Jarrod Rogers CPA, 3 July 2020 No... you definitely can't. ...claim your coffee machine, that…
We recently conducted a JobKeeper Q&A session on YouTube. If you cannot view the video we have included a transcript below.
Hi everybody, it’s Jarrod Rogers here from Beyond Accountancy.
I’m here today with Ashlee and Craig. JobKeeper is now law, it has been operating for a while. Enrolment started last week but there are still a lot of questions and clarifications which we are getting from clients and a lot of the same questions.
So, what we’re trying to do today is answer some of those most common questions on how JobKeeper works and some of the ins and outs of it and to clarify some of the things that perhaps weren’t clear in our previous video or weren’t clear from the government announcements and websites.
Let’s start with a few questions. Firstly, they’ve relaxed the deadlines so, Ashlee, what is the new date for registration to qualify for the April payment, which will be paid in May?
ASHLEE: Employers now have until the 31st of May to enrol in the JobKeeper payments for April. Crucially, the first two fortnights running 30th of March to 12th of April and 13th of April to 26th of April, late payments of the minimum of $1,500 per employee per fortnight as long as they are paid by 8th of May.
JARROD: Fantastic. There was confusion early on where people thought, “Well, this payment starts in May, I don’t have to pay my employees until May,” when actually the May payment is a backdate for April. So, they will let you pay but then after that you’ve got to actually be paying them every fortnight.
Craig, what happens, we talked about that business needs to fall by 30% to get JobKeeper, but what happens if the business recovers, say in the month of June? Do they then drop out of the JobKeeper scheme?
CRAIG: No, so actually, once you qualify for the JobKeeper program you’re in it for the entire six months.
So there are some reporting things which we will go into a little bit later, but even once your business starts to recover and your turnover recovers and your clients and your customers come back, JobKeeper payments will still be made right up till the end of the scheme, which finishes in six months’ time.
JARROD: And Ashlee, Craig talked about monthly reporting, what are the monthly reporting obligations for employers and other businesses?
ASHLEE: So, sole traders and employers will need to report their turnover each month. This is for information purposes only because, as Craig mentioned, you will still qualify for JobKeeper regardless.
In addition, employers will also need to report the number of eligible employees on a monthly basis. The number of employees reported each month will be used to help calculate the amount of JobSeeker payments received by the employer.
JARROD: Perfect. And where do you go and do this reporting?
ASHLEE: So, you do your monthly reporting in the same place as you first registered for JobKeeper, so if you’re using the business portal you can see on the screen there, the same place you registered for JobKeeper down the bottom, there is the monthly declaration for JobKeeper payments so you’ll be able to click on that from 4th of May and do your reporting from there.
JARROD: Fantastic. And employee details you can see down in step two, for those who have workers. You talked about monthly for employees, as well as turnover you report your employees.
Alright, this is one of the loopholes Craig, so sole traders who hadn’t yet done last year’s tax and weren’t registered for GST had to have done their tax by March even though it was due in May, so what’s going on with those people, that sort of misstep via a loophole?
CRAIG: So, we were going through some of the criteria, especially for sole traders, and finding that where there was a criterion that said that you had to either have lodged a BAS statement and declared some GST as of 1 July last year or you had to have completed your most recent tax return
For a sole trader who wasn’t registered to GST, they weren’t completing any BAS’s, they didn’t pass on that part of the test and also if they’re lodging with an agent their return wasn’t due until May 15, so they also hadn’t lodged their return.
That meant that technically they didn’t pass that part of the eligibility test and they would not have qualified. The government has since come out and said that no, a sole trader in that situation still does qualify and the best thing to do is to get your tax return done as soon as possible.
JARROD: Perfect. It was strange because people weren’t late, they’d done nothing wrong with their tax obligations, they still had three months further before they needed to lodge and yet they still missed out just on technicalities, so it’s good that they fixed up that little problem.
We talked a lot about turnover, so Ashlee, what is turnover and how is it defined and how do you work it out?
ASHLEE: You can use the GST turnover test to workout what income is turnover, even if you’re not registered for GST. You can choose to use cash or accruals when preparing your comparisons. You can test one month for either March or April or you can test for the April to June quarter.
You can use an estimated turnover, as well, but you need to ensure that you can substantiate this, meaning that you’ve calculated it in a logical fashion that you can later show.
For example, if you have a number of standard contracts which you’ve been advised will be cancelled and you can estimate how that will affect your turnover, or if you’ve had to shut down business altogether and can safely estimate your turnover it would be nil.
JARROD: Yes, perfect. We’ve got an example here of a business that we’re just doing the monthly method. Do you want to talk us through that?
ASHLEE: Yes. So, this business has got two income streams, so chair rental, it’s a hairdressing salon, so they are renting chairs to other hairdressers. They also have sales. Both of those would count towards your turnover, so you can see in March turnover is only down by $388, which is 6%, so they haven’t qualified.
However, in April you can see that turnover has been reduced by 44% so based on using April as your comparative month they do qualify for JobKeeper payments.
JARROD: Perfect. So, the enrolment form will have what month they are using to get the turnover drop, in this case she picked April. It doesn’t have to be both months, it just has to be one of them. That was one of the confusing things, as well. It doesn’t have to be every month, just one month.
Craig, turnover doesn’t necessarily work for everybody. Some people can’t compare or last year wasn’t a normal year, or whatever, so what are some of the examples where people can use different tests basically, and still qualify.
CRAIG: Even though there are a lot of options in terms of choosing months and quarters and things to pass the turnover test as well as a cash and accruals basis, there are a lot of situations where a business isn’t able to do that.
For example if the business wasn’t running 12 months ago you don’t have a monthly view to compare with, or if the business went through a restructure recently or if the business was affected by a natural disaster or something out of the ordinary affected the turnover in the previous period, which meant that that wasn’t a normal period, it was a much lower period that regular, it would mean that you wouldn’t pass the reduction test for this year.
Or even if your business has had a regular turnover in the previous 12 months, or if a sole trader who was sick or away in that corresponding period last year, again, their turnover is going to be dramatically reduced more than likely.
In that instance the ATO has provided some extra guidance on how to apply some Commissioner’s discretion. It is set criteria, again, and we’d go into those and you’d be best to book and appointment with us.
But the one thing to note is that it’s not just a general discretion available, so you know, if something’s happened that’s a little bit out of the ordinary, and you just think , “Oh, I’ll apply to the Commissioner and he’ll just apply some sort of overall discretion.” He does actually have set rules and things that he has to follow.
JARROD: I think the most common one, which is not really one of the dot points, is the new business.
So, if you started on 1 July last year for example, I have a few clients in that boat, and you’ve definitely seen a drop in turnover but you can’t do much to March or April till April, then you still do qualify, which is good.
That’s probably the most common of those situations, as Craig said, that’s the kind of one where it’s more specific and gets more involved, that’s why we can individually advise on that.
So, Ashlee, let’s move on to more about the employee issues. There are a few different things, so I’ll just get you to run through some of those for us.
ASHLEE: Sure. So, as an employer you will need to contact all of your eligible employees to notify them of your intention to enrol in JobKeeper.
You must give each eligible employee a Notice of Intent to Claim JobKeeper form, which they must fill out and return to you either confirming their intention to participate with you as their employer or communicating to you that they do not agree to participate.
An employee may not want to participate because they have already agreed with another employer. A common question is what to do with these forms once you have them back.
You just need to keep them for your records in case they are needed later for an audit or a substantiation. You don’t actually need to file them with the ATO.
If you are a casual employee who has a more permanent job with another employer you would not be an eligible employee with your casual job and you would only be able to enrol in the JobKeeper payments with your permanent employer.
Also, an employee cannot refuse to work if it is safe and reasonable to do so. You’re obliged to work when your employer requests you to work your normal shifts if you’re receiving JobKeeper.
Not attending work in reasonable circumstances would be considered abandoning your employment and could result in the loss of your JobKeeper payments.
JARROD: Yes, that’s a very common one in the media. People are getting the confused idea that they can get JobKeeper and then they can just sit at home and do nothing and collect $1,500, which is probably one of the myths in the process.
If you’ve got a job and there is work to do, you keep doing your work, you keep doing your normal hours. That just makes logical sense. And if people are, for example, in retail and they can’t open they can still get you to come in and do training.
If you are the employer you want to make the most of that time when you’ve got paid employees, even if the government is the one paying them, but if you’ve got paid employees see what you can do.
Renovate or clean up or do some marketing, do some training, whatever you can do to make the most of the time so your business is as strong as possible when you reopen.
And then another, probably one of the most common questions from non-business owners from the employee side, “Can I get both JobKeeper and JobSeeker?”
ASHLEE: In theory you can, however, it’s likely that your JobKeeper payment would put you over the income limit for JobSeeker. We’ve quoted the Centrelink website on the screen.
So you can see here that the income threshold for a single with no children is $1,086.50 per fortnight, so if you’re also receiving JobKeeper the JobKeeper payment alone will put you over the threshold so you would no longer be eligible for JobSeeker payments.
JARROD: So technically possible, practically unlikely.
Okay, Craig, so what about small business owners who are non-employees, what we call business participants? What are the categories of people who are eligible, obviously sole traders, but who else?
CRAIG: So, one partner in a partnership, one beneficiary of a trust or one director of a company will be eligible. All of these people need to be what they consider to be active employees, so working on and in the business in an ongoing way and just simply are paid through other methods rather than being paid through the business’s payroll system.
It was another one of those ones where initially it looked like a bit of an oversight and a lot of people looked like they were going to slip through the cracks, so the government has got together and made a little bit of a concession, so again, why they picked one, one and one where there are potentially a lot more, who knows? But at least they’ve given some potential access there for business owners who were not paying themselves regularly as employees, which happens in a small business when you don’t have the turnover to pay; sometimes it’s hard to find the money to pay your staff let alone to pay yourself, as well, on a regular basis.
JARROD: Or another common one, this may sound strange if you’ve never, ever run a business or a trust or a company, that people will take money out but it won’t count as a wage.
It’ll count as, for a partnership it will be a distribution, for a trust it’ll be a trust distribution, for a company it might be a dividend, so you’re still taking money from the earnings of the company, it’s still taxable to you, but it is not technically a wage where you don’t get an income statement at the end of the year. You don’t withhold tax, 9% super, etc.
So basically in the same situation as a business owner who’s paying a formal wage in the sense that they’re getting money every month but they just didn’t qualify so that’s where they’ve added this, I guess, non-employing business rule.
CRAIG: Yes, that’s right. So long as you’re being paid for the work you’re doing in the business and not just being paid more as an investor or as an overall owner, you’re being active in the business is that thing that’s really important rather than just sort of sitting on the sidelines a little bit and just participating and enjoying the profits of the business.
JARROD: Perfect, alright. And so the last one is another one of these things where initially people missed out on stimulus but they’re trying to change that and it’s a service entity arrangement which I will just quickly run through.
A larger-size business, might have two entities. So, one entity deals with the public, makes all the sales, sends all the invoices, etc., but they don’t actually employ anybody. They set up a separate company, mostly for legal and risk management reasons, that employs everybody, so we call that a service entity.
You’ve got the trading entity that deals with the public, the service entity deals with all the staff and then the service entity will just invoice for all the costs of wages, super, work cover, all the payroll expenses and just send an invoice to the trading company.
So, these sort of arrangements missed out and the reason why that is, is the trading entity has a drop of turnover, which it needs to have, but doesn’t employ staff so that was a “No” for JobKeeper.
The service entity doesn’t have a drop in turnover but it does employ a lot of staff and so it wasn’t eligible either but Craig, you’re saying that you heard an announcement last week that is supposed to fix that arrangement for these medium-sized businesses.
CRAIG: Yeah, that’s right, so this issue was coming up along with a couple of more technical ones.
Service entities are quite often using the medical industry or in other industries where trading entities are not allowed to incorporate, so some lawyers and legal practices are still in that situation.
The Treasurer announced on Friday night that the government is going to work on and provide an alternative to client in turnover tests so that new 30% turnover tests for the eligibility of these special purpose service entities where they’re providing employee labour to other trading entities or members of a group that have not met the basic client in turnover test.
It will be similar to the other tests in that it will still be referenced to the normal calculation of turnover based on GST using the related entities, so using those trading entities rather than using the turnover of the service entity.
JARROD: Yes, great. So that’s another example where you want to get more specific advice.
So, that’s all the questions we had. There will be more that pop up over time. Thanks, Craig, for your time and thanks Ashlee.
Now, many of you, especially the sole traders among you, are not going to have much problem enrolling and doing the monthly reporting. It’s a pretty good system they set up. Initially the instructions looked very complex but you just jump in online and it’s pretty self-explanatory.
For employers there’s a bit more you need to do. You need to make sure you’re reporting your employees, nominating who’s eligible for each fortnight. It’s $1,500 per employee so you’ve got to make sure you put all the ones who are eligible; there’s a bit more work involved.
Or if you might be in a situation where you started a business in the last 12 months or any of these other obscure or less common examples, then we’re here to help, so get in touch. We are trying to help our clients as much as possible in this strange time that we’re in.
Finally, we will be releasing more videos as new information comes out on the stimulus and other topics, so please subscribe to the channel if you want to stay in the loop.
Thanks for watching and we’ll talk to you again soon.