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From today, most employers will need to demonstrate that their actual GST turnover for the September quarter has declined by at least 30 per cent in order to receive the JobKeeper wage subsidy through to 3 January 2021.
Large businesses, those with an aggregated turnover of $1 Billion or more, will need to show a decline of at least 50 per cent, whilst ACNC registered charities will need to demonstrate a 15 per cent reduction in GST turnover.
The JobKeeper wage subsidy is now split into $1,200 for employees who work more than 80 hours in their reference periods and $750 for everyone else.
Whilst the Tax Office will allow employers until 31 October to meet the wage condition for JobKeeper fortnights starting 28 September and 12 October, employers need to remember that if they pay the top up payment to employees and they aren’t eligible for the JobKeeper wage subsidy they can’t claw it back from the employee. This creates a real conundrum for employers who are not sure of their eligibility – on the one hand they don’t want to see their employees suffer financial hardship by not making the payment but don’t want to put their business more at risk by making the payments only to find out later that they aren’t eligible for the wage subsidy.
Our advice to clients who are in that position is:
- if you need the JobKeeper wage subsidy to make the payment to employees, don’t make the top up payments to employees until you are certain of your eligibility;
- communicate with the employees to let them know that you are unsure of your eligibility to receive the JobKeeper wage subsidy and that your business may not be able to afford to make the top up payments to them (or continue with their employment) without that support, but as soon as you have completed your assessment of your eligibility you will be in a position to advise them of the outcome;
- make sure that your September 2019 Business Activity Statement (BAS) has been lodged;
- as soon as possible after the end of the quarter, complete your September 2020 BAS;
For most businesses, determining the eligibility is a relatively simply process of comparing actual GST turnover for one quarter to the GST turnover in the corresponding quarter in the prior year. However, there are some things that businesses need to be aware of:
- Whilst eligibility for the JobKeeper wage subsidy requires there to be at least a 30 per cent reduction in GST turnover those businesses that aren’t registered for GST are still eligible to receive the subsidy.
- One of the important changes to note from JobKeeper 1.0 is that calculating actual GST turnover will now be restricted to the GST attribution method (cash or accruals) used by the business in preparing its BAS. Businesses not registered for GST can choose which attribution method to use but must use the same method in both test periods.
For some businesses the GST attribution method used in preparing their BAS may not be representative their current business environment and in some instances may mean that they fail the eligibility criteria for JobKeeper. For example, if you use the cash basis to prepare your BAS, you may be receiving payment now for work that you did pre COVID or in a prior GST quarter whilst your current turnover has dried up (especially so, if your business is in Victoria). This may mean that because you are reporting that revenue on your BAS now you fall short on the eligibility criteria, where if you were using the accrual method it would have been reported in an earlier period and you may then have met the eligibility criteria. - Eligibility is determined by reference to a business’ actual GST turnover not projected turnover and the inability to use projections may catch a few businesses by surprise. This approach may be problematic for business’ that had reasonable revenue for July to September but projections show a decline in revenue – they won’t meet the eligibility criteria based upon current revenue and will need the support in the coming months as revenues dry up. Businesses in this position need to consider carefully their forecasted revenues and expenses and where appropriate take immediate action to reduce costs, including standing down employees.
- When a GST registered business sells a capital asset, it is required to be reported at G1 on the BAS and therefore will be included in GST turnover of the business. It may come as a shock to some businesses that have had to sell capital assets in order to reduce liabilities or to generate enough cash flow to pay overheads, that they now find themselves failing the eligibility criteria because the sale of the asset has artificially inflated their GST turnover.
Businesses that have sold capital assets need to assess the impact of those disposals on their GST turnover and eligibility for JobKeeper. Unfortunately, where this means that the business will fail to meet the eligibility criteria they will not be entitled to the JobKeeper wage subsidy and should consider this impact on being able to continue to make the top up payments to employees. Where top up payments can no longer continue you should communicate this to the employees as soon as possible. - Alternative tests remain available for businesses that do not fit into the standard turnover test and cover the following 7 scenarios:
- the business commenced after 30 September 2019 so there is no comparative period to test against;
- the business acquired or disposed, part or all of a business after 30 September 2019 and that has substantially changed turnover;
- the business has restructured since 30 September 2019 which has substantially changed turnover;
- this business has seen substantial growth in turnover in the last 12 months;
- the business has been affected by drought or a natural disaster (bushfires) in the last 12 months;
- the business has irregular turnover during the last 12 months (e.g. lumpy contracts); or
- a sole trader or partner has taken leave during the relevant comparison period which has significantly impacted the turnover of each business.
If you are concerned about whether your business will be eligible for JobKeeper 2.0, please contact one of our team members.
