Some good news: The JobKeeper Payment Legislation has passed!
The legislation to enact the JobKeeper Payment was passed through both houses of parliament overnight. There were a couple of attempts to make changes which did slow the passage of the legislation, however it passed through unchanged in the end.
The Good NEWS: As an employer, you are now one step closer to ensuring that your employees can be retained, engaged and paid if you have been impacted by the COVID-19 economic upheaval! I know that this will provide a welcome boost to a vast number of our clients and their employees as well.
If you have already registered your interest in making a claim on behalf of your employees through the following link, https://www.ato.gov.au/Job-keeper-payment/, you will be notified as soon as the formal application process opens. Please keep an eye on your emails and text messages from the Australian Taxation Office.
Employers will be eligible to receive this wage subsidy for each eligible employee if their turnover declines by more than 30%. An eligible employee is a full-time, part-time or long-term casual employee that was employed by you on 1 March 2020, and is still engaged by you (please note: an employee on stand-down is actually still classified as “engaged” by you, and this payment might enable you to bring them back to work). There are some exceptions to this, mainly regarding non-residents, certain Visa holders and children under the age of 16. Make sure that you familiarise yourself with the requirements around eligible employees before you commence any application form for this payment. A good summary can be found at the bottom of page 2 of this PDF document released by Treasury https://treasury.gov.au/sites/default/files/2020-04/Fact_sheet_Info_for_Employers_0.pdf
The ATO will pre-fill your application with known employment details from your Single Touch Reporting information, but you will need to assess each person’s eligibility against the criteria as part of the application process and confirm which ones are eligible and still engaged.
The Turnover Test
The most common questions we have fielded in relation to this payment is around how a business would or could show the required decline in turnover, including what period is relevant to the test.
While there will always be outliers and businesses that don’t quite “fit the criteria”, read on for an overview of what we know will apply to most businesses across the country. If you are one of these outliers, please read on to the end as well – there is light at the end of the tunnel!
To establish that you have faced the relevant fall in turnover, you would generally be expected to show that your turnover as per your Activity Statement lodgement cycle has fallen relative to the same reporting period 12 months earlier. Turnover includes all GST-taxable and GST-Free supplies, but not input-taxed supplies (typically residential rent or financial supplies, which won’t be applicable to most of you).
For example, if you are a quarterly Activity Statement lodger and your G1 Sales amount as reported on your March 2020 quarter BAS is $330,000 including GST, to satisfy the test that your turnover has fallen by 30% the reported G1 amount as per your March 2019 BAS would need to be more than $471,500 including GST.
The same test would apply to a monthly Activity Statement lodger, comparing the March monthly Activity Statement G1 amount for 2020 to the same month from 2019.
If this comparison does not show the required reduction, but you know that you will (or reasonably believe that you will) suffer the required reduction in turnover in the near future, there will be alternative tests for you.
The explanatory documentation includes references to “a business is likely to face the relevant fall in turnover” and “their turnover will likely fall in the relevant month or quarter”.
This leads us into a future turnover test and if you could demonstrate that, for example, your April 2020 Activity Statement G1 amount that you are expecting to lodge on your upcoming Activity Statement will be 30% less than the amount lodged on your April 2019 Activity Statement, you would satisfy the reduction in turnover test. We expect that this would also apply for a quarterly lodger in relation to the expected June 2020 BAS lodgement. You would need to have a very good basis for such a claim. For example, a report from your CRM software showing a 50% reduction in enquiry or qualified leads starting in March 2020. The future impact on your turnover would be obvious and we could use that information to support a claim that your turnover will likely reduce by at least 30% even if your turnover for the March period was actually ok compared to the year before.
The Commissioner will definitely have an alternative test to cover those businesses that have been forced to close due to a Government directive, like gyms, tattoo studios and beauty salons. This would be relevant to certain industry groups. If you are one of these businesses, your March quarter income may have been ok, but we all know that your April income will be $0, or close to it.
What about if your business did not exist 12 months earlier? Or where your business income from a year earlier is not really representative of your current turnover due to a large acquisition? Or you are a start-up? Or there has been some other fundamental change in your business?
In your case, the Commissioner will be given discretion to consider additional information to establish that your turnover has fallen due to the COVID-19 pandemic. This other information could be in the form of future forecasts as per the above, or it could be a comparison of say December 2019 Activity Statement reported turnover against the March 2020 Activity Statement turnover. Or an average monthly turnover comparison for the current financial year compared to a recent month or expected April 2020 turnover with supporting data.
If you are one of the true outliers and none of the above applies to your situation, the Commissioner will have discretion to set out alternative tests that would establish eligibility in specific circumstances. These alternative tests will form part of the application process and the additional information that the Commissioner can consider in support of your claim for payment.
There will be some tolerance where employers have estimated a 30% reduction in turnover but actually experience a slightly smaller fall provided the original estimates were made in good faith (and you can back them up through some sort of data).
Employers, the application process will open soon! Start gathering your data to support your claim for a reduction in turnover, whether it be actual already, or likely in the near future. And as always, if you need any help at all, please contact us.