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JobKeeper 2.0 – tweaks to the ‘Decline in Turnover’ Tests

On 21 July 2020, the Government announced that the JobKeeper Payment (‘JKP’) would be extended until 28 March 2021 (i.e., for a further six months beyond its original end date of 27 September 2020).

As a result, JKPs will now be made over two separate extension periods, being:

  • Extension period 1 – which covers the seven new JobKeeper fortnights that commence on 28 September 2020 and end on 3 January 2021; and
  • Extension period 2 – which covers the six new JobKeeper fortnights that commence on 4 January 2021 and end on 28 March 2021.

Furthermore, on 7 August 2020, the Government announced adjustments to JobKeeper 2.0 to expand the eligibility criteria for JKP, primarily in the wake of the tougher COVID-19 restrictions recently imposed in Victoria.

These adjustments will apply nationwide, and the crucial amendments include adjustments to the proposed new ‘Decline in Turnover’ tests applicable from 28 September 2020.

More specifically, to qualify for the JKP in the two new extension periods (outlined above), businesses will now only have to demonstrate that their actual GST turnovers have decreased (in accordance with the applicable rates) in the previous quarter.

For these purposes, the applicable rate of decline in turnover required to qualify for the JKP is determined in accordance with the existing rules (e.g., 30% for entities with an aggregated turnover of $1 billion or less).

Specifically, to be eligible for the JKP Extension Period 1 (i.e., from 28 September 2020 to 3 January 2021), businesses only need to demonstrate an applicable decline in turnover in the September 2020 quarter.

This differs from the previously announced JobKeeper 2.0, where they would have been required to show that they had suffered an applicable decline in turnover in both the June and September 2020 quarters.

To be eligible for the JKP Extension Period 2 (i.e., from 4 January 2021 to 28 March 2021) businesses only need to demonstrate an applicable decline in turnover in the December 2020 quarter.

Whereas under the previously announced JobKeeper 2.0, they would have been required to show that they had suffered an applicable decline in turnover in each of the June, September and December 2020 quarters.

Importantly, the dual payment rate system originally proposed in JobKeeper 2.0 will remain, with the full rate of payment decreasing from $1,500 to $1,200 per fortnight from 28 September 2020 and then to $1,000 per fortnight from 4 January 2021.

The proposed reduced rates (being $750 from 28 September 2020 and $650 from 4 January 2021) will also remain for employees and business participants who worked fewer than 20 hours per week in the relevant period.

Ref: Extension of the JobKeeper Payment, Treasury fact sheet, 7 August 2020

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Superannuation guarantee amnesty ends 7 September 2020

Speaking of the superannuation guarantee, time is rapidly running out for employers to apply for the SG amnesty and catch up on past unpaid super without incurring a penalty.

The ATO encourages employers to apply for the amnesty and make payments as early as they can.

Importantly, eligible amnesty amounts paid by 7 September 2020 are tax deductible!

The ATO must receive amnesty applications by 11:59 pm (local time) on 7 September 2020.

Broadly, to be eligible for the amnesty:

  • the unpaid super must be for a quarter between 1 July 1992 and 31 March 2018;
  • the shortfall cannot have already been disclosed to the ATO; and
  •  the ATO cannot already be examining the shortfall.

If an employer cannot pay in full, the ATO will work with them to set up a flexible payment plan.

Superannuation guarantee payments and PRNs

Applicants will need their payment reference number (‘PRN’) to make SG amnesty payments.

The ATO has been sending employers their PRN within 14 business days of receiving their application, however, if an amnesty application has not been lodged by mid-August, they can get their PRN:

  • from a super guarantee charge related statement issued for the same Australian Business Number; or
  • by phoning the ATO on 1800 815 886 between 8.00am and 6.00pm from Monday to Friday.

Editor: If you wish to discuss the implications of the SG amnesty and any related payment plans (or indeed anything else with respect to SG obligations and liabilities) please contact our office to discuss.

Ref: SG amnesty ends 7 September 2020, ATO website, August 3 2020

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Superannuation guarantee rate increase update

Recently, arguments both for and against increasing the rate of compulsory superannuation guarantee (‘SG’) have continued to be tossed around!

The SG is the compulsory amount of superannuation an employer must pay into an eligible employee’s chosen super fund.

The rate of SG has been frozen at 9.5% of an employee’s ordinary wages since July 2014, but from 1 July 2021 it is due to incrementally increase (by 0.5% each financial year) until it ultimately reaches 12% in July 2025.

As a result, the superannuation guarantee rate is currently set to increase to 10% from 1 July 2021.

Editor: At this stage, despite a lot of political rhetoric and media coverage, no change has been announced to change these set plans.

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80 cents per hour ‘shortcut’ method for home office expenses has been extended

Back in April 2020 the ATO announced that a ‘shortcut’ method was to be made available to use from 1 March 2020 until 30 June 2020 for individuals claiming home office expenses due to COVID-19.   The ATO has recently announced an extension of this shortcut method to also include 1 July 2020 to 30 September 2020.

In summary, a taxpayer can claim a deduction of 80 cents for each hour they work from home due to COVID-19 as long as the individual is:

  • working from home to fulfil their employment duties and not just carrying out minimal tasks such as occasionally checking emails or taking calls; and
  • incurring additional deductible running expenses as a result of working from home.

A taxpayer does not have to have a separate or dedicated area of their home set aside for working, such as a private study.

The shortcut method rate covers all deductible running expenses such as: electricity and gas  used for heating/cooling and running electronic items used for work purposes; depreciation and repair of assets used for work purposes; work-related phone and internet costs.

Editor:  If you are working from home due to COVID-19 and have queries about what deductions you can claim, contact our office.

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Additional new turnover tests

In order to be eligible for the JobKeeper Payment after 27 September 2020, businesses and not-for-profits will have to meet a further decline in turnover test for each of the two periods of extension, as well as meeting the other existing eligibility requirements for the JobKeeper Payment.  In order to be eligible for the first JobKeeper Payment extension period of 28 September 2020 to 3 January 2021, businesses and not-for-profits will need to demonstrate that their actual GST turnover has significantly fallen in the both the June quarter 2020 (April, May and June) and the September quarter 2020 (July, August, September) relative to comparable periods (generally the corresponding quarters in 2019).

In order to be eligible for the second JobKeeper Payment extension period of 4 January 2021 to 28 March 2021, businesses and not-for-profits will again need to demonstrate that their actual GST turnover has significantly fallen in each of the June, September and December 2020 quarters relative to comparable periods (generally the corresponding quarters in 2019).

Businesses and not-for-profits will generally be able to assess eligibility based on details reported in the Business Activity Statement (BAS).

Editor:  Please contact our office if you wish to discuss your business’ eligibility for JobKeeper payments.

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The extended JobKeeper Payment rates

From 28 September 2020 to 3 January 2021, the JobKeeper Payment rates will be:

  • $1,200 per fortnight for all eligible employees who, in the four weeks of pay periods before 1 March 2020, were working in the business or not-for-profit for 20 hours or more a week on average, and for eligible business participants who were actively engaged in the business for 20 hours or more per week on average in the month of February 2020; and
  • $750 per fortnight for other eligible employees and business participants.

 

From 4 January 2021 to 28 March 2021, the JobKeeper Payment rates will be:

  •  $1,000 per fortnight for all eligible employees who, in the four weeks of pay periods before 1 March 2020, were working in the business or not-for-profit for 20 hours or more a week on average and for business participants who were actively engaged in the business for 20 hours or more per week on average in the month of February 2020; and
  • $650 per fortnight for other eligible employees and business participants.

Businesses and not-for-profits will be required to nominate which payment rate they are claiming for each of their eligible employees (or business participants).

The JobKeeper Payment will continue to be made by the ATO to employers in arrears.  Employers will continue to be required to make payments to employees equal to, or greater than, the amount of the JobKeeper Payment (before tax), based on the payment rate that applies to each employee. This is referred to as the wage condition.

The eligibility rules for employees remain unchanged.

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Extension of the JobKeeper Payment

Sadly, many Australian businesses are a long way from trending back to ‘normal’ as we approach 27 September 2020, the original date that JobKeeper was set to end.  Thankfully the government has announced an extension of the JobKeeper Payment, with additional turnover qualifications.

The JobKeeper Payment, which was originally due to run until 27 September 2020, will now continue to be available to eligible businesses (including the self-employed) and not-for-profits until 28 March 2021.

The payment rate of $1,500 per fortnight for eligible employees and business participants will be reduced to $1,200 per fortnight from 28 September 2020 and to $1,000 per fortnight from 4 January 2021.  From 28 September 2020, lower payment rates will also apply for employees and eligible business participants that worked fewer than 20 hours per week.

From 28 September 2020, businesses and not-for-profits seeking to claim the JobKeeper Payment will be required to demonstrate that they have suffered an ongoing significant decline in turnover using actual GST turnover (rather than projected GST turnover).  Businesses and not-for-profits will be required to reassess their eligibility with reference to their actual GST turnover in the June and September 2020 quarters.  They will need to demonstrate that they have met the relevant decline in turnover test in both of those quarters to be eligible for the JobKeeper Payment from 28 September 2020 to 3 January 2021.

From 4 January 2021, businesses and not-for-profits will need to further reassess their turnover to be eligible for the JobKeeper Payment. They will need to demonstrate that they have met the relevant decline in turnover test with reference to their actual GST turnover in each of the June, September and December 2020 quarters to remain eligible for the JobKeeper Payment from 4 January 2021 to 28 March 2021.

To be eligible for JobKeeper Payments under the extension, businesses and not-for-profits will still need to demonstrate that they have experienced a decline in turnover of at least:

  •  50 per cent for those with an aggregated turnover of more than $1 billion;
  •  30 per cent for those with an aggregated turnover of $1 billion or less;
  •  15 per cent for Australian Charities and Not for profits Commission-registered charities (excluding schools and universities).

If a business or not-for-profit does not meet the additional turnover tests for the extension period, this does not affect their eligibility prior to 28 September 2020.

The JobKeeper Payment will continue to remain open to new recipients, provided they meet the existing eligibility requirements and the additional turnover tests during the extension period.

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COVID-19 and Division 7A relief

The ATO has announced some limited relief for private companies that have loans to their shareholders or related parties that are governed by what are referred to as “complying loan agreements”.

A complying loan agreement is entered into to avoid triggering an assessable deemed dividend that could potentially be equal to the amount of the loan from the private company.

When there is a complying loan agreement between a private company and a borrower, the borrower must make the minimum yearly repayment (MYR) by the end of the private company’s income year.  This avoids the borrower being considered to have received an unfranked dividend, generally equal to the amount of any MYR shortfall.

As a result of the COVID-19 situation, the ATO understands that some borrowers are facing circumstances beyond their control.  To offer more support, the ATO will allow an extension of the repayment period for those borrowers who are unable to make their MYR by the end of the lender’s 2019–20 income year (generally 30 June).

Requesting the extension

A request for a 12-month extension can be made through the completion of an online application.  Borrowers will be asked to confirm the shortfall, that the COVID-19 situation has affected them and that they are unable to pay the MYR as a result.

When the ATO approves an application, it will let the borrower know they will not be considered to have received an unfranked dividend.  This is subject to the shortfall being paid by 30 June 2021. It will not be necessary to submit further evidence with the application.

This particular streamlined process established by the ATO only applies to applications for an extension of up to twelve months for COVID-19 affected borrowers.   It is still open to a borrower to apply to obtain a longer extension of time outside the streamlined process.

Editor: If you have been affected by the COVID-19 situation and need more to time to make your minimum yearly repayment (MYR) in relation to complying loans from private companies, contact our office for assistance.

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Regulations confirm no SG obligation on JobKeeper payments where work is not performed

The federal government has registered the Superannuation Guarantee (Administration) Amendment (Jobkeeper) Payment Regulations 2020.

These regulations ensure that amounts of salary or wages that do not relate to the performance of work and are only paid to an employee to satisfy the wage condition for getting the JobKeeper payment are prescribed by the Regulations as excluded salary or wages.

The effect is that these amounts are excluded from the calculations of an employer’s superannuation guarantee shortfall and the minimum compulsory superannuation contribution an employer is required to make in respect of an employee to avoid a superannuation guarantee charge liability.

Likewise, the Regulations recognise that an employer is only entitled to a JobKeeper payment for its employees if the business has suffered a substantial decline in turnover.  In these circumstances, it is appropriate to require employers to only make minimum superannuation contributions in respect of amounts that are required to be paid to an employee for the performance of work.

Employers would not be required to make contributions in relation to additional amounts paid to satisfy the wage condition (for example, the amount by which $1,500 exceeds an employee’s normal pay).

Editor: If you are concerned about the calculation of compulsory superannuation for any employees supported by JobKeeper, please contact our office.

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Treasury Laws Amendment (2019 Measures No 3) Bill 2019

Treasury Laws Amendment (2019 Measures No 3) Bill 2019 has passed both Houses of Parliament and is now law.

Testamentary trusts and minors

This legislation contains amendments to ensure the tax concessions available to minors in relation to income from a testamentary trust only apply in respect of income generated from assets of the deceased estate that are transferred to the testamentary trust (or the proceeds of the disposal or investment of those assets).

Broadly speaking, when a trustee distributes income to a minor it is taxed at the highest marginal rate (plus Medicare levy).  However, there are certain exceptions to this rule.  One such exception is where the trust is a testamentary trust – being a trust that was established as a result of the will of a deceased individual.  Income from a testamentary trust is a type of ‘excepted trust income’ that is generally taxed at ordinary rates.

Prior to this legislation being passed, the previously existing law did not specify that the assessable income of the testamentary trust be derived from assets of the deceased estate (or assets representing assets of the deceased estate).  As a result, assets unrelated to a deceased estate that were injected into a testamentary trust may, subject to anti-avoidance rules, generate excepted trust income that was not subject to the higher tax rates on minors.  This was an unintended consequence, which allowed some taxpayers to inappropriately obtain the benefit of concessional tax treatment.

This legislation clarifies that excepted trust income of the testamentary trust must be derived from assets transferred to the testamentary trust from the deceased estate or from the accumulation of such income.

This change will apply in relation to assets acquired by or transferred to the trustee of a testamentary trust on or after 1 July 2019.

Please contact our office if you have any concerns about testamentary trusts making distributions to minor beneficiaries.