By Timothy Bow, Timothy BowManaging Partner - Melbourne
24 September 2020
The following summary seeks to outline the different considerations an Eligible Employer will need to review to comply with JobKeeper 2.1 – Extension Period 1. The commentary included below is general in nature and does not constitute tax advice, please seek advice specific to your circumstances.
Key Dates and Actions for Employers
- 28 September 2020: JobKeeper 1 ends, JobKeeper extension period 1 starts and the payment rates change for eligible employees & business participants depending on the hours worked during the reference period. See the Reference Period and Payment Rate sections below for further details.
- Between 1 and 14 October 2020: (Final monthly declarations for JobKeeper 1.0) complete the monthly business declaration so you can be reimbursed for September fortnights (JobKeeper FN 12 and FN 13).
- Between 1 and 31 October 2020:
- Check and submit the business’s actual decline in turnover to the ATO online to be eligible for JobKeeper extension period 1.
- Make sure you have a copy of the JobKeeper employee nomination notice for each eligible employee (Note: additional notice is required for terminated employees re-employed after 1 July 2020).
- 31 October 2020: (Transitional) final day to meet the wage condition for JobKeeper fortnights from 28 September 2020 and 12 October 2020 (JobKeeper FN 14 and FN 15).
- Between 1 and 14 November 2020: Complete a monthly business declaration and notify the ATO which payment tier is being claimed for each eligible employee
Actual Decline in Turnover
To be eligible for the extension of the JobKeeper payment, Eligible Employers must demonstrate that their current GST turnover (not projected GST turnover) has declined in the September quarter.
Consistent with existing rules, participating businesses and not-for-profits will need to demonstrate:
- 30% fall in turnover (for an aggregated turnover of $1 billion or less).
- 50% fall in turnover (for an aggregated turnover of more than $1 billion).
- 15% fall in turnover (for ACNC-registered charities other than universities and schools).
What if I prepare and report my BAS on a monthly basis rather than a quarterly basis?
Please aggregate the monthly actual GST turnover and work out the decline based on the September 2020 quarter in comparison to the September 2019 quarter (unless alternative test periods apply).
Can I choose to use either cash or accruals method to work out my current GST Turnover?
Entities registered for GST must report supplies made to a particular BAS according to either a cash basis or a non-cash basis of accounting.
Depending on the GST accounting basis relevant to you, supplies should be allocated to a test period as follows:
- Cash basis – supplies are considered made in the test period you received payment for them. If you receive part-payment for a supply in the test period, your supply is only taken to be made in the test period for the part of the payment you received.
- Non-cash basis (accruals basis) – supplies are considered made in the test period you received any payment, or when you issued an invoice if it was issued prior to receiving any payment.
How do I work out my current GST Turnover during the test period?
In general terms, the current GST Turnover would include the following:
- GST taxable supplies
- GST free supplies
- Proceeds from the sale of capital assets
For many businesses that only make GST-free and taxable supplies, the G1 disclosure on the BAS is usually representative of the current GST Turnover.
When calculating current GST turnover for an entity that operates two or more businesses, the turnover from each business is combined.
Entities that form part of a GST group or consolidated group must work out the current GST turnover and apply the actual decline in turnover test for each entity individually.
Do not include:
- Input taxed supplies (i.e. bank interest, proceeds form sale of shares, residential rental income received).
- Sale of private capital assets (i.e. private motor vehicle).
- Payments for no supply (i.e. JobKeeper payments received).
The ATO has also outlined the following (QC 63698: last modified 22 Sep 2020):
Financial supplies (for example, issuing shares) are usually input taxed supplies. However, when a financial supply is made to a non-resident who is not in Australia the supply is GST-free instead of input taxed.
This means capital raised from issuing shares to offshore entities will generally be included in your turnover.
28-day period ending at the end of the most recent pay cycle that ended before 1 March 2020 or 1 July 2020. Records will need to be kept, confirming the 80-hour threshold is satisfied to claim the higher rate.
Assuming a fortnightly pay cycle applies to an eligible employee as an example.
- An employer can choose the most beneficial reference period.
- The employee only needs to satisfy the 80-hour threshold in one of the 28-day reference periods. If the 80 hours requirement is satisfied in either reference period, the higher payment rate applies.
- If the pay cycle is longer than 28 days for (for example monthly), a pro-rata calculation is required (i.e. total hours x 28/31).
Eligible Business Participant:
February 2020 (29 days – given leap year).
The Eligible Business Participant:
- Was actively engaged in the eligible entity’s business for 80 hours or more during the reference period, and
- Has provided the eligible entity with a written declaration confirming this.
Note: alternative reference period applies, further details can be accessed via the following link:
Payment Rate (two-tier)
The 80 hours would include:
- Actual hours the eligible employee worked;
- Hours eligible employee were on paid leave; and
- Hours eligible were paid for absence on a public holiday.
The ATO has confirmed that although JobKeeper payments are ordinary income, they are not derived in the ordinary course of business, and therefore not included in aggregated turnover. In other words, the JobKeeper payments received are assessable income but will not be included in the calculation of aggregated turnover under the following thresholds:
- $2m — small business CGT concessions
- $10m — small business entity concessions
- $20m — refundable R&D offset
- $50m — base rate entities and Instant Asset Write Off for medium businesses
- $500m — Instant Asset Write Off for large businesses
- JobKeeper decline in turnover percentage
Find out more about JobKeeper 2.1 by visiting PKF Australia’s COVID-19 Hub.