Tailored Accounts facebook   +61 2 6169 5196

Common mistakes that made businesses think they failed the JobKeeper 2.0 test (Part 1)

JobKeeper (JK) 1.0 was a big challenge for us as it involved a new set of complex laws that required tedious documentation and reconciliation to ensure everything was executed smoothly! JobKeeper 2.0 is even more challenging because many businesses have to complete both JK 1.0 and 2.0 tests.

Since the release of JK 2.0 rules by the Australian Tax Office (ATO) and the alternative tests, our team has been working tirelessly to make sure our clients are entirely confident of whether or not they are going to receive JK payments for the next three months. The good news is that over 80% of our clients who were eligible for JK 1.0 also qualified for JK 2.0, however over 50% of the JK 1.0 participants that were qualified via alternative tests.

The reason for sharing this article is that we continue to hear business owners say they won’t qualify for JK 2.0 after doing the test themselves. As mentioned above, the tests involve complex sets of rules that require substantial accounting knowledge and experience to understand. In my opinion, it takes between one and four hours to determine if a business is qualified or not. There are fewer hours required for businesses who passed the basic test, while far more hours are required for those that have to go through all 26 sets of tests. So if you doubt your DIY test result, you should speak to one of our accounting staff, we often do the test for no cost!

Here are common misunderstandings that cause false test results:

  • I can use the test kit provided by XERO to work out if I am qualified or not. 

This is very wrong! XERO provides a quick test kit, but I would not recommend anyone use it unless you are simply after a quick result and plan on going through the rest of the test later. The XERO test kit does not take into account various factors that could give you the wrong result. For example, if you posted a journal to an income account and ticked the box that includes this journal into a cash report, it is reported as GST turnover in a XERO report. This result could give you the wrong figure for JK GST turnover testing purposes. Further, there is no alternative test provided.

  • As long as my books are completed up to 30th September, I am ready to do the test.

This is only partly right, there are a series of checks to make sure your books are ready for JK tests. Here are some tips:

  • First, you need to determine if your BAS is on a cash or accrual basis. If you are on cash (as are most small businesses) then you have to make sure your bank reconciliations are done with no outstanding or unreconciled transactions for the periods that you are testing and for the reference period (e.g. July - September 2019). 
  • Re-do your BAS for the reference periods to make sure that your current data matches with the BAS that was lodged with the ATO (access via the ATO portal). Periods that you need to check: July - September 2019, April - June 2010 and December - February 2020. For some other tests, you also have to check from March 2019 until June 2020.
  • When going through the GST audit reports for all the BASs above, ensure you check all transactions coded with the following GST code: GST Free Income & BAS excluded. Keep in mind that some of these transactions could be fine for BAS purposes but will need to be checked for JK turnover purposes.
  • Go through the GST turnover definition and remove any income that shouldn’t be accounted for as GST turnover. Keep in mind that some of these income streams could be reportable in G1 as your BAS turnover, but should be excluded for JK 2.0 GST turnover. For example, an ACNC registered organisation who receives Government funding that is considered G1 should be manually taken out for the purpose of this test. Another example could be client reimbursements, some of these transactions could be coded as GST free income and hence reported in G1, however, they should be excluded from the JK turnover test. 
  • Donations are another ledger that needs to be checked carefully. Finally, if your business is exporting, you have to include all export sales to your JK turnover test. Whereas they could be reported differently in your BAS turnover.
  • Check all manual journal transactions when going through GST audit reports for all BASs above. Some of these transactions could be excluded from JK turnover testing purposes.
  • If you are doing the books but not doing Accounts Receivable, you need to double-check with the Accounts Receivable team to make sure they have finished all invoices/credit notes for testing for the reference periods mentioned above.
Read more...

The latest JobKeeper amendment notice

The latest amendment to the JobKeeper 1.0 rules has been released. This seventh amendment, released on Friday 14 August, encapsulated the changes set out in the 7 August version of the “JobKeeper Payment” fact sheet, as discussed in Tax & Super’s article “When considering the latest JobKeeper changes, stay tethered to the facts”.

Note: In recognition of the short time available to employers to meet the wage condition for newly eligible employees, particularly in relation to JobKeeper fortnight 10, the ATO has given employers until 31 August 2020 to meet the wage condition for JobKeeper fortnights 10 (3-16 August) and 11 (17-30 August). See What Employers Should Do Now Below.

Entitlement based on employees

The major change is the admission into the JobKeeper scheme of employees who were on the books as at 1 July 2020, from JobKeeper fortnight 10 (3-16 August).

The rules as amended not only enable individuals who may be new into the workforce after 1 March 2020 to join JobKeeper, but also enable individuals who were employees of an entity (the “old entity”) as at 1 March 2020 (“1 March employee”) but who have subsequently left the old employer and found new employment on or before 1 July 2020, to give a nomination notice to, and join JobKeeper, through that new employer.

The individual must have ceased to be employed by the old entity after 1 March 2020 but before 1 July 2020. The reason they ceased their relationship does not matter (for example, they could have had their employment terminated, they could have resigned, or their employer may have ceased to exist). By satisfying the requirements with reference to the 1 July 2020 date, it does not matter whether the individual had previously been an eligible individual of another qualifying entity.

Additionally, if an employer qualified for JobKeeper payments for an eligible employee for a JobKeeper fortnight ending on or before 2 August 2020, that individual may still be an eligible employee for JobKeeper fortnights beginning on or after 3 August 2020 even if they terminate their employment and are later re-employed by that employer.

Provided that these individuals have not become an eligible individual (whether as an employee, business participant, or religious practitioner) under the JobKeeper scheme for another entity at any time, they do not need to retest their eligibility with reference to the new 1 July 2020 date since their eligibility under the former 1 March 2020 requirements and nomination requirements continues to be preserved.

This ensures that the JobKeeper scheme can provide support to employers that have re-employed their former employees who had been let go because of the effects of COVID-19.

Under the amendments, there are new notification requirements for 1 March 2020 employees where their employment ceased before 1 July 2020 and they are re-employed by an entity after 1 July 2020. As qualifying entities are not entitled to claim the JobKeeper payment in relation to returning eligible employees that have at any time been eligible individuals of another entity, the amendments require individuals to provide a notice to the re-employing entity if all of the following circumstances apply:

  • The individual was an eligible employee of the qualifying entity (as a 1 March employee of the entity);
  • The individual had ceased to be employed by the qualifying entity after 1 March 2020 but before 1 July 2020; and
  • The individual was re-employed by the qualifying entity after 1 July 2020.

This notice will enable an employer that re-employs a 1 March 2020 employee to determine whether or not they are able to rely on the original nomination notice that was provided to them before the individual ceased their employment. Individuals who provide a false or misleading statement may be liable to criminal and administrative penalties.

Further, the eligibility of existing employees is preserved for employees who are already covered by the JobKeeper scheme under the original 1 March 2020 arrangements. In practical terms, for JobKeeper fortnights beginning on or after 3 August 2020, individuals that were already eligible employees for their employer for any JobKeeper fortnight under the former rules do not need to retest their eligibility with reference to the new 1 July 2020 date under the 1 July 2020 requirements or satisfy any new nomination requirements.

The amendments do not allow an individual to be eligible if they either stay in employment or continue to actively engage in the business as a business participant in respect of another entity, and attempt to switch their eligibility with reference to a second employer if they have not ceased their employment or business engagement with the first qualifying entity. The requirement that the relationship must have ceased after 1 March 2020 but before 1 July 2020 prevents this from occurring.

Accordingly, where all other eligibility criteria are met, for JobKeeper fortnights beginning on or after 3 August 2020, the JobKeeper scheme can apply if an employer:

  • Employed a new employee by 1 July 2020, even if that employee has previously been an eligible individual for another entity under the JobKeeper scheme (whether as an employee or business participant) provided that the employee was not employed or actively engaged in the business of the other entity by 1 July 2020;
  • Had existing employees who were not eligible due to the former reference date of 1 March 2020, but become eligible employees under the new 1 July 2020 reference date;
  • Had existing employees who were eligible prior to the commencement of the instrument and they continue to be employed without any termination in employment and are not excluded from being eligible employees; or
  • Qualified for JobKeeper payments in respect of an eligible employee prior to the amendments commencing, and the employee ceased to be employed after 1 March 2020 but was later re-employed by the same employer. However, this only applies if no other entity qualified for JobKeeper payments in respect of that individual for any JobKeeper fortnight.

However, for a qualifying entity to claim the JobKeeper payment in respect of an eligible employee for a JobKeeper fortnight:

  • The employee must continue to meet other eligibility criteria including being in the required employment relationship with the entity and not be excluded from eligibility; and
  • The entity must continue to meet other eligibility criteria including meeting the wage condition requirements.

The existing notification requirements for entities that first start to participate in the JobKeeper scheme continue to apply. Similar to the existing requirements to give notice to employees, the amendments require employers that have already elected to participate in the JobKeeper scheme to give notice to all employees other than:

  • Employees that the entity has previously given a notice in writing advising that the entity has elected to participate in the JobKeeper scheme;
  • Employees that had previously provided the employer with a nomination form in relation to the JobKeeper scheme;
  • Individuals who the entity reasonably believes does not satisfy the 1 July 2020 requirements; and
  • For employers that are ACNC-registered charities that have elected to disregard certain government and related supplies and the individual’s wages and benefits are funded from such government and related sources.
  • All other requirements under the JobKeeper 1.0 rules remain unchanged. For instance, although the eligible employee test has moved to 1 July 2020, the carrying on a business in Australia test, to determine an eligible employer, has not. Consideration must still be given to all the former requirements when determining employer eligibility.

The ‘one in all in’ principle

Under the amendments, for JobKeeper fortnights beginning on or after 3 August 2020, an individual can be an eligible employee if:

  • They meet the eligibility requirements with reference to the new 1 July 2020 date; or
  • Their eligibility from 1 March 2020 was preserved as a 1 March 2020 employee under the amendments.

Accordingly, a qualifying entity that has some eligible employees that were in an employment relationship with the entity on 1 March 2020 and other employees that are newly eligible by applying the 1 July 2020 requirements cannot choose to exclude any eligible employees if the entity participates in the JobKeeper scheme.

Entitlement based on business participation

The eligible business participant rules remain largely unchanged. There was a minor amendment to the rules around eligible business participants, clarifying that the same individual could not be the eligible business participant of two entities in the same fortnight. Previously there was no timeframe on this condition.

However, the rules still require that the nomination notice provided by an eligible business participant stipulates that, at the time the individual gives the entity the nomination notice:

  • The individual has not given any other entity, or the Commissioner, a nomination notice; and
  • No other individual has already given a nomination notice to the entity.


WHAT EMPLOYERS SHOULD DO NOW

When considering which employees may now be eligible for JobKeeper assistance, bear in mind that the “one in all in” principle applies to the newly eligible 1 July 2020 employees, just as it did to the 1 March 2020 employees;

Consider which employees are now eligible to bring into the JobKeeper scheme, not forgetting:

  • Employees who may have joined the business after 1 March 2020 but are currently stood down;
  • Casuals who may qualify as long-term casuals as at 1 July 2020;
  • Employees who may not have met the age condition as at 1 March 2020, but do as at 1 July 2020;
  • Employees who may not have met the residency condition as at 1 March 2020, but do as at 1 July 2020;

Immediately obtain Nomination Notices from the newly eligible employees (including former employees now re-engaged, as discussed above);

By Friday, 21 August 2020, notify those newly eligible employees in writing of the business’s intention to apply for JobKeeper on their behalf;

By Monday, 31 August 2020, ensure that the newly eligible employees are paid $1,500 per fortnight for JobKeeper fortnight 10 (3-16 August) and JobKeeper fortnight 11 (17-30 August);

Add the new employees into the JobKeeper monthly reporting for August 2020 (due 14 September).

The article is authored by Neville Birthisel, Tax & Super Australia. Retrieved on 18 August 2020. URL

Read more...
Subscribe to this RSS feed