Category: Business Tax

Christmas Parties and Gifts – The Tax Truths

Christmas is traditionally a time of giving – including employers showing gratitude towards staff and clients/suppliers for their loyalty throughout the year. With the right approach, it is possible to enjoy some tax benefits out of your generosity, and also avoid Fringe Benefits Tax (FBT). But as always with tax, the landscape is layered with complexity. The following is a general summary of the tax treatment of Christmas giving

Gifts to Staff 

Non-entertainment gifts to staff (such as Christmas hampers, bottles of alcohol, gift vouchers, pen sets etc.), are tax deductible and you can claim GST credits, irrespective of cost. Note however that you can generally avoid paying FBT if you keep the gift under $300. If this threshold is exceeded, FBT will apply. Therefore, be conscious of this threshold when providing such gifts to staff this Christmas. 

Entertainment gifts to staff (such as tickets to movies/theatre/amusement park/sporting events, holiday airline tickets etc.) which are under $300 will not attract FBT, but are not income tax deductible, and you can not claim GST credits. If over $300, FBT will apply, but a tax deduction and GST credits can be claimed. With FBT rate sitting at 47%, the tax deduction and GST credits available is unlikely to provide a better tax outcome than avoiding FBT by keeping the gift under $300. 

Gifts to Clients/Customers/Contractors/Suppliers 

No FBT is payable, irrespective of the type of gift and irrespective of cost. However, where a gift constitutes entertainment, no GST or tax deduction can be claimed. Thus, at least from a tax standpoint, it’s better to provide non-entertainment gifts to clients (Christmas hampers, bottles of alcohol, gift vouchers, pen sets) and, in doing so, enjoy a tax deduction and GST credits. 

Christmas Parties 

Instead of (or as well as) gifts, it’s quite common for employers to host a Christmas Party for their staff (often including spouses) at a restaurant. 

Where this is the case, the total cost will generally be exempt from FBT provided the per-head cost (dinner and drinks) is kept to under $300 per person. This is known as the Minor Benefits Exemption. To enjoy this exemption the employer must use the Actual Method for valuing FBT meal entertainment. The Actual Method is the default method for valuing meal entertainment, and no formal ATO election is required to use this method. Under the Actual Method, an employer pays FBT (in the absence of an exemption) on all taxable meal entertainment provided to employees and their associates such as spouses. The downside of using the Minor Benefit Exemption is that the meal entertainment is not tax deductible, and nor can you claim a GST credit. 

This Minor Benefit Exemption is not available if you elect to value your meal entertainment under the alternative 50/50 Method. Under this method, you pay FBT on only 50% of all taxable meal entertainment provided to employees, spouses AND clients, contractors, customers etc. irrespective of the cost. Likewise, you can only claim a 50% income tax deduction and 50% GST credits on such meal entertainment. However as stated earlier, with the FBT rate now at 47%, the 50% tax deduction and 50% GST credits available under the 50/50 Method is unlikely to provide a better after-tax result than the Actual Method where no FBT is payable. 

The “take-home message” is that if like many employers the only social functions you host for employees during the year are a Christmas Party (and perhaps the Melbourne Cup), be conscious of keeping the per-head cost under $300. By doing so, you may be able to exempt the entire cost of the party from FBT. 

 

Federal Budget 2020

2020 FEDERAL BUDGET WRAP 

The Federal Budget was handed down on 6 October 2020. Following is a precis of some of the headline measures. 

BUSINESS 

  • Expanded Access to Small Business Tax Concessions – access will be expanded to a range of small business tax concessions. Under the changes, businesses with an annual aggregated turnover of less than $50 million (up from $10 million) will have access to the following concessions: 

Concession

Start Date

immediate deduction for certain start-up expenses

1 July 2020

immediate deduction for certain prepaid expenses

1 July 2020

FBT exemption for car-parking benefits

1 April 2021

FBT exemption for multiple portable electronic devices (laptops, tablets etc.)

1 April 2021

simplified trading stock rules

1 July 2021

remit PAYG instalments based on GDP-adjusted notional tax

1 July 2021

settle excise duty monthly on eligible goods

1 July 2021

two-year amendment period

1 July 2021

simplified account method access for GST purposes

1 July 2021

Note that access to the small business CGT concessions has not been expanded, and remains at an aggregated turnover of less than $2 million, or less than $6 million in net assets. 

  • Extension of the Instant Asset Write-Off – businesses with aggregated annual turnover of less than $5 billion will be able to deduct the full cost of eligible capital assets acquired from 7:30pm AEDT on 6 October 2020 (Budget night) and first used or installed by 30 June 2022. 

    “Full expensing” in the year of first use will apply to new depreciable assets and the cost of improvements to existing eligible assets.

    For small- and medium-sized businesses (with aggregated annual turnover of less than $50 million), full expensing also applies to second-hand assets.

    Businesses with aggregated annual turnover between $50 million and $500 million can still deduct the full cost of eligible second-hand assets costing less than $150,000 that are purchased by 31 December 2020 under the existing instant asset write-off. 

  • Loss Carry-Back – companies that have paid tax in the past, but that are now in a tax loss position, will be permitted to carry their loss back to those past years to obtain a refund of some of the tax they previously paid. This measure will enable many distressed companies to claim back the taxes they paid on their pre-COVID-19 profits against losses they are incurring during the current downturn. 

Specifically, companies with an aggregated annual turnover of less than $5 billion, will be permitted to carry-back losses from the 2019–20, 2020–21 and 2021–22 income years against tax paid in the 2018–19, 2019–20 or 2020–21 income years. 

The tax refund would be limited by requiring that the amount carried back is not more than the earlier taxed profits. The tax refund will be available on an election basis by eligible businesses when they lodge their 2020-21 and 2021-22 tax returns.

Companies that do not elect to carry back losses under this measure, can still carry losses forward as normal.  

  • FBT Exemptions to Support Training and Re-Skilling – an FBT exemption will be introduced for retraining and reskilling benefits provided by employers to redundant, or soon-to-be redundant, employees where the benefits may not be related to their current employment. Before this change (which will apply from 6 October 2020) FBT was payable where an employer provides training to redundant or soon-to-be redundant employees and that training does not have sufficient connection to their current employment. 
  • Hiring Credit for Employers – a new JobMaker Hiring Credit scheme will be available to employers from 7 October 2020 for each new job they create over the next 12 months for which they hire an eligible young person. For each eligible employee, employers will receive for up to 12 months: 
  • $200 a week if they hire an eligible young person aged 16 to 29 years; or 
  • $100 a week if they hire an eligible young person aged 30 to 35 years. 

The new employees must have received JobSeeker Payment, Youth Allowance (other) or Parenting Payment for at least one of the previous three months at the time of hiring. Employers must demonstrate that they have increased their overall employment to receive this payment for up to 12 months for each position created. To claim the credit, employers need to report their employees’ payroll information to the ATO via Single Touch Payroll. 

INDIVIDUALS 

  • Tax Cuts – reductions in individual tax rate thresholds will apply for the 2020-21 income year. That is, from 1 July 2020:

  • the top threshold of the 19% personal income tax bracket will be increased from $37,000 to $45,000 
  • the top threshold of the 32.5% personal income tax bracket will be increased from $90,000 to $120,000. 

This brings forward changes previously legislated to commence from the 2022-23 income year. By way of illustration, this will result in an annual tax saving of $1,080 for individuals with a taxable income of $50,000; a saving of $1,530 for those earning $100,000; and a saving of $2,430 if you are earning $150,000. 

  • CGT Exemption for ‘Granny Flat’ Arrangements – from 1 July 2021, CGT will not apply to the creation, variation or termination of a granny flat arrangement providing accommodation where there is a formal written agreement in place. This will apply to arrangements that provide accommodation for “older Australians or those with a disability”. At the time of writing, there are no further details as to what constitutes “older” or “disability”. The exemption will only apply to agreements that are entered into because of “family relationships or other personal ties” and will not apply to commercial rental arrangements. 

To be clear, this measure will provide a CGT exemption for the home-owner in relation to any capital gains arising from the creation of “granny flat rights” and/or for the variation, extension or ending of such rights. 

All told, this measure will remove the adverse tax consequences for the property owner while providing protection for older parents or people with disabilities. Note that the exemption is limited to cases where the home is the principal residence of the property owner.   

SUPERANNUATION 

Unlike recent years, there were no taxation or contribution-related reforms in the Budget, however a broad package of measures was announced aimed at improving the superannuation system by: 

  • Having your superannuation follow youpreventing the creation of unintended multiple superannuation accounts by ensuring that individuals automatically keep their superannuation fund when they change employers 
  • Making it easier to choose a better fundindividuals will have access to a new interactive online comparison tool which will encourage funds to compete harder for members’ savings 
  • Holding funds to account for underperformanceto protect members from poor outcomes and encourage funds to lower costs, the Government will require superannuation products to meet an annual objective performance test. Those that fail will be required to inform members. Persistently underperforming funds will be prevented from taking on new members. 

 

 

JOBKEEPER 2.0 (28 September 2020 to 3 January 2021) Bullet Point Guide

Here is a quick snapshot of the important points of JobKeeper 2.0 as we count down the days until its commencement next week:    

  • Entities must re-assess their eligibility for JobKeeper 2.0 from 28 September 
  • Entities already enrolled in JobKeeper 1.0 do not need to re-enrol for JobKeeper 2.0 
  • Employees who received JobKeeper 1.0 do not need to fill out fresh nomination notices for JK 2.0 
  • The decline in turnover is now “actual” GST turnover for the September quarter” v. “actual GST turnover the 2019 September quarter” (projected turnover now plays no role) 
  • The decline in turnover percentages remain unchanged from JobKeeper 1.0, at 15% (ACNC registered charities other than universities and schools), 30% ($1b or less) and 50% (more then $1b) 
  • Businesses are generally expected to assess eligibility based on details reported in their BAS. Alternative arrangements will be announced for entities not lodging a BAS 
  • As with JobKeeper 1.0, the Commissioner will have discretion to set out alternative tests where it is not appropriate to compare actual turnover in a quarter in 2020 with actual turnover in a quarter in 2019 
  • The wage condition, based on the tier into which the eligible employee or business participant falls (see below), continues to apply 
  • The “one-in”, “all-in” principle continues to apply 
  • For the first two JK 2.0 fortnights, the ATO has extended until 31 October 2020 the time an entity has to pay employees in order to meet the wage condition 
  • JobKeeper 2.0 will be a two-tiered payment arrangement based on average hours worked, on an employee-by-employee basis, in the four weeks of pay periods before either 1 March 2020 or 1 July 2020. 
  • Tier 1 and Tier 2 level employees are identified as part of the JobKeeper extension process 

Tier 1 – $1,200 per fortnight (before tax). This rate applies to: 

  • eligible employees who worked for 80 hours or more in the four weeks of pay periods before either 1 March 2020 or 1 July 2020, and 
  • eligible business participants who were actively engaged in the business for 80 hours or more in February and provide a declaration to that effect. 

Tier 2 – $750 per fortnight (before tax). This rate applies to any other eligible employee or business owner. 

  • Payments for eligible business participants and religious practitioners will be based on the same two-tiered payment basis 
  • An extra reporting requirement will apply. That is, businesses will be required to nominate which payment rate they are claiming for each of their eligible employees (or business participants) 
  • Employers must notify eligible employees of the payment to which they are eligible, within seven days of notifying the ATO 
  • The ATO has set out alternative tests where an employee or business participant’s hours were not usual during the February and/or June 2020 reference periods. For example, this will include where the employee was on leave, volunteering during the bushfires, or not employed for all or part of February or June 2020. 
  • From 4 January 2021 the tier 1 rate reduces to $1,000 and the tier 2 rate reduces to $650 

JobKeeper Extension – Almost Here!

With the JobKeeper extension commencing in two weeks, we provide the latest publically available information –  

Extension from 28 September 2020 

The original JobKeeper scheme finishes on 27 September 2020. 

In good news for employers, the Government then announced that the scheme will be extended from 28 September 2020 until 28 March 2021. 

There are two separate extension periods. For each extension period, an additional actual fall in turnover test applies and the rate of the JobKeeper payment is different. 

Alternative tests for determining turnover and payment rates may be available in some circumstances but at the time of writing are yet to be published. We will notify you of these as they come to hand. 

Extension 1 

This extension period runs from 28 September 2020 to 3 January 2021. 

You will need to demonstrate that your actual GST turnover has fallen by the following percentages= in the September 2020 quarter (July, August, September) relative to a comparable period (generally the corresponding quarter in 2019) 

  • 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), or 
  • 15% fall in turnover (for ACNC-registered charities other than universities and schools). 

The payment rates of the JobKeeper Payment in this extension period are:  

  • Tier 1: $1,200 per fortnight (before tax) 
  • Tier 2: $750 per fortnight (before tax). 

Rates of Payment 

The rate of the JobKeeper Payment will depend on the number of hours an eligible employee works or on the other hand the number of hours an eligible business participant is actively engaged in the business. 

It will be split into two rates as follows: 

 

TIER 1 RATE

 

TIER 2 RATE

 

This applies to

  • eligible employees who worked for 80 hours or more in the four weeks of pay periods before either 1 March 2020 or 1 July 2020, and
  • eligible business participants who were actively engaged in the business for 80 hours or more in February and provide a declaration to that effect.

 

 

This rate is expected to apply to any other eligible employees and eligible business participants.

 

 

Employers and businesses will need to nominate the rate they are claiming for each eligible employee and/or eligible business participant.  

Extension 2 

This extension period will run from 4 January 2021 to 28 March 2021. 

You will need to demonstrate that your actual GST turnover has fallen in the December 2020 quarter (October, November, December) relative to a comparable period (generally the corresponding quarter in 2019). 

You can be eligible for JobKeeper Extension 2 even if you were not eligible for JobKeeper Extension 1.  

The rates of the JobKeeper Payment in this extension period are: 

  • Tier 1: $1,000 per fortnight (before tax) 
  • Tier 2: $650 per fortnight (before tax). 


What Employers Need to do 

From 28 September 2020, employers must do all of the following: 

  • work out if the Tier 1 or Tier 2 rate applies to each of your eligible employees and/or eligible business participants and/or eligible religious practitioners 
  • notify the Commissioner and your eligible employees and/or eligible business participants and/or eligible religious practitioners what payment rate applies to them; and 
  • during JobKeeper Extension 1, ensure your eligible employees are paid at least
    • $1,200 per fortnight for Tier 1 employees  
    • $750 per fortnight for Tier 2 employees 
  • during JobKeeper Extension 2, ensure your eligible employees are paid at least 
    • $1,000 per fortnight for Tier 1 employees 
    • $650 per fortnight for Tier 2 employees. 

 

For your eligible religious practitioners, you must provide certain benefits to them in the fortnight. 

If you are registered for GST and have outstanding BAS statements, you should lodge your BAS for the September 2019 and December 2019 quarters as soon as possible (or for equivalent months, if you report monthly). 

Fall In Turnover 

To claim for fortnights in the JobKeeper Extension 1, you need to determine if you satisfy the actual fall in turnover test for the September 2020 quarter, you must calculate your GST turnover for the quarter of September 2019 and September 2020. 

For many businesses registered for GST, this calculation will match the ‘total sales’ reported at G1 on your BAS minus GST payable (1A), where applicable. 

You can provide additional turnover information to demonstrate that you satisfy the actual fall in turnover test for the September quarter from the start of October onwards. You must provide it before you complete your November monthly declaration. 

What Doesn’t Change? 

To claim for fortnights in the JobKeeper Extension 1 or 2: 

  • You don’t need to re-enrol for the JobKeeper extension if you are already enrolled for JobKeeper for fortnights before 28 September. 
  • You don’t need to reassess employee eligibility or ask employees to agree to be nominated by you as their eligible employer if you are already claiming for them before 28 September. 
  • You don’t need to meet any further requirements if you are claiming for an eligible business participant, other than those that applied from the start of JobKeeper relating to:
    • holding an ABN, and 
    • declaring assessable income and supplies. 

 

JobKeeper 2.0 – Passes Parliament!

The JobKeeper 2.0 legislation has just passed both houses of Parliament, and is now law (subject to the formality of Royal Assent). This legislation enables the Treasurer to draft a legislative instrument setting out the key changes to the scheme as follows: 

Employer Eligibility 

From 28 September 2020, businesses and not-for-profits seeking to claim JobKeeper will be required to re-assess their eligibility for the JobKeeper extension with reference to their actual turnover in the September quarter 2020 (rather than the June and September quarters). Businesses and not-for-profits will need to demonstrate that they have met the relevant decline in turnover test in this quarter to be eligible for JobKeeper from 28 September 2020 to 3 January 2021. 


Businesses and not-for-profits will need to further reassess their eligibility in January 2021 for the period from 4 January to 28 March 2021. Businesses and not-for-profits will need to demonstrate that they have met the relevant decline in turnover test in the December quarter 2020 (rather than each of the June, September and December quarters) to remain eligible for the period to 28 March 2021 (the March quarter). 

Payment Rates 

The payment rates have been pared back and will now depend upon the hours worked by an employee. 

From 28 September 2020 to 3 January 2021, the JobKeeper Payment rates will be: 

  • $1,200 per fortnight for all eligible employees who were working in the business or not for-profit for 20 hours or more a week on average in the four weeks of pay periods before either 1 March 2020 or 1 July 2020, and for eligible business participants who were actively engaged in the business for 20 hours or more per week on average; and 
  • $750 per fortnight for other eligible employees and business participants. 

From 4 January 2021 to 28 March 2021, the JobKeeper Payment rates will be: 

  • $1,000 per fortnight for all eligible employees who were working in the business or not for-profit for 20 hours or more a week on average in the four weeks of pay periods before either 1 March 2020 or 1 July 2020, and for business participants who were actively engaged in the business for 20 hours or more per week on average; and 
• $650 per fortnight for other eligible employees and business participants 

Employee Eligibilty 

  • Employees that meet the eligibility requirements can now be nominated by a new employer if their original employment with a JobKeeper employer ended before 1 July 2020 
  • As of 3 August 2020, the key date for assessing employee eligibility is now 1 July 2020 (not 1 March 2020) 
  • For the fortnights commencing on 3 and 17 August 2020, employers had until 31 August 2020 to meet the wage condition for newly-eligible employees under the revamped 1 July eligibility test. 

JobKeeper Changes – Employment Start Date and Amendment to Turnover Test

On 7 August, the government announced two further changes to the JobKeeper program. Firstly, employees hired as at 1 July 2020 may also be eligible to receive JobKeeper. Secondly, employer turnover eligibility for the revised JobKeeper scheme to commence on 28 September 2020 will be based on a single quarter tax period (rather than multiple quarters as previously announced). 

  1. Employee Change 

Before this change, an eligible employee had to, among other things, be employed as at 1 March 2020 to qualify for JobKeeper. Additionally, where they were a casual at that date, they had to have been employed on a regular and systematic basis for longer than 12 months as at 1 March 2020. 

The 7 August 2020 announcement changes that reference point to 1 July 2020, with effect to all JobKeeper fortnights commencing on or after 3 August 2020 – which means it impacts the last four fortnights of the original JobKeeper scheme. 

Noting that the “one-in, all-in” principle still applies to the 1 July changes, employers should consider which employees are now eligible to bring into the JobKeeper scheme, including: 

  • full-time or part-time employees employed after 1 March 2020 but on or before 1 July 2020; 
  • employees who may have joined the business after 1 March 2020 but are currently stood down 
  • casual employees employed at 1 July 2020 who commenced their casual employment before 1 July 2019. 
  • employees who may not have met the age condition as at 1 March 2020, but do as at 1 July 2020 
  • employees who may not have met the residency condition as at 1 March 2020, but do as at 1 July 2020 
  1. Employer Turnover Change 

From 28 September 2020, businesses and not-for-profits seeking to claim JobKeeper will be required to re-assess their eligibility for the JobKeeper extension with reference to their actual turnover in the September quarter 2020 (rather than the June and September quarters). Businesses and not-for-profits will need to demonstrate that they have met the relevant decline in turnover test in this quarter to be eligible for JobKeeper from 28 September 2020 to 3 January 2021. 

Businesses and not-for-profits will need to further reassess their eligibility in January 2021 for the period from 4 January to 28 March 2021. Businesses and not-for-profits will need to demonstrate that they have met the relevant decline in turnover test in the December quarter 2020 (rather than each of the June, September and December quarters) to remain eligible for the period to 28 March 2021 (the March quarter). 

Further Consequent Change 

This amendment, announced on Friday 14 August, accommodates the employee eligibility change on 7 August (above). 

With the key date for assessing which employees are eligible for JobKeeper now 1 July 2020, rather than 1 March 2020, the ATO states that employers should start paying new eligible employees a minimum of $1,500 per fortnight from  JobKeeper fortnight 10, which commenced on 3 August. To accommodate what may be a cashflow issue brought about by this change, for the fortnights commencing on 3 August 2020 and 17 August 2020, the ATO is allowing employers until 31 August 2020 to meet this wage condition for all new eligible employees included in the JobKeeper scheme under the new 1 July eligibility test. 

 

Instant Asset Write-Off – Extension Announced

Businesses will be able to access the boosted $150,000 instant asset write-off scheme for a further six months to the end of the year. 

By way of background, as part of its emergency COVID-19 fiscal package, the government quin­tupled (from $30,000) the value of assets businesses were able to instantly write -off for the ­period of March 12 to June 30, and expanded the eligibility to cover  businesses with turnover of less than $500m (up from $50m ­previously). 

Today the government will announce that the more than 3.5 million eligible businesses will now be given until December 31, 2020 to take advantage of this measure. The asset must be installed ready for use by this date. 

Although it is anticipated that this extension will be supported by Parliament, it is subject to the passage of legislation. 

 

JobKeeper Payment Rules Released 10/4/20

Late on Friday April 10, explanatory materials were released in relation to the JobKeeper payment that has now been passed into law. The explanatory material clarifies one key aspect of the new legislation:

Establishing a downturn

 

By way of background, to qualify for the JobKeeper wage subsidy, one of the eligibility criteria is that:

  • for businesses that have an annual aggregated turnover of less than $1 billion, they estimate their GST turnover has fallen or will likely fall by 30% or more or
  • for businesses that have an annual aggregated turnover of $1 billion or more (or is part of a consolidated group for income tax purposes with turnover of $1 billion or more), they estimate their GST turnover has fallen or will likely fall by 50% or more.

Treasury has revealed that the comparison period is for either (a) any monthly period from April 2020 to the end of September 2020 or (b) any quarterly period from April to June or July to September…compared to the same monthly or quarterly period in 2019.

Importantly, once this test is met for either (a) a monthly period or (b) any quarterly period, there is no requirement to re-test in later months or quarters. For example, if a business assesses that its turnover will fall by 30% in April 2020 compared to April 2019…then it retains its eligibility until the JobKeeper payments stop for all businesses at the end of September 2020. This is irrespective of its turnover in the months subsequent to April 2020. It is not required to estimate or determine turnover for subsequent periods.

Where an entity does not qualify in the month of April 2020, for example, or the April to June quarter, it can re-test in later months or quarters, but will only be eligible for the JobKeeper payments from the period of qualification onwards (the payment won’t be backdated to the commencement of scheme).

Alternative tests

The explanatory material acknowledges that comparing monthly or quarterly periods from April 2020 and onwards, to April 2019 and onwards, may not always be possible or made lead to unfair outcomes. To this end, where the ATO is satisfied that there is no such comparison period in 2019, or there is not an appropriate relevant comparison period, the ATO Commissioner may, by legislative instrument, determine an alternative decline in turnover test.

The two alternative test examples cited in the explanatory materials relate to:

  • businesses that were not in existence for the whole of the comparison period in 2019. In the explanatory materials, the business is permitted to average its actual turnover from October 2019 when it came into existence to March 2020, and compare that average it to its estimated turnover in April 2020.
  • businesses that were impacted by a natural disaster during the 2019 comparison period. In the explanatory materials, the business is permitted to go back to 2017 (the most recent year when its turnover was not impacted by drought) and compare its turnover to the same eligible period in 2020.

The Commissioner retains flexibility to apply other alternative tests and take into account other unique circumstances (aside from natural disaster and start-up businesses) confronted by a business, should the 2019 comparison period not be reflective of typical turnover. Treasury, in a separate fact sheet Supporting Business to Retain Jobs, has stated that these alternative tests may include, for example, eligibility being established as soon as a business ceases or where a business significantly curtails its operations.

Businesses and their advisors should contact the ATO where they believe they warrant special consideration in this regard.

 

JobKeeper Payment – Fresh Guidance on Establishing a Downturn

We’ve received many questions from subscribers around how a “downturn of turnover” will be measured for the purposes of eligibility for the coronavirus-related Job Keeper Payment.

Last night there was fresh guidance from Treasury. 

By way of background, one of the eligibility criteria for Job Keeper is that: 

• for businesses that have an annual turnover of less than $1 billion, they estimate their turnover has fallen or will likely fall by 30% or more; or  
• for businesses that have an annual turnover of $1 billion or more (or is part of a consolidated group for income tax purposes with turnover of $1 billion or more) they estimate their turnover has fallen or will likely fall by 50% or more; and  
• the business is not subject to the Major Bank Levy. 

Treasury has indicated that the decline in turnover test is linked to the GST turnover test in particular the projected GST turnover – which will take into account anticipated decline in revenue. The test requires a business to measure its projected GST turnover and compare this to what is termed a relevant comparison period. If this equals or exceeds the following thresholds, the entity satisfied the decline in turnover test: 
• ACNC-registered charities – 15%; 
• entities with turnover less than $1bn – 30%; 
• entities with turnover greater than $1bn – 50%. 
There is scope for the ATO to apply an alternative test to different classes of entities. 
The turnover test period must be a calendar month that ends after 30 March 2020 and before 1 October 2020, or a quarter that starts on 1 April or 1 July 2020. The relevant comparison period must be the period in 2019 that corresponds to this turnover test period. 
Further ATO guidance will be forthcoming 
The turnover numbers must be reported to the ATO before any payments will start, though there is a transitional rule for the first 2 JobKeeper fortnights. 
The key take-away points are while, at this stage, this is Treasury guidance: 

• the test/comparison period vis-à-vis 2019 to 2020– spans from April to the end of September 
• if 2019 is not representative of typical turnover, another comparison period may be considered 
• the ATO is willing to exercise its discretion where there are anomalous cases.

Job Keeper Payment and Establishing a Downturn

Employers will be eligible for the Job Keeper subsidy if: 

  • their business has a turnover of less than $1 billion and their turnover has fallen by more than 30 per cent; or 
  • their business has a turnover of $1 billion or more and their turnover has fallen by more than 50 per cent; and 
  • the business is not subject to the Major Bank Levy. 

Since this measure was announced, we’ve been inundated with questions around how a business can establish that it has suffered a 30 per cent downturn.  

Ultimately, this won’t be clear until at least next Wednesday when the legislation is introduced into Parliament.

The latest guidance from Treasury is as follows:

To establish that a business has faced either a 30 (or 50) per cent fall in their turnover, most businesses would be expected to establish that their turnover has fallen in the relevant month or three months (depending on the natural activity statement reporting period of that business) relative to their turnover a year earlier. Where a business was not in operation a year earlier, or where their turnover a year earlier was not representative of their usual or average turnover, (e.g. because there was a large interim acquisition, they were newly established or their turnover is typically highly variable) the Tax Commissioner will have discretion to consider additional information that the business can provide to establish that they have been significantly affected by the impacts of the Coronavirus. The Tax Commissioner will also have discretion to set out alternative tests that would establish eligibility in specific circumstances (e.g. eligibility may be established as soon as a business has ceased or significantly curtailed its operations). There will be some tolerance where employers, in good faith, estimate a greater than 30 (or 50) per cent fall in turnover but actually experience a slightly smaller fall.

With the legislation to be unveiled next week, we will keep you updated on this very important matter.