Category: General

Evidencing Your Decline in Turnover for JobKeeper

To qualify, an employer must demonstrate that its GST turnover has fallen by the following percentage compared to the same comparison period 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). 

You will need to keep evidence and sufficient records to demonstrate how you calculated your projected GST turnover during the 2020 turnover test period, and your basis for estimating that it would fall by the required percentage. 

Your projected GST turnover during the 2020 turnover test period is the sum of the value (GST exclusive sale price) of all the sales you have made, or are likely to make during that period. 

For the purpose of determining sales likely to be made, the ATO will accept a calculation based on a genuine business plan, accounting budget or some other reasonable estimate based on the evidence about the projected facts and circumstances for the remainder of the turnover test period. 

Relevant evidence that would support a prediction of sales likely to be made may include: 

  • a decline in sales during the turnover test period or since 1 March 2020 as a result of government COVID-19 restrictions 
  • customers cancelling or modifying existing contracts for sales on or from 1 March 2020 
  • being required to close or pausing the business due to government COVID-19 restrictions 
  • delays in being able to get access to trading stock sourced from overseas on or from 1 March 2020 
  • evidence of your business’s reliance on tourism 
  • any consequential effect on the price of what you supply, for example, the effect on the market value of new property being sold by a developer 
  • information known to the business, whether or not publicly available 
  • economic forecasts undertaken by a reputable organisation that are relevant to your type of business 
  • the likely timing of government COVID-19 restrictions being lifted for your type of business based on government announcements. 

According to the ATO, when people make a good-faith estimate to comply and a good-faith decision that   they’re eligible, the Commissioner will be very understanding and sympathetic to their position, particularly where they have passed the benefit of the JobKeeper payment to their employees What the legislation, and the ATO are asking of businesses is to make a “good faith effort”. When the ATO considers a good faith effort has been made, even if it’s slightly wrong (i.e. less than the required downturn percentage), the ATO will not seek repayments of JobKeeper or apply penalties. 

 

 

Key Dates for Business – May & June 2020

Many lodgement and payment deadlines are looming for business including those relating to Activity Statements, superannuation, and more. 

MAY 2020 
12 May – 3rd Quater 2020 Activity Statements – due for lodgement and payment if lodging electronically 
21 May – April 2020 monthly Activity Statments – due for lodgement and payment 
21 May – 2020 FBT Annual Return – due for payment 
28 May – Due for lodgement and payment of the Superannuation Guarantee Charge Statement if yu failed to pay Superannuation Guarantee on time for the January-March quarter. Superannuation Guarantee charge is not deductible 

JUNE 2020 
21 June – May 2020 monthly Activity Sxtatments – due for lodgement and payment 
30 June – Superannuation Guarantee payments must be received by Superannuation funds by this date in order to be duducted in 2019/2020 
30 June – End of 2019/2020 financial year

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.

Employees Working From Home

As a consequence of COVID-19, many employees are now working from home.  
To make it easier for people to claim deductions when working from home, the ATO yesterday announced a new shortcut method which will allow taxpayers to claim a rate of 80 cents per hour for all their running expenses, rather than needing to calculate costs for specific running expenses. Therefore, the ATO will only require you to keep a record of the number of hours worked from home as evidence of their claim.  
This concession applies from 1 March 2020. 
The ATO will review this concession for the next financial year as the COVID-19 situation unfolds. 

According to the ATO, the simplified method will encompass all deductible running expenses, including electricity for heating, cooling and lighting; phone and internet expenses; and the decline in value of computers, printers, phones, furniture and furnishings. 

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.

 

Job Keeper Plan Announced


Prime Minister Scott Morrison, on 30/03/2020, has announced a $130 billion support package to help employers and employees.  

The idea behind these measures is that employers will retain their employees and have them working where they can.  However, if there is no work available due to Coronavirus related downturn or closures, then these employers retain their employees on this payment for up to six months so that employees stay connected to their employers.  

There will be a $1,500 per fortnight Job Keepers Payment. 

  • This will be paid to the employer, who will then pay their employee; 
  • An individual cannot received the Job Seekers Payment as well as the Job Keepers Payment; 
  • This is a flat rate for everyone; 
  • This applies to full time workers, part time workers, sole traders and casual employees that have been with their employer for more than 12 months; 
  • Any employee that has been stood down from 1 March 2020 can be eligible for these payments; 
  • Payments will be made from 1 May 2020 onwards, however, they will be backdated to today, 30 March 2020; 
  • Employers can start making these payments as of today from their own funds, and they will be reimbursed back to today’s date; 
  • Every business will be eligible where they have seen a decrease in turnover of 30% of more (50% if your business turnover is more than $1.1 billion); 
  • Employers must register with the Tax Office to receive these payments (businesses can do this themselves directly on the ATO website, alternatively your bookkeeper can provide assistance, if you do not utilise the services of a bookkeeper, your accountant can provide this assistance); 
  • The ATO will have a registration button on their website ato.gov.au very soon; 
  • The Single Touch Payroll system will be used to process payments to employees; 
  • New Zealander’s on a 444 Visa will be eligible for these payments; 
  • This is intended to be a scheme that lasts for up to six months; 
  • Employers can top up their employees wages; 
  • There is no Super Guarantee paid on this payment. 

More Coronavirus Relief for Business

Over the weekend (29/03/2020), more relief was announced for business including:  

  1. Deferral of Loan Repayments 

A little over a week ago, the Australian Banking Association announced a six-month deferral of all loan repayments for small businesses hit by the coronavirus pandemic. 

On the weekend, this relief has now been extended to all businesses that have loans of up to $10 million. That accounts for just on 98% of all Australian businesses that have loans with Australian banks 

  1. Commercial Tenancies 

National Cabinet agreed to a moratorium on evictions over the next six months for commercial and residential tenancies in financial distress who are unable to meet their commitments due to the impact of coronavirus. 

Commercial tenants, landlords and financial institutions are encouraged to sit down together to find a way through to ensure that businesses can survive and be there on the other side. As part of this, National Cabinet agreed to a common set of principles, endorsed by Treasurers, to underpin and govern intervention to aid commercial tenancies as follows: 

  • a short term, temporary moratorium on eviction for non-payment of rent to be applied across commercial tenancies impacted by severe rental distress due to coronavirus;
  • tenants and landlords are encouraged to agree on rent relief or temporary amendments to the lease; 
  • the reduction or waiver of rental payment for a defined period for impacted tenants; 
  • the ability for tenants to terminate leases and/or seek mediation or conciliation on the grounds of financial distress; 
  • commercial property owners should ensure that any benefits received in respect of their properties should also benefit their tenants in proportion to the economic impact caused by coronavirus; 
  • landlords and tenants not significantly affected by coronavirus are expected to honour their lease and rental agreements; and 
  • cost-sharing or deferral of losses between landlords and tenants, with Commonwealth, state and territory governments, local government and financial institutions to consider mechanisms to provide assistance. 

 

COVID-19 Business Support Summary

Support from the Federal Government 

For Sole Traders: 

▪️Increased & accelerated income support: you’re able to access the $550 per fortnight Coronavirus supplement payment through JobSeeker, Youth Allowance Jobseeker or Parenting Payment with the waiting period and asset testing waived 

▪️The increased instant asset write-off: The Government has lifted the threshold for instant asset write-off from $30,000 to $150,000 

▪️Backing Business Investment: A time limited 15 month investment incentive (through to ‪30 June 2021‬). Businesses with a turnover of less than $500 million will be able to deduct 50% of the cost of an eligible asset on installation 

▪️Early access to superannuation: You can access $10,000 of your superannuation in 2019-20 and a further $10,000 in 2020-21. You can apply for early release of your super from mid-April 2020 

▪️Find out more here: https://business.gov.au/…/support-available-for-sole-traders 

For Employers and Companies: 

▪️Temporary cash flow support: employers will receive a payment equal to 100% of their salary and wages withheld, with a maximum payment of $50,000 and minimum payment of $10,000. Not for profits are also eligible. An additional payment is being introduced which means eligible businesses will receive at least $20,000 up to a total of $100,000 under the two payments 

▪️Help to pay the wages of apprentices or trainees: eligible employers can get a wage subsidy of 50% of the apprentice’s or trainee’s wage paid during the 9 months ‪from 1 January to 30 September 2020‬ 

▪️There is also relief for companies and directors by lifting the threshold of payments to creditors, and for personal liability for directors for trading while insolvent 

▪️Find out more here: https://business.gov.au/…/coronavirus-information…/employers

You can get the full details of all the support available here: https://business.gov.au/…/coronavirus-information-and-suppo…

 

COVID-19 Additional Help for Business

As the anticipated economic impact from the Coronavirus worsens, the Government on the weekend beefed up its assistance package that was originally announced last week as follows:

PAYG cash credits to SME employers and charities up to $100k (minimum $20k) 

The Government announced on the weekend that it will boost last week’s cash credit to employers. It will now provide a tax-free credit up to $100,000 for eligible small and medium sized entities (SMEs), and not-for-profits (including charities) that employ people, with a minimum credit of $20,000. These tax-free credits seek to help businesses’ and NFPs’ cash flow so they can keep operating, pay their rent, electricity and other bills and retain staff. 

Under the enhanced scheme from last week’s first stimulus package, employers will receive a credit equal to 100% PAYG withholding from employee salary and wages (up from 50%), with the maximum credit being increased from $25,000 to $50,000. In addition, the minimum credit will be increased from $2,000 to $10,000. 

SMEs with aggregated annual turnover under $50m and that employ workers are eligible. NFPs entities, including charities, with aggregated annual turnover under $50m and that employ workers will now also be eligible. This will support employment at a time where NFPs are facing increasing demand for services. 

The cash flow credit for employers will be available from 28 April 2020. 

For example, if an employer lodging their quarterly March Activity Statement was ordinarily due to withhold $40,000 in PAYG withholding from their employee’s salaries in that quarterly period, then they would just keep this money themselves (being 100% of the withholding that was due) rather than sending it to the ATO and it would be tax-free. The rest of that Activity Statement would be dealt with normally, for instance it may be the case that GST may be owed for that quarter. 

We can see from this example, that the benefit is by way of the withholding that would normally be owed to the ATO, and that withholding amount is tax-free to the employer. Therefore, it is not a cash payment from the ATO as such, but rather retaining the withholding which would otherwise be payable. 

An additional credit is also being made from 28 July 2020. Eligible entities will receive an additional credit equal to the total of all of the Boosting Cash Flow for Employers payments received. The credits are tax-free, there will be no new forms and payments will flow automatically from the ATO. 

Temporary Relief for Financially Distressed Businesses  

The Government is temporarily increasing the threshold to $20,000 (up from $2,000) at which creditors can issue a statutory demand on a company and the time companies have to respond to statutory demands they receive (21 days to 6 months). Temporary relief will also be provided for directors from any personal liability for trading while insolvent. The Corporations Act 2001 will also be amended to provide temporary and targeted relief for companies to deal with unforeseen events that arise as a result of the Coronavirus.