relation to the JobKeeper payment, however it is likely that the same principle would apply — i.e. contact the ATO and provide additional information.
LCR 2020/1 — decline in turnover test
Law Companion Ruling LCR 2020/1 (the Ruling) is intended to assist in working out when an entity has met the decline in turnover test, including in the identification of relevant supplies, allocation of supplies to relevant periods and the value of each supply.
As an alternative to allocating a supply to a relevant period and then determining its value based strictly on the time the supply is made (which may be difficult to determine), the Commissioner will allow an entity to use the following alternative methods:
- accrual accounting;
- GST attribution basis; or
- income tax accounting — where the entity is not registered for GST.
The Ruling states that it supplements guidance on the ATO’s website and that ‘[i]t is not our intent to focus compliance resources on circumstances where you have already used guidance on our website in good faith to determine whether you satisfy the decline in turnover test.’
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