10 Things You Should Know About JobKeeper
Last week, JobKeeper payments started to be paid to eligible employers and sole traders. The program will run for another six months. Clients of the practice will not be charged for application and ongoing support to the program.
Feedback to the practice indicates there is widespread uncertainty as to how JobKeeper will operate. The ATO has continued to refine the boundaries of eligibility for both employers/sole traders and employees since the program was announced at the end of May. Below is a summary of the top 10 queries we have received about JobKeeper:
1. Can I still apply?
Applications may be made until 31 May, and payments will be dated from 30 March for successful applicants, depending on when you meet the decline in turnover test.
2. When will I be paid?
Clients of the practice have been receiving their payments within 2 days of their forms being submitted to the ATO; however, the standard processing time for applications is 14 days. That is, if a payment is not made within 14 days, we can request the ATO to expedite payment or ask if there is a technical reason for the application not being finalised.
One of these technical reasons could be your history of tax compliance. If you were late in lodging your 2019 tax return, your application could be refused.
3. The ‘all in’ rule
The original position of Treasury was that an eligible employer had to nominate all of its eligible employees or it could not participate in the program. However, some taxpayers found themselves in a position where they were eligible for JobKeeper as a sole trader and also as an employee in one or more businesses.
It is now apparent that an employee may advise an employer in writing that they do not wish to be nominated for that employer’s scheme if they wish to apply for JobKeeper with another employer or as a sole trader.
4. Am I eligible?
Employees on maternity leave and employees in receipt of workers compensation insurance payments were specifically excluded from eligibility in the JobKeeper legislation as were certain foreign nationals and casual employees who had not been continually employed by an employer for at least 12 months.
Bankrupts also cannot access the program. Casual employees who are 17 years old or younger and attend school are held to be ineligible, regardless of whether they have been with their employer for 12 months or more.
5. Should I apply as a sole trader if I am a permanent or part-time employee?
It is common in the arts for sole traders to be employed in other businesses. Musicians may play performances over the weekend through their ABN and be employed as permanent part-time teachers in schools throughout the week. Radio announcers commonly perform voice-overs as a business, separate to their day job. Film and television producers may receive PAYG summaries from production companies and also invoice the same businesses for other work.
In these instances, the amount of income received from being a sole trader must be compared to the amount of income from being a permanent or part-time employee in other businesses. If your sole trader income is higher than your employment income, and you have not been nominated for the scheme by your employer, you may apply for JobKeeper as a sole trader. You must advise your employer in writing that you do not wish to be nominated as an employee for the purposes of their application.
6. Defining turnover
Turnover is defined as your business income including GST. If you are not registered for GST, you typically measure your turnover as the deposits made to your business accounts by your clients for the relevant month or period of the JobKeeper application.
Measuring turnover this way is known as ‘cash basis’ accounting and is most commonly used for services businesses, particularly in the arts.
The alternative way of measuring turnover is known as ‘accrual basis’ accounting, which applies mainly to businesses with larger turnovers. Accrual basis accounting measures turnover by the invoices sent to your clients in a period.
If you have been using the cash basis for your tax returns and activity statements, it is permissible to use the accrual basis for JobKeeper; however if you have been employing the accrual basis, the ATO may wish to discover why you have switched to the cash basis for your application.
7. How do I project my turnover?
One of the questions in the JobKeeper application concerns projecting turnover in future months. Like many areas of tax administration, the answer to an uncertain question is to have evidence and to be reasonable. If you currently have no contracts in place for the month ahead and no reasonable chance of securing business income for this period, your projected turnover will be $0.
An ATO ruling released last week will bring comfort to applicants who are concerned that their projected turnover will be less than their actual figures in the future.
“If it later eventuates that your actual turnover for your turnover test period is greater than your prediction of your projected turnover, you do not lose access to the JobKeeper scheme,” the ATO ruling said.
8. What if my actual turnover increases?
ATO Deputy Commissioner Deborah Jenkins has clarified that businesses only have to prove their eligibility once at the point of enrolment, with the monthly business declaration not a retest of eligibility.
“Once you are eligible, you remain eligible for the period until September,” Ms Jenkins said.
“People can’t predict the future. They don’t have a crystal ball. Wouldn’t it be wonderful if businesses are doing well in that period and didn’t have a drop of 30 per cent? They continue to be eligible even though, later on, they might find their business has kicked in, and people are shopping again, buying again, out in the restaurants and cafés.”
9. Single touch payroll and business participants
The ATO relies on Single touch payroll (STP) to identify who are the eligible employees of businesses enrolled in JobKeeper.
Directors of companies or trustees of trusts may be enrolled as business participants, however only one non-STP participant is allowed per business.
10. JobKeeper obligations
During the life of the program applicants will have to make up to six separate monthly declarations of the employees/participants being nominated, actual turnover and projected turnover.
It is expected that these declarations are made in good faith and that your business records are maintained to answer any queries the ATO may have about your eligibility.
The receipt of a JobKeeper payment from the ATO is taxable income and must be declared on your tax return. It is advised that a portion of the payment be set aside to pay for future income tax, depending on your circumstances.
Acrylic on canvas
168 cm by 92 cm
Image courtesy of Fox Galleries