IMPORTANT Client Circular – Jobkeeper 2 Extended Rules – New Turnover Test - New Two Tier System etc

24 September 2020

We have referred to the Jobkeeper periods as follows:

Jobkeeper 1.0 = the original Jobkeeper scheme that ends 27 September 2020 Jobkeeper 2.1 = Extension Period 1 for 28 September 2020 to 3 January 2021 Jobkeeper 2.2 = Extension Period 2 for 4 January 2021 to 28 March 2021

Introduction:

Many businesses will have participated in the initial Jobkeeper 1.0 arrangements and some may continue with the extended Jobkeeper 2.1 and 2.2 or become newly qualified for the extended arrangements. This circular is intentionally brief so as to give you an overview. We have included some links to the ATO which will lead to additional information and as always stand ready to assist clients with complex questions.

Reminder: The Jobkeeper 1.0 final fortnight (FN13) is for pay cycles ending on or before 27th September 2020. If your business will possibly continue with the Jobkeeper 2.1 extensions do not mark this as the final fortnight in your STP (Single Touch Payroll System). As with previous months the ATO declaration for September has to be lodged by 14th October 2020.

We have grouped our information below under the following headings:

1. New Turnover Test – determine your eligibility for Jobkeeper 2.1;

2. Exiting Employers – some reminders when the business no longer qualifies for Jobkeeper and exits the program;

3. Continuing Eligible Employers – new two -tier system etc;

4. Newly eligible employers;

5. Business participants.

Item 1. New Turnover Test:

Jobkeeper 2.1 and 2.2 will basically use only two turnover test comparisons, as follows:

Extension period 1 = to qualify for Jobkeeper October to December 2020 (ie; now)

= compare actual turnover for Quarter July to September 2020 versus same period 2019

Extension period 2 = to qualify for Jobkeeper January to March 2021 (ie; later and a separate test)

= compare actual turnover for Quarter October to December 2020 versus same period 2019

Previously there was debate about the use of cash versus accruals method to work out the GST exclusive amount of turnover. A new rule has been added which can be summarised as follows:

- If your BAS for Sept. 2019 quarter was on a cash basis you compare on a cash basis to Sept. 2020;

- If your BAS for Sept. 2019 quarter was on an accruals basis you compare on an accruals basis to Sept. 2020;

- You use the quarter even if you are a monthly lodger;

- You use the quarter even if you are not registered for GST and don’t lodge BAS

. Reminders:

- For businesses with Aggregated (ie; Group) Turnover below $1bn per annum, you test the employer entity single entity Turnover, which must have reduced by more than 30%;

- For service entities (if you have a separate entity for that purpose) the ATO have various rules which are too complex to cover here. Please contact us and we will discuss with you your particular circumstances;

- The ATO may expect the relevant BAS lodgement to be up to date.

Other:

- Whilst you may not have final information for the September 2020 quarter, it is important to estimate your position so you can plan;

- The ATO will allow till 31st October to declare the actual turnover and eligibility for Jobkeeper 2.1;

- On 23/9/2020 the ATO issued the Alternate Turnover test rules which we expect will only apply to a small number of entities which are considered to have been subject to special circumstances. There is no power for the ATO to consider the special circumstances of any one particular taxpayer / employer. The Alternate rules apply only to the groups described in the new rules which we have summarised in the headings below. Entities still have to have existed prior to 1/3/2020. Whilst these rules are too complex to describe in detail, we have set out their paraphrased headings so that you are aware and can do further investigation or contact us for assistance if the alternate rule appears to be relevant to you:-

o New business entity commenced after 1/10/2019 and before 1/3/2020;

o Entity that acquired or disposed of part of it’s business after 1/10/2019 and before 1/7/2020 which affected it’s turnover;

o Entity that underwent a restructure after 1/10/2019 and before 1/7/2020 which affected it’s turnover;

o Entity that had a substantial increase in it’s turnover just before 1/10/2019 or 1/3/2020;

o Entities specifically affected by Drought or Bushfire and received the relevant relief packages;

o Entities with highly irregular (but not cyclical variation) turnover in the 12 months before 1/10/2019 or 1/3/2020

o Sole trader or small partnership where the principal person was subject to injury, sickness or leave that affected their turnover in the comparison period.

Please follow the link to the ATO website and familiarise yourself with some of the detail so that you can collate the relevant information and check your entity’s status under the new Turnover Tests.

https://www.ato.gov.au/General/JobKeeper-Payment/JobKeeper-extension-announcement/

Item 2. Exiting Employers:

As we near the end of the Jobkeeper 1.0 scheme being 27th September some employers may be exiting.

For the last time employers in this category should ensure they have paid the minimum Jobkeeper wages for employees to the end of the scheme 27th of September 2020 ie the end of Jobkeeper Fortnight 13. If your pay cycle does not align with the ATO fortnights please refer to how the top up in the first fortnight (30th March – 12th April) when doing the final payroll.

Employers should lodge the declaration for September turnover etc with the ATO (as per prior months) to claim for wages paid in September by 14th of October 2020.

As per the current ATO guidelines there is no requirement to opt out of the program however some payroll software providers have advised it is a requirement for the employer to opt out of Jobkeeper for software reporting purposes. Please refer to your STP payroll software provider.

It is requirement that the employer notify employees they are no longer receiving Jobkeeper on their behalf.

As mentioned above although an employer may not be eligible for Jobkeeper 2.1 (Dec 2020 quarter) it is possible you may be eligible for JobKeeper 2.2 ie the March 2021 Qtr. We therefore suggest you review your eligibility towards the end of December. If eligible again you will be required to register with ATO and make changes in your payroll software.

Item 3. Continuing Eligible Employers:

For the employers that are enrolled in Jobkeeper 1.0 and receiving Jobkeeper payments, there’s no requirement to re-enroll to claim payments in the extension periods. You will need to check your continuing eligibility (new turnover test) and submit the relevant information to the ATO after 1 October 2020 (eg: applicable tier for each employee).

The rate of the JobKeeper payment in each extension period will change depending on the number of hours an eligible employee works, or an eligible business participant is actively engaged in the business. The table below summarizes the current and new payment rates.

The two-tier payment system will apply to each employee based on their total working hours in the applicable “reference period” which consists of the 28-day periods ending at the end of the most recent pay cycle for the employee ending before:

1 March 2020 - the original reference date; or

1 July 2020 - the additional reference date for conditions that apply to newly eligible employees of qualifying employers for JobKeeper fortnights starting on or after 3 August 2020.

Please note eligible business participants only have 1 reference period (refer item 5 of this newsletter).

In general, Tier 1 rates apply to employees whose total hours of work, paid leave and paid absence on public holidays in the reference period were 80 hours or more. Otherwise Tier 2 rates apply. Remember the reference period is 28 days not a fortnight.

From 28 September 2020, continuing eligible employers must notify the Commissioner of the payment rate that applies to each employee. Please check your STP payroll software update which may enable such reporting.

After determining what rate applies to each eligible employee, employers must notify their employees in writing within seven days of advising the Commissioner of the payment rate applicable to the employee.

Please refer extract below from the ATO website

Key dates and actions for employers

https://www.ato.gov.au/printfriendly.aspx?url=/General/JobKeeper-Payment/JobKeeper-extension-announcement/

• 28 September 2020 – start paying eligible employees tier 1($1,200) and tier 2 ($750) JobKeeper rates. This is based on the hours worked by employees. • Between 1 and 14 October 2020 – complete the October JobKeeper monthly business declaration so you can be reimbursed for September fortnights.

• Between 1 and 31 October 2020 – check and submit the business actual decline in turnover to us online to be eligible for JobKeeper extension 1.

• 31 October 2020 – for the JobKeeper fortnights from 28 September 2020 and 12 October 2020 only, we are allowing employers until 31 October 2020 to meet the wage condition (paying all your eligible employees/business participant).

• Between 1 and 14 November – complete a monthly business declaration and tell us the payment tier being claimed for each eligible employee/business participant.

You will note the ATO allows until 31st October 2020 to meet the wages condition (eg: top up) for FN14 (28 September -11 October 2020) and FN15 (12-25 October), that is if unsure if the top up will apply you can wait and pay a catch up by 31 October 2020.

Item 4. Newly eligible employers:

If you first become an eligible employer in the extension period 1, and have decided to enter the program, we hope you have been reading our newsletters and keeping some familiarity with the Jobkeeper program overall. It is not possible to cover all the matters, however as a reminder list of the main items, we suggest you will need to: a) Identify eligible employees (eg; employed pre 1/7/2020, resident, not receiving paid parental leave, if casual employed by you for 12 months to 1/7/2020, etc);

b) Send the Jobkeeper employee nomination notice to your eligible employees to complete and obtain the signed forms back;

c) Notify all eligible employees you are intending to claim the JobKeeper payment;

d) Enroll in the JobKeeper scheme and make the necessary declarations such as turnover, participating employees etc (usually via the ATO Business Portal);

e) Update your STP (Single Touch Payroll) reporting regarding JobKeeper, including identifying relevant payment cycles, setting up Jobkeeper allowance for any top ups, adjusting SGC (Superannuation Guarantee) flags for exemption from SGC for top up amounts above hours worked, etc;

f) Ensure wages conditions are met (ie; any required top up (if any) to meet minimum payment per rates above at item 3 above are paid and any catch up is done by the extended date of 31/10/2020), etc.

g) Consider how to best arrange employee hours and arrangements having regard to the Jobkeeper subsidy.

Item 5. Business Participants:

We bring to your attention some differences between employees on Jobkeeper 2.0 mentioned above to the business participant whether a Sole trader or Employer business participant. A business participant is usually the principal of a business who is not paid as an employee but is actively engaged in the business.

When determining which rate tier is applied to a business participant it is noted that there is only 1 reference period being the 28 days before 1st of March 2020 unlike employees who also have a 1st July date. It is therefore important to assess the number of hours the business participant was ‘activity engaged’ in the 28 days before 1st March 2020 which will determine the tier applied.

Where the 28 days prior to March is not an accurate representative of hours worked the Commissioner has provided various alternate reference period tests. Please contact our office for more information.

Once the Tier for the business participant is determined no retest is required for March 2021 Quarter.

An entity other than a sole trader must give a notice to its business participant within 7 days advising them which rate has been claimed.

Similar to employee declarations entities with a business participant, if eligible, must submit the actual decline in turnover and tier rate declarations to the ATO between 1st October and 31st October 2020.

The guidelines and eligibility of business participant have in broad terms stayed unchanged from Jobkeeper 1.0. For more information on please refer https://www.ato.gov.au/general/jobkeeper-payment/Partnerships,-trusts-and-companies/#JobKeeperandyourentitystaxreturn

Other useful links

Xero Link :

https://central.xero.com/s/article/About-JobKeeper-payments#Howthetwophaseswork

Important: Clients should not act solely on the basis of the material contained in this newsletter. Items herein are general comments only and do not constitute or convey advice per se. Also changes in legislation may occur quickly. We therefore recommend that our formal advice be sought before acting in any of the areas. Client Alert is issued as a helpful guide to clients and for their private information. Therefore it should be regarded as confidential and not be made available to any person without our prior approval.