Tuesday, 28 April 2020

Update 7 – JobKeeper Changes and Decline in Turnover Test Rules

In Update 6, we provided a Q&A for employers based on the Coronavirus Economic Response Package (Payments and Benefits) Rules 2020 (Eligibility Rules) introduced on 9 April 2020.

The Government has since announced some changes to the JobKeeper scheme, including some forthcoming changes to the Eligibility Rules, and the introduction of alternative tests for ‘decline in turnover’.

Extension of time to enrol for the JobKeeper scheme

Importantly, the deadline for employers to enrol for the initial JobKeeper periods has been extended from 30 April 2020 until 31 May 2020.

If the employer enrols by 31 May they will still be able to claim for the fortnights in April and May, provided they meet all the eligibility requirements for each of those fortnights. This includes having paid employees by the appropriate date for each fortnight.

For the first two fortnights (30 March – 12 April, 13 April – 26 April), the ATO will accept the minimum $1,500 payment for each fortnight has been paid by the employer even if it has been paid late, provided it is paid by 8 May 2020. If an employer does not pay its staff by this date, they will not be able to claim JobKeeper for the first two fortnights.

Changes to the Eligibility Rules

The Government has announced a number of changes to the Eligibility Rules to ensure that the scheme provides a targeted and appropriate support to employers impacted by coronavirus. These changes include:

  • Full time students aged 17 years old and younger: JobKeeper has previously been available to all eligible employees aged 16 years and older. However, the amended Eligibility Rules will provide that employees who are full-time students aged 17 years and younger and not financially independent are not eligible for JobKeeper. This will apply prospectively, which means that eligible employers that have already paid such employees $1,500 for a fortnight may still be entitled to a JobKeeper Payment in arrears for that fortnight.
  • ‘One in, all in’ principle: Once an employer decides to participate in the JobKeeper scheme and their eligible employees have agreed to be nominated by the employer, the employer must ensure that all eligible employees are covered by their participation in the scheme. The employer cannot select which eligible employees will participate in the scheme. This ‘one in, all in’ principle is a key feature of the scheme and will be clarified in the amended Eligibility Rules (it was previously omitted from the Rules but stated in the Explanatory Statement to the Rules).
  • Employee Nomination Notice: All employers electing to participate in the JobKeeper program must provide each employee with a nomination notice unless the entity reasonably believes the employee does not satisfy the eligibility criteria. Note – the Employee Nomination Notice has changed and we anticipate it will be amended again shortly.
  • Alternate decline in turnover test for business structures that use separate entities for employment: For business structures that use separate entities for employment, it is common for employees to be employed by an ‘employment entity’. If the employment entity does not meet the basic test for turnover, it may still be eligible for JobKeeper if it genuinely meets the alternate test and there are no material compliance or integrity concerns with the entity’s use of the alternate test. This alternate test will relate to the combined GST turnovers of the related group members using the services of the employment entity.
  • Charity employers can elect to exclude government revenue from the turnover test: Australian Charities and Not-for-profits Commission (ACNC) charities can elect to exclude government revenue from the turnover test so that they can retain their employees in all parts of their operations, not only those that are government funded.
  • Registered religious institutions: A registered religious institution that meets the eligibility requirements will be able to receive JobKeeper for each eligible religious practitioner (minister of religion / a full-time member of a religious order) for which they are responsible under the tax law.
  • International Aid Organisations: An entity will be eligible, subject to the decline in turnover test if it is an approved organisation under the Overseas Aid Gift Deduction Scheme (OAGDS). Previously, a not-for-profit entity was only eligible if it pursued its activities principally in Australia.
  • Universities: Core Commonwealth Government financial assistance provided to universities will be included in their decline in turnover, so that the bulk of revenue received by universities is considered in assessing eligibility for JobKeeper.
  • The ATO may confirm entitlement for JobKeeper to support loan applications: The ATO may confirm an employer’s notification of entitlement for the JobKeeper Payment to the approved deposit taking institutions such as banks to assist them with bridging finance to eligible employers.

Decline in Turnover Test Rules

Basic Decline in Turnover Test

As we previously reported, the Eligibility Rules provides the basic decline in turnover test that a business must satisfy to be eligible for JobKeeper as follows:

  • for a business with an aggregated turnover of less than $1 billion, it must demonstrate a decline or projected decline in GST turnover of 30% or more when compared to a comparable period (turnover test period);
  • for a business with an aggregated turnover of $1 billion or more, it must demonstrate a decline or projected decline in GST turnover of 50% or more when compared to the turnover test period;
  • for an Australian Charities and Not-for-profits Commission (ACNC)-registered charity, it must demonstrate a decline or projected decline in GST turnover of 15% or more when compared to the turnover test period.

The turnover test period may be a 1-month period (e.g. March 2020, April 2020, etc.) or a 3-month period (e.g. the quarter commencing 1 April 2020).

Alternative Decline in Turnover Tests

Last week, it was announced that there will be alternative decline in turnover tests for JobKeeper eligibility which will apply to certain classes of entities where the basic decline in turnover test above may not be appropriate.

These alternative decline in turnover tests are contained in the Coronavirus Economic Response Package (Payments and Benefits) Alternative Decline in Turnover Test Rules 2020.

We set out a summary of the alternative tests below.

Scenario Alternative Test
If the turnover test period is a month
Alternative Test
If the turnover test period is a quarter
If the entity commenced business before 1 February 2020 but after the relevant comparison period Projected GST turnover is compared to:
• the average monthly current GST turnover for each whole month after the entity commenced business;
OR
• 3 months’ current GST turnover divided by 3.

Latter not available if the business had not commenced at least 3 months before 1 March 2020.

Projected GST turnover is compared to:
• the average monthly current GST turnover multiplied by 3
OR
• total current GST turnover in the 3 months immediately before 1 March 2020.

Latter not available if the business had not commenced at least 3 months before 1 March 2020.

If the business commenced in February 2020 Projected GST turnover is compared to the current GST turnover before 1 March 2020, divided by the number of days that the business was in operation multiplied by 29. Projected GST turnover is compared to the average monthly current GST turnover multiplied by 3.
If there was an acquisition or disposal of part of the business which changed the business’ turnover Projected GST turnover is compared to the current GST turnover from the month immediately after the acquisition or disposal occurred. Projected GST turnover is compared to the current GST turnover from the month immediately after the acquisition or disposal occurred multiplied by 3.
If there was a restructure of the business which changed the business’ turnover Projected GST turnover is compared to the current GST turnover from the month immediately after the restructure occurred. Projected GST turnover is compared to current GST turnover from the month immediately after the restructure occurred multiplied by 3.
If the business had a substantial increase in turnover of:
• 50% or more in the 12 months immediately before the turnover test period
• 25% or more in the 6 months immediately before the turnover test period
• 12.5% or more in the 3 months immediately before the turnover test period
Projected GST turnover is compared to total current GST turnover in the 3 months immediately before the applicable turnover test period, divided by 3. Projected GST turnover is compared to the total of the entity’s GST turnover in the 3 months immediately before the applicable turnover test period.
If the business operated in a declared drought zone or declared natural disaster zone during the relevant comparison period, and this changed the business’s turnover Projected GST turnover is compared to current GST turnover for the same period in the year immediately before the declaration of a drought or natural disaster zone. Projected GST turnover is compared to current GST turnover for the same period in the year immediately before the declaration of a drought or natural disaster zone.
If the business had an irregular turnover where in the 12 months immediately before the applicable turnover test period, the business’s lowest turnover quarter was no more than 50% of the highest turnover quarter and the business’s turnover is not cyclical Projected GST turnover is compared to the average monthly current GST turnover for the 12 months immediately before the applicable turnover test period. Projected GST turnover is compared to average monthly current GST turnover multiplied by 3.
If a sole trader or partner of a small partnership (with no employees) did not work due to sickness, injury or leave which impacted the business’s turnover for all or part of that period Projected GST turnover is compared to current GST turnover from the month immediately after the sole trader or partner returned to work. Projected GST turnover is compared to current GST turnover from the month immediately after the sole trader or partner returned to work multiplied by 3.

Note – The above tests may need to take into account any Bushfires 2019–2020 lodgment and payment deferrals or any Drought Help concessions during the relevant periods.

The HR Legal team is working from home and available to respond to any employment law queries you may be grappling with. We can be contacted after hours (and on the weekends) to assist with urgent matters.

This article was produced by HR Legal. It is intended to provide general information only in summary format on legal issues. It does not constitute legal advice, and should not be relied on as such.

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