As you are aware, the existing JobKeeper program (JKP) comes to an end on 27 September. The next phase of the program runs from 28 September to 28 March 2021. We have previously outlined the next phase, based on the announcements that had been made to that time.
The ATO are now releasing details of the Amending Rules which will apply to the next phase and this is now giving us details on a few areas that were lacking clarity.
If you are already enrolled in the program, there is no need to re-enrol for the next phase. You do however need to retest, which we will discuss below. If you qualify for the next phase, all your eligible employees (1 March-based and 1 July-based) will simply carry over.
Below is a summary of the next JobKeeper phase (assuming the 30% decline threshold applies):
From 28 September, JobKeeper will be tapered, making it more targeted. If you are not in the existing JobKeeper program, you can still qualify for the next phase. You’ll need to satisfy the same qualifying criteria, and the new actual decline in turnover test. You can qualify for either the 1st stage or the 2nd stage.
The new actual decline in turnover test is discussed in more detail below, however some key points that must be assessed urgently by businesses include:
- Must use the accounting basis used for GST reporting purposes (Eg. Either cash or accruals)
- No modification to actual GST turnover allowed for income from sale of capital assets, bad debts or accounts
- Tests for extension period applied on a quarterly basis based on actual turnover generally tested by reference to the BAS
The ATO will also publish further guidance on the alternative tests for the actual decline in turnover test soon.
The first monthly declaration for the next JobKeeper phase will be for October, incorporating the first two fortnights, ending 11 October and 25 October. We expect the declaration will be similar to before, except that each eligible employee will be allocated to the higher-rate or lower-rate camp.
Here are some of those finer points that are now clearer, including what you need to do.
1. Decline in turnover test – the new actual GST decline in turnover test
The JobKeeper Extension now requires an entity to test their decline in turnover based on actual turnover rather than on projected turnover as required under the initial JobKeeper rules.
The new actual turnover test will be based on two key quarterly periods – the September 2020 and December 2020 quarters compared to relevant prior period quarters.
In particular and as shown in the above table, for JobKeeper fortnights between 28 September 2020 and 3 January 2021 (Period 1), an entity must determine whether it has an actual decline in turnover for the September 2020 quarter compared to the prior September 2019 quarter and have met the relevant decline percentage – 15%, 30% or 50% depending on the type of entity as originally announced under the initial JobKeeper rules.
Similarly, for Period 2 covering JobKeeper fortnights between 4 January 2021 and 28 March 2021, an entity must determine whether it has an actual decline in turnover for the December 2020 quarter compared to the prior December 2019 quarter and have met the relevant decline percentage (15%, 30% or 50%).
Where an entity does not satisfy the actual September 2020 quarter decline in turnover test for Period 1 there is still an opportunity to satisfy the test for the December 2020 quarter under Period 2 and be entitled to JobKeeper payments in Period 2 (i.e. starting from 4 January 2021 onwards).
Conversely, an entity that satisfies the actual turnover test in Period 1 may later fail the Period 2 actual decline in turnover test. In this case, the entity would therefore only be entitled to JobKeeper payments up to the end of Period 1 (i.e. up to 3 January 2021).
To avoid a re-run of the saga over differing methods of measuring turnover, the Commissioner of Taxation has been given the power to determine that turnover essentially means what you disclose in your Business Activity Statements (BAS), and he is expected to so determine. The Commissioner already had the power to determine alternative decline in turnover tests where there is no comparative period in 2019 (eg, recently commenced business), and had issued a number of such alternatives. These alternative tests can similarly be available for the September and December 2020 quarters when re-testing for actual decline in turnover.
Determine your entity’s turnover for the September 2020 quarter as soon as possible after 30 September. Compare to September 2019 quarter BAS. Where applicable, apply the Commissioner’s alternative tests. Make sure any outstanding BAS for the September and December 2019 quarters have been lodged.
2. New 80 hour work test – Will the higher or lower rate apply
Assuming the actual decline in turnover test has been met, each employee must also be assessed against an 80 hour work test which then determines the rate of JobKeeper payment for an employee.
This only needs to be done once. Once this has been determined for an eligible employee, the higher/lower rate will apply for them for either or both of stages 1 and 2 as applicable.
The rate is determined based on the number of hours worked in the 28-day period up to the end of the most recent pay cycle ending before either 1 March 2020 or 1 July 2020. This includes time on annual leave, long service leave, sick or personal leave and paid public holidays. You must adopt the high/lower rate for any particular employee based on which 28-day period has the higher number of hours. If the number of hours is 80 or more, the higher rate applies for that employee. If under 80, the lower rate applies.
If employees are paid on a pay cycle that is greater than 28 days, pro-rate the hours to 28 days (eg, pay cycle is each calendar month, per the middle row above. An eligible employee worked 83 hours in February. Therefore, 83 x 28/29 = 80.1 hours attributed to the 2-29 February period.)
For Eligible Business Participants (EBP), it is fixed as the calendar month of February (despite having 29 days this year) for determining the number of hours. As they are not employees, there are no payroll records. Rather, they must “reasonably demonstrate” the number of hours “actively engaged” in the relevant business in the month of February.
Analyse payroll records for eligible employees for the applicable pay cycles per above. Pretty much required only for part-time and long-term casual eligible employees. If the number of hours worked (plus on leave, etc) in either applicable 28-day period was 80 or more, allocate that employee to the higher-rate camp. If the number of hours in both applicable 28-day periods was less than 80, allocate that employee to the lower-rate camp. EBPs, document your time “actively engaged” during February in some manner (diary/calendar entries, work output, etc).
1. Notification requirements
There is no requirement to re-enrol if you are already in the JobKeeper program. However, you must make two notifications covering every eligible employee once you have categorized them into higher and lower rates.
Firstly, you must provide details relating to eligible employees and also the applicable rate for which they are eligible in respect of their employees as part of the information that must be provided to the Commissioner. There will be no requirement to notify the Commissioner a second time for JKPs relating to Extension Period 2 as no further testing of the hours of work is required to determine the rate of payment.
Where you fail to notify the Commissioner of the applicable payment rate in respect of an employee for JobKeeper fortnights commencing on or after 28 September 2020, the employer is not eligible for JKPs until a valid notification is made. This applies regardless of whether the employer has been receiving JKPs in respect of the employee prior to 28 September 2020.
Secondly, you must also notify your employees in writing within seven days of advising the Commissioner of the payment rate applicable to the employee.
EBPs operating through an entity whose number of active engagement hours in February 2020 was 80 or more must give notice to that effect (no particular form) to the entity in order to receive the higher rate. The entity must notify the ATO (approved form pending) that an EBP is subject to the higher or lower rate, and then must notify the EBP in writing of the rate notified to the ATO. If EBP’s February hours was less than 80 – or they simply don’t provide the notice to the entity where 80 or more – the lower rate will apply.
EBPs operating in their personal name as a sole trader whose number of active engagement hours in February 2020 was 80 or more must state that in a notice to the ATO (approved form pending) in order to receive the higher rate.
Employers submit the ATO notification as soon as possible, then notify your eligible employees within seven days. The sooner the better, to allow time to resolve any particular employee disputing being allocated to the lower-rate group. EPBs attend to their notices.
The above is general advice only and was correct at time of release, being 18 September 2020. The ATO is releasing information via its JobKeeper Extension.
In the meantime please contact us if you require further information specific to your circumstances. email@example.com | 08 6165 4000