No.65 COVID-19 Latest Updates – JobKeeper Payment

The Government is continuing to introduce legislative changes and provide further guidance to businesses seeking to apply for the JobKeeper Payment.

Extended date for initial wage payment and enrolment

The Commissioner of Taxation has extended the time available to employers to pay their employees and still be able to claim back the first two fortnight JobKeeper payments.

  • Employers now have until 8 May 2020 to ensure all eligible employees have been paid $1,500 (before tax) for the first two JobKeeper fortnights (30 March – 12 April, 13 April – 26 April).
  • If employees are not paid by 8 May 2020, employers will not be able to claim JobKeeper for the first two fortnights.
  • Employers also now have until 31 May 2020 to formally enroll to claim the JobKeeper payments for the first two fortnights.

 Updated JobKeeper rules

Following the Treasurer’s announcement on 24 April 2020, the Coronavirus Economic Response Package (Payments and Benefits) Amendment Rules (No 2) 2020 has been released to refine and clarify elements of the JobKeeper scheme, according to the Government, to ensure that it most appropriately supports businesses and employees affected by the significant economic impact caused by the coronavirus.

In particular, the amending rules include the following:

  • provide a modified decline in turnover test for certain types of service entities in group structures.

    This alternate test will apply where an entity provides the services of its employees to one or more related entities and where those related entities carry on a business deriving revenue from unrelated third parties.  This alternate test will only be available where the employer entity is a member of –
    o   a tax consolidated group;
    o   a consolidatable group (that is, a group that could choose to consolidated for tax
    purposes but has not); or
    o   a GST group,
    and the employer entity’s principal activity is supplying employee labour services to other members of the group.

    The employer entity will use the combined GST turnovers of the related entities using the services of the employer entity to determine if the decline in turnover test is satisfied.

  • adjust the way in which Commonwealth payments are treated when calculating a University’s turnover.
  • extend the JobKeeper scheme to certain charities that undertake overseas aid and disaster relief.
  • adjust the way in which payments made by the government and the United Nations are treated when calculating a charity’s turnover.
  • include a notification requirement to confirm that all employees of a participating entity must be given the opportunity to agree to be nominated.

    Referred to as the “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 of the eligible employees are covered by their participation in the scheme. This includes all eligible employees who are undertaking work for the employer or have been stood down. The employer cannot select which eligible employees will participate in the scheme.

  • impose additional requirements that must be met for children to be eligible nominees, meaning that full-time students who are 17 years old and younger, and who are not financially independent, are not eligible for the JobKeeper Payment. This rule applies prospectively, which means that an eligible employer that has already met the wage condition of paying such an employee $1,500 for a fortnight may be entitled to a JobKeeper Payment in arrears for that fortnight only.
  • extend the JobKeeper scheme to include religious practitioners that are not employees.

Alternative decline in turnover test rules

Employers and businesses that cannot satisfy the basic decline in turnover test to access JobKeeper Payments because there is no appropriate comparison period in 2019 can still qualify if they meet an alternative test. The alternative test may be relevant for a business that only recently commenced, or that had suffered an extraordinary circumstance in 2019 that affected its usual turnover.

The details of the alternative tests have been released in Coronavirus Economic Response Package (Payments and Benefits) Alternative Decline in Turnover Test Rules 2020.

Before an alternative test can be applied, the ATO must be satisfied that there is no appropriate comparison period for the entity in 2019.

The rules set out the following circumstances in which an alternative test can be relevant:

  • an entity that commenced business such that there is no relevant comparison period in 2019.
  • an entity that acquired or sold part of their business after the relevant comparison period in 2019, which affected their turnover.
  • an entity that has restructured their business after the relevant comparison period in 2019 which affected their turnover.
  • where a business experienced rapid growth in turnover such that its projected turnover is not comparable to the 2019 period. This may include an entity that has had an increase in turnover by 50% or more in the 12 months or 25% or more in the 6 months, or 12.5% or more in the 3 months, immediately before the turnover test period.
  • the business was affected by drought or other natural disaster in the relevant comparison period in 2019.
  • a business has an irregular turnover that is not cyclical, eg the building and construction sector, and
  • a sole trader or partner in a small partnership (less than five partners) did not work due to illness, injury or leave in the comparable period, which affected the turnover.

The appropriate test that is to be applied depends on which of the above circumstances an employer falls within. The rules however clarify that only one of the alternative tests needs to be satisfied to access the scheme, even if more than one of the circumstances applies to an entity.

ATO JobKeeper guidance

Decline in turnover test

The ATO has released Law Companion Ruling LCR 2020/1 setting out the Commissioner’s view of the decline in turnover test as part of the JobKeeper rules.

The Ruling is to assist businesses in working out if they have met the decline in turnover test and covers the following steps:

  • Step A – what supplies are relevant when calculating projected GST turnover and current GST turnover
  • Step B – how supplies are allocated to relevant periods
  •  Step C – how to determine the value of each supply that has been allocated to a relevant period
  • ATO compliance approach – alternative methods for applying Steps B and C

The Ruling includes reference to the ATO’s compliance approach acknowledging that there may be practical compliance difficulties in linking amounts businesses have received or invoiced based strictly on the time a supply is made or likely to be made. Accordingly, the Ruling outlines alternative methods which, if applied in good faith, the ATO will accept can be used as a proxy for determining the value of supplies which were made or likely to be made in a relevant period.

The alternative methods are as follows:

  • Alternative method one – accrual accounting – The Commissioner will allow a business to use the GST-exclusive revenue from making supplies that would be recognised in financial accounts prepared in accordance with (or otherwise substantially consistent with) accounting principles as a proxy for the value of supplies made or likely to be made in a turnover test period.  This method can be used even if the business would otherwise account for GST or income tax on a cash basis.
  • Alternative method two – GST attribution basis – For supplies that are included in the current GST turnover or projected GST turnover in the relevant period that are not taxable supplies, for example GST-free supplies, businesses should use the GST attribution rules as if they applied in the same way as they do for taxable supplies and as if the relevant period was a reporting period for GST purposes.
  •  Alternative method three – income tax accounting (if not registered for GST) – Businesses not registered for GST and that do not use any other alternative methods in this Ruling, may use the same accounting method used for income tax purposes.

 GST adjustment events

The Ruling includes the instruction not to take into account adjustments attributed to the relevant period for GST purposes. This is because such adjustments change the value of the supplies attributed to a prior period for GST purposes.

Examples of adjustments may include; bad debt adjustments or discounts given in a future period for supplies attributed to the relevant period.

The ATO recognise that some entities may have already determined whether they satisfy the decline in turnover test before this Ruling was issued by including GST adjustments in their calculations when adopting a GST attribution approach.  The ATO have noted they won’t be concerned where such an approach has been taken, as long as it has been done consistently for both the relevant periods.

 Using a GST cash or accruals (non-cash) basis

Businesses registered for GST and that account for GST on a cash basis, can use either the cash or accruals (non-cash) basis to calculate their GST turnover.

For businesses registered for GST and that currently use an accruals (non-cash) basis to account for GST, the ATO expect in most cases these businesses would continue to use the accruals method. However, if a business chooses to use the cash basis the ATO may want to understand why the different approach is an appropriate reflection of turnover and further understand the rationale for the calculation and ensure it has integrity as a proxy for the supplies the business has made in the relevant periods.

The ATO have raised concerns where businesses are using GST attribution rules as an alternative method in circumstances where they delay issuing invoices, or request payments to be delayed, for supplies already made in order to artificially meet the turnover test.

 Other requirements where you use one of the alternative methods

The Ruling also provides that if businesses use any of the alternative methods for allocating supplies to the relevant periods, the business must use the same method, and apply it consistently, for both relevant periods. In addition, businesses will need to keep reasonable records to show which method was used. Where businesses used a cash basis when they normally attribute on a non-cash basis they will need to keep a record showing why that method is a reasonable proxy for supplies made.

Whatever method a business uses should also be used for the monthly JobKeeper reporting requirements.

This Ruling is administratively binding on the Commissioner and applies from 9 April 2020.

Schemes in relation to the JobKeeper payment

The ATO has released Practical Compliance Guidance PCG 2020/4 providing guidance on how it will apply its compliance resources to schemes to obtain access to the JobKeeper payment, or an increased amount of a JobKeeper payment.

An entity’s entitlement to an amount of a JobKeeper payment that results or would result from schemes to obtain access to the JobKeeper payment may be denied in whole or in part under section 19 of the Coronavirus Economic Response Package (Payments and Benefits) Act 2020.

The Commissioner will be able to recover any overpayments and will have the power to impose significant penalties and interest. This specific integrity provision is aimed at contrived and artificial arrangements that technically satisfy the eligibility requirements but have been implemented for the sole or dominant purpose of accessing a JobKeeper payment.

Generally if the arrangement is entered into in response to the significant impact the external operating environment has had on the business and those external factors are beyond the group’s control, there is a low risk the Commissioner would apply his compliance resources to consider the application of section 19.

PCG 2002/4 provides examples of how the ATO will apply its compliance resources to certain schemes that result in an entity obtaining access to the JobKeeper payment, or an increased amount of a JobKeeper payment. The examples deal with:

  • deferring the making of supplies to obtain the JobKeeper payment
  • bringing forward the making of supplies solely to obtain the JobKeeper payment
  • transferring assets without any decline in external revenue
  • employer entity that reduces a service fee
  • employer entity that stands down employees
  • employer entity unable to pay
  • parent company of a corporate group that reduces management fees, and
  • parent company of a corporate group that manipulates timing of management fee.

This guideline applies before and after the date of issue of 1 May 2020.

 Commissioner’s discretion to allow further time for an entity to register for an ABN or provide notice to the Commissioner of assessable income or supplies 

 The ATO has issued Practice Statement Law Administration PS LA 2020/1 in relation to the exercising of the Commissioner’s discretion to allow an entity further time to register for an ABN or report business income, for the purpose for satisfying the eligibility criteria for the cash flow boost or the JobKeeper payment.

The original eligibility requirements were included to prevent new entities from being established, or inactive entities being revived, solely to obtain the benefits provided under the cashflow boost or JobKeeper payments.

The practice statement gives the discretion to grant further time to hold an ABN after 12 March 2020, as the entity might be running a business and is eligible to hold, but has not applied for an ABN, due to no-ABN rules and GST provisions not applying to it.

The practice statement also gives the discretion to grant further time to give notice that an amount should be included in assessable income, or that the entity had made the taxable supply. The date of effect of the guidance is from 1 May 2020.


If you have any questions about the JobKeeper Payment, please contact your Blaze Acumen advisor.