On 21 September 2020, the ATO updated its material on its website explaining the eligibility requirements for ‘sole traders’ to include the extended ‘JobKeeper 2.0’ changes – which are broadly an extension for 2 more quarters, each with a stepped down benefit and each with a 2-tier benefit structure depending on an 80 hours ‘work…
Eichmann v CofT – CGT Small Business Concessions – Property used for storage was an ‘active asset’ – taxpayer finally wins in Full Federal Court
On 18.9.2020, the Full Federal Court has allowed the Taxpayer’s appeal, holding that a property used to store materials, tools and other equipment was an active asset for the purpose of the Div 152 CGT small business concessions, and as a result, those concessions applied (reversing the Federal Court decision, which reversed the AAT decision,…
ACT Rates Relief – for Commercial Tenants negotiating in good faith with COVID-19 affected tenants – extended with JobKeeper
The ACT Government notified on 10 September 2020 the Leases (Commercial and Retail) COVID-19 Emergency Response Declaration 2020 (No 2) to extend its assistance to incentivise commercial landlords to offer rent relief for tenants impacted financially by COVID-19. This matches the extension of the Federal JobKeeper support package.
See below for details.
Foreign Resident CGT Withholding Tax – ATO updates website for ‘Purchaser Payment Notification’ (PPN) forms – generating a ‘reference number’ for ATO, vendor and purchaser purposes
On 27 Aug 2020, the ATO updated its website regarding legal practitioners lodging ‘Purchaser Payment Notification’ (PPN) forms, for Foreign Resident CGT Withholding Tax (CGT Withholding Tax). Though this will be most relevant for conveyancers, it is worth re-acquainting ourselves with this regime.
See below for details.
Qld stamp duty: Resolute Mining Ltd v Commr State Revenue – duty payable on $635k ‘unencumbered value’ of land – not the $8.4m ‘funding amount’ to move a school – which couldn’t be valued because it could go up or down
The Qld Supreme Court has held that duty was payable on the unencumbered value of land as the highest consideration payable under the agreement to purchase the land could not be ascertained when the agreement was executed.
See below for details.
JobKeeper 2.0 – ‘work test’ for higher (Tier 1) benefits when hours of work not ascertainable – ATO Determination on when higher benefit will be paid
The ATO registered a legislative instrument, the Coronavirus Economic Response Package (Payments and Benefits) Higher Rate Determination 2020, on 16 September 2020. It sets out when the higher JobKeeper rate applies to an eligible employee of a JobKeeper registered entity, identifying the specific circumstances in which the Commissioner will be satisfied that determining an employee’s total hours is not…
JobKeeper 2.0 ‘decline in turnover test’ – ATO Determination allows ‘actual’ turnover to be calculated on an ‘attribution’ timing basis
The ATO registered a legislative instrument, the Coronavirus Economic Response Package (Payments and Benefits) (Timing of Supplies Made and Decline in Turnover Test) Rules 2020 (No 1), on 16 September 2020 – to allow taxpayers to use the GST ‘attribution’ rules to calculate their actual ‘turnover’ for the ‘decline in turnover test – for the extended JobKeeper…
JobKeeper 2.0 – Alternative 28-day ‘Reference Periods’ for the 40hr per fortnight work test (for higher ‘tier’ benefits) – determination made by Commissioner
On Wed 16 Sept 2020, the Commissioner of Taxation registered a legislative instrument, the Coronavirus Economic Response Package (Payments and Benefits) Alternative Reference Period Determination 2020. It sets out 4 alternative reference periods for specified classes of individuals in determining whether the higher or lower JobKeeper payment rate (Tier 1 or Tier 2) applies. See below for details.…
On Tuesday 15.9.2020, the Federal Government released details of its extension to the JobKeeper scheme beyond September 2020. As previously announced, the JobKeeper payment will be extended for two periods, being the December 2020 quarter and March 2021 quarters.
See below for details.
Federal Register of Legislation:
- Coronavirus Economic Response Package (Jobkeeper Payments) Amendment Act 2020; No. 81, 2020 (Assent: 3 Sept 2020; Registered: 9 Sept 2020)
- Coronavirus Economic Response Package (Payments and Benefits) Amendment Rules (No. 8) 2020; made by Treasurer on 15 Sept 2020.
- Coronavirus Economic Response Package (Payments and Benefits) Rules 2020 – as amended]
- Coronavirus Economic Response Package (Payments and Benefits) Alternative Reference Period Determination 2020 – made my Commissioner of Taxation on 16 Sept 2020 (see related TT article).
- Coronavirus Economic Response Package(Payments and Benefits) Higher Rate Determination 2020 – made my Commissioner of Taxation on 16 Sept 2020 (see related TT article).
- Coronavirus Economic Response Package (Paymentsand Benefits) (Timing of Supplies Made and Decline inTurnover Test) Rules 2020 (No. 1) – made my Commissioner of Taxation on 16 Sept 2020 (see related TT article).
The JobKeeper scheme, which was originally scheduled for completion in September will now continue until 28 March 2021 with new eligibility and payment conditions. The key features of JobKeeper 2.0 are:
- the duration of the scheme has been extended, for the periods 28 September 2020 to 3 January 2021 (“the First Extension Period”) and 4 January 2021 to 28 March 2021 (“the Second Extension Period”), provided relevant eligibility requirements are satisfied;
- employers are required to separately test their eligibility for each period based on an actual decline in turnover for a quarter; and
- reduced rates of payment apply, determined by the average number of hours worked by an employee during the relevant period.
The new rules provide the ATO with powers around the turnover test and with respect the higher and lower rates. Those powers become effective from 16 September 2020. It is expected there will be additional rules released in the next few days. The below answers are subject to change where additional guidance from the ATO is released.
What conditions do I need to satisfy to continue to be eligible under JobKeeper 2.0?
To be eligible to continue receiving payments under the extended scheme, businesses and not-for-profits will need to demonstrate their actual GST turnover has fallen in the September 2020 quarter (for payments during “the First Extension Period”) or the December 2020 quarter (for payments during the “Second Extension Period”) relative to a comparable period (generally the corresponding quarter in 2019).
Each of these periods will be tested separately, meaning businesses can be eligible for one or both periods (or neither). Importantly, businesses will still be required to meet the other eligibility conditions that applied under the original JobKeeper scheme (i.e. carried on a business or pursued its non-profit objectives in Australia at 1 March 2020).
Can I qualify for JobKeeper 2.0 without having enrolled in the original scheme?
Enrolment in the original JobKeeper (i.e. prior to 28 September 2020) is not a requirement for payments during the first or second Extension Period. New entrants are permitted to enrol for either of these periods provided they meet the other eligibility conditions that apply.
However, the entity would have needed to have met the original decline in turnover test under JobKeeper 1.0. On a practical basis, it is expected that most entities will satisfy this test if they satisfy the actual decline in turnover test under JobKeeper 2.0 (as they are testing the same quarters).
How do I satisfy the new decline in turnover test?
To satisfy this test an entity must establish that turnover for the quarter has declined by 30% (or 15% or 50% depending on the type and size of the entity) relative to a comparable period (generally the corresponding quarter in 2019). However, in contrast with the rules under the original scheme this test will be based on “actual” GST turnover. That is, rather than looking forward to demonstrate the business is likely to experience a reduction in turnover going forward, businesses will now be required to establish that they have already experienced the required reduction in turnover (for either the September 2020 or December 2020 quarter).
Can I use a month instead of a quarter to satisfy the actual decline in turnover test?
For the purposes of JobKeeper 2.0, businesses no longer have a choice of testing a month or a quarter, they are required to test the turnover for the September 2020 and December 2020 quarters, regardless of their usual BAS reporting cycle.
How do I calculate my turnover for the purposes of the actual decline in turnover test?
Under the Rules, the Commissioner has been given the power to determine that supplies or classes of supplies are made in a particular period. As outlined in the accompanying Explanatory Statement, it is expected that the Commissioner will determine that most or all supplies will be treated as being made during the period to which they are attributable for GST reporting purposes. If the Commissioner exercises this power, this will require the entity to use the GST turnover as reported in their BAS for each of the September 2020 and December 2020 quarters. This is likely, therefore, to result in all the options in LCR 2020/1 not being applicable under the JobKeeper 2.0 rules.
Are the Commissioner’s alternative tests still available?
The Commissioner retains the power to determine that an alternative test applies to a particular class of entities where there is no relevant comparison period. Under JobKeeper 1.0, the Commissioner released a legislative instrument setting out eight alternative tests that entities could use to satisfy the decline in turnover test. These tests remain available to satisfy the test for the purposes of JobKeeper 2.0, however application in the current form may result in inappropriate outcomes. While the Commissioner has not yet released any changes to the current version of the alternative tests, Pitcher Partners has been in confidential consultation with ATO and Treasury on revising the alternative tests for the JobKeeper 2.0 rules.
Can service entities qualify under JobKeeper 2.0?
The modified test (section 8A of the Rules) remains available for service entities in its current form (i.e. for entities in GST, consolidated or consolidatable groups). Entities will need to reconsider the key conditions of this test for the September and December 2020 quarters, such as whether the entity supplies employee labour services to group members that have making supplies to third parties as their principal activity and that the employer does not itself supply employee labour services to entities outside the group (other than incidental amounts).
In respect of services entities under PCG 2020/4, the ATO has not yet announced any updates under JobKeeper 2.0.
Who is an eligible employee?
The eligibility rules regarding employees have not changed since the release of Pitcher Partners’ previous bulletin (see here). Broadly, it requires an individual satisfy;
- an employment test (full time, part-time or casual employee);
- age test (18 years or over, unless independent or not studying full-time) and;
- residency test as at the relevant date.
For fortnights commencing on 3 August 2020, whether an individual is an eligible employee can be tested as at 1 July 2020, instead of 1 March 2020. This extends the application of JobKeeper to employees that have been engaged by an employer since the scheme was originally introduced.
Employers already enrolled in JobKeeper prior to 3 August 2020 are not required to retest employees that satisfied the eligibility requirements as at 1 March 2020.
Who is an eligible business participant?
The rules regarding eligible business participants have not changed. An individual will only be an eligible business participant if they meet the relevant criteria as at 1 March 2020 and continue to be actively engaged in the business in each JobKeeper fortnight.
What are the new payment rates for employees?
Under the amendments, the maximum payment available under JobKeeper 2.0 will be reduced from 28 September 2020 to $1,200 for the First Extension Period and $1,000 for the Second Extension Period. The maximum payment will be available only to those eligible employees and eligible business participants that satisfy a “work hours test” (more than 80 hours in the relevant period), regardless of their hours of employment within the fortnight itself. Employees or business participants that do not satisfy the work hours test will be eligible for the reduced payment rate of $750 (for the First Extension Period) or $650 (for the Second Extension Period).
For the employer to be eligible for the payment at the higher rate for the employee, the business must notify the Commissioner that the higher rate applies. The employer must additionally notify the employee whether the higher or lower rate applies.
For those that anticipate being eligible for payments under JobKeeper 2.0, employers can now begin assessing whether their employees are likely to be higher or lower rate.
How do I determine which payment rate applies for an employee?
The payment rate for eligible employees and business participants will depend on whether the individual satisfies a work hours test. For an employee, this test requires that the total hours of work, paid leave and paid absence on public holidays was 80 hours or more during the relevant period (“the reference period”) prior to 1 March 2020 or 1 July 2020 (whichever is higher for the employee).
The reference period is determined by the normal pay cycle for the employer. If the employer pays on a weekly or fortnightly basis, the test will consider the number of hours worked in the 28-day period ending at the end of the last pay cycle before 1 March 2020 or 1 July 2020.
For example, a business normally pays its staff fortnightly in arrears. Its last pay cycle prior to 1 March 2020 ended on Tuesday 25 February 2020. The employer will consider the number of hours worked by the individual in the 28-day period ending on 25 February 2020 (i.e. between Wednesday 29 January 2020 and Tuesday 25 February 2020). Where the employee worked more than 80 hours during this period, the employer will be entitled to the JobKeeper payment at the higher rate for that employee for both Extension Periods (if the employer qualifies for both).
Does the payment rate apply to both the First and Second Extension Periods?
As the work hours test is based on a previous period (i.e. February or June 2020), the higher or lower rate for the employee or business participant will apply for both Extension Periods and will only need to be tested once. That is, the hours worked by the employee in the September or December quarters are not relevant in determining whether the higher rate applies.
What if we pay our employees on a monthly basis?
Where the pay cycle for an employee is longer than 28-days, a pro-rata proportion of the total hours of work, paid leave and paid absence on public holidays of the employee in the pay cycle is to be used in determining whether the individual has met the work hours test.
For example, this may require taking a pay cycle for a 31-day period ending in February or June 2020 and multiplying the total hours of work, paid leave and paid absence on public holidays by 28/31. In this example the total hours in the 31-day period would need to be 89 (i.e. 89 x 28/31 = 80.39).
Does the individual need to have worked more than 80 hours in both reference periods?
To be eligible for the higher rate, the individual only needs to meet the work hours test in one of the reference periods that applies to the individual (not both).
How do I determine which payment rate applies for an eligible business participant?
The payment rate for eligible employees and business participants will depend on whether the individual satisfies a work hours test. For a business participant, this test requires that the individual was actively engaged in the business for at least 80 hours during the month of February 2020. In addition, the individual must give the business (or to the Commissioner if the individual is a sole trader) a notice outlining that it meets this condition, for the business to be eligible for the payment at the higher rate.
Does the Commissioner have any power to make alternative tests?
The Commissioner was given power to make two determinations in relation to the payment rate; (1) the power to determine that another reference period applies to a specified class of individuals if the Commissioner considers that the period is not suitable for that class of individuals; and
(2) the power to determine other specified circumstances in which the higher rate might apply for a class of individuals, where the Commissioner considers that the hours worked in the reference period are not readily ascertainable.
When am I required to pay my employees for the first fortnight?
It continues to be a requirement under JobKeeper 2.0 that an employer is required to meet the wage condition (i.e. pay the minimum JobKeeper payment to each eligible employee) by the end of each JobKeeper fortnight. As outlined in the Explanatory Statement, it is expected that the ATO will provide an extension of time to allow an entity to meet the wage condition for the first fortnights in each extension period.
What happens if my payroll cycle straddles periods for which different payment rates apply?
The first week of the First Extension Period (i.e. the fortnight ending 11 October 2020) and the Second Extension Period (i.e. the fortnight ending 17 January 2021) will include days that straddle different minimum wage payments. It may become problematic to calculate whether the wage condition is satisfied in such cases where employees are not paid on a weekly or fortnightly basis. The Treasury Fact Sheet notes that the ATO will be releasing further guidance to assist employers who pay their staff for periods longer than a fortnight.
GST tax reform – its importance and place in wider tax reform in Australia (including as part of a COVID-recovery)
On Friday 18.9.2020, The Tax Institute published an the Report of the Chair of their National GST Technical Committee: Bastian Gasser in its weekly tax bulletin: TaxVine (No. 36, 18.9.20). It covers the work that Committee has been doing in considering the part GST might play in Institute’s Tax Summit: Project Reform. It also comes as…