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 test’ (generally) in the month of February 2020.

See below for details.

[Tax Month – September 2020]

 


 

ATO JobKeeper Guide for ‘sole traders’ – including JobKeeper 2.0 changes

[For other self-employed entities: Partnerships, Companies and Trusts – see companion ATO Guide]

Sole traders may be eligible for the JobKeeper payment under the business participation entitlement if their business has experienced a decline in turnover according to the eligibility criteria.

The JobKeeper guide – sole traders provides step-by-step information on how to:

  • enrol yourself as a sole trader under the business participation entitlement
  • identify and maintain employees, and make a monthly business declaration, and
  • from 28 September 2020, check your actual decline in turnover to receive payments under the extensions to JobKeeper.

Work out your eligibility

As a sole trader, you may be entitled to the JobKeeper payment for yourself if:

  • you meet the conditions of an eligible entity
  • you are also an eligible business participant.

An eligible business participant is an individual who is actively engaged in the operation of the business but is not:

If you are eligible, you can claim the JobKeeper payment for yourself as the eligible business participant.

  1. For JobKeeper fortnights to 27 September 2020, you are entitled to one $1,500 JobKeeper payment per fortnight for yourself as the eligible business participant.
  2. For fortnights from 28 September 2020, the JobKeeper amount will reduce and depends on whether you satisfy the 80-hour threshold. If you satisfied the 80-hour threshold, the higher tier 1 rate will apply. If you did not satisfy the 80-hour threshold, the lower tier 2 rate will apply.

Work Test threshold hours – you satisfy the 80-hour threshold if you:

  • were actively engaged in your business for 80 hours or more during your reference period, and
  • have notified us of this in your business monthly declaration.

[NOTE – if you do nothing, you get the ‘Lower Tier’ benefit]

If you have employees, you may also be able to claim JobKeeper payments for each eligible employee.

Work out if you are an eligible entity

To claim JobKeeper payments, an entity must satisfy certain eligibility requirements. As a sole trader, you are an eligible entity if:

  • on 1 March 2020, you carried on a business in Australia
  • you satisfy the relevant decline in turnover tests.
  • you satisfied certain conditions at 12 March 2020, being
    • you had an ABN on 12 March 2020, and
    • you had lodged, on or before 12 March 2020, at least one of
      • a 2018–19 income tax return showing an amount included in your assessable income for carrying on a business, or
      • an activity statement or GST return for any tax period that started after 1 July 2018 and ended before 12 March 2020 showing you made a taxable, GST-free or input-taxed sale.

Bankruptcy – a sole trader is not eligible for the JobKeeper payment if they have entered bankruptcy.

Work out if you are an eligible business participant

If you are a sole trader – that is, you own your business and are not an employee of your business – only you can be the eligible business participant.

You will qualify as an eligible business participant provided you satisfy all the following conditions:

  • You are actively engaged in your business (at 1 March 2020 and for the fortnight you are claiming).
  • You were a sole trader at 1 March 2020 and for the fortnight you are claiming.
  • At 1 March 2020, you are both
    • at least 18 years old. If you are 16 or 17 you can also qualify if you are independent or not studying full time.
    • an Australian resident (under section 7 of the Social Security Act 1991), or a resident for income tax purposes and the holder of a Special Category (Subclass 444) visa.
  • You are not receiving government parental leave or Dad and Partner Pay
  • You are not totally incapacitated for work and receiving payments under an Australian workers’ compensation law in respect of your total incapacity to work
  • You are not an employee (other than a casual employee) of another entity
  • You have given us a JobKeeper nomination notice
    • as a sole trader, this is done during the online enrolment process in the Business Portal or in ATO online services using myGov. You do not need to complete a separate nomination notice for yourself.
  • You have not previously given another entity, or us, a JobKeeper nomination notice.

There is a limit of one JobKeeper payment per fortnight for the eligible business participant.

Actively engaged

As a sole trader – that is, you own your business and are not an employee of your business – you will be actively engaged in your business if you regularly:

  • Perform, or manage the performance, of services the business provides
  • sell or manage the sale of goods of the business
  • perform other activities associated with managing the business
  • exercise control over activities related to business strategy and growth.

You will not be actively engaged in the business simply because you:

  • own an interest in the business or invest capital in it
  • provide advice or other assistance to the business from time to time.

From 28 September 2020, the JobKeeper payment rate will depend on whether you were actively engaged in your business for at least 80 hours in your reference period (generally, February 2020).

If you don’t have employees

As a sole trader, you can only nominate yourself as the eligible business participant. Where you meet the eligibility requirements, you can qualify for the JobKeeper payment.

If you are a sole trader with more than one business

A sole trader can only receive one JobKeeper payment per fortnight as an eligible business participant, even if you operate more than one business as a sole trader.

You can only be an eligible business participant for one entity. If you nominate yourself as an eligible business participant as a sole trader, you can’t be an eligible business participant for any other entity.

Fortnights from 28 September 2020 (stepped down rates and 2 Tiers in each)

For fortnights from 28 September 2020, there are two payment rates. Both payment rates decrease from JobKeeper fortnight 21, starting on 4 January 2021.

JobKeeper fortnights tier 1 and 2 rates
JobKeeper fortnights Tier 1 rate Tier 2 rate
28 September 2020 – 3 January 2021

$1,200

$750

4 January 2021 – 28 March 2021

$1,000

$650

 

The tier 1 rate of the JobKeeper payment will apply to you if you satisfy the 80-hour threshold. You satisfy this if you:

  • were actively engaged in your business for 80 hours or more in your 29-day reference period, and
  • have notified us of this in your business monthly declaration.

The tier 2 rate – applies if you do not meet both these requirements [NOTE: the default, if you do nothing, is that you get the lower tier benefit].

It is important that you accurately work out whether you were actively engaged for 80 hours during your reference period. There are penalties for making a false or misleading declaration.

‘Work Test’ – Reference period

Your reference period will usually be the month of February 2020.

There may be circumstances where February 2020 is not a suitable reference period for you. If you do not satisfy the 80-hour threshold in February 2020, you should consider whether you satisfy it using an alternative reference period.

If more than one reference period can apply to you, you only need to satisfy the 80-hour threshold for one of those reference periods for the tier 1 rate to apply to you.

Alternative reference period – less than 80 hours and not representative

Use this alternative reference period if your:

  • total hours of active engagement in your business was less than 80 hours in February 2020, and
  • when compared to earlier 29-day periods (each wholly within a calendar month), February is not representative of your typical number of hours of active engagement in your business.

For example, you were sick or injured during February 2020, so that period is not representative of your typical time spent actively engaged in your business.

The alternative reference period is the most recent 29-day period (wholly within a calendar month):

  • ending before 1 March 2020
  • in which your total hours of active engagement in your business was representative of a typical 29-day period.

Record keeping

If the tier 1 rate applies to you as an eligible business participant, you must keep records. These records will show how you made your assessment of the hours that you were actively engaged in your business. These records might include:

  • business diaries
  • appointment books
  • log books
  • hours billed
  • invoices issued
  • time sheets or attendance records
  • records prepared for other business or statutory purposes.

There are penalties for making a false or misleading declaration.

Enrol for the JobKeeper payment

How to prepare

When you, as a sole trader, have worked out that you satisfy the eligible entity requirements, as well as the eligible business participant requirements, you need to enrol.

To claim the JobKeeper payment for a fortnight you must enrol before the end of the month in which the fortnight ends.

As a sole trader, you can nominate yourself as the eligible business participant during the online process. You do this in the Business Portal, in ATO online services using myGov or your registered tax or BAS agent can do it for you.

Note: Sole traders do not need to complete a separate nomination notice for themselves but do need to notify us if they are eligible for the tier 1 or tier 2 rate.

There are steps you will need to take before you can receive JobKeeper payments.

  • Step 1: If you are joining JobKeeper for the first time you need to enrol
  • Step 2: Identify and maintain your eligible employees or business participant
  • Step 3: Make a business monthly declaration

If you are currently enrolled and would like to continue to claim JobKeeper extension one, you will need to check your continuing eligibility from 1 October 2020.

To claim JobKeeper extension two, you will need to check your continuing eligibility again from 1 January 2021.

For detailed instructions on how to enrol, identify and maintain employees and make a monthly business declaration, see the JobKeeper guides.

See also:

How to stop receiving JobKeeper payments

You can choose to stop receiving JobKeeper payments at any time. For more information on how to do this refer to JobKeeper guide – sole traders.

JobKeeper and your tax return

If you are a sole trader who has received JobKeeper payments, you need to include them as business income in your individual tax return. Include the amounts paid to you at the label ‘Assessable government industry payments’.

If you have any employees, JobKeeper payments are treated the same as their usual salary or wages from their employer. It will be included in their income statement as either salary and wages or as an allowance, depending on their circumstances. If they self-prepare their tax return, we will automatically include this information once their income statement is finalised. For most people this will occur by the end of July. A registered BAS or tax agent will also have access to this information to complete their client’s tax returns.

[ATO website: JobKeeper – Sole Traders]

 

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