Business Tool:

FAQs on Australia’s COVID-19 economic stimulus tax measures

09 April 2020

The Australian Government has released a number of economic measures in response to the coronavirus (COVID-19). This table summarises FAQs on the key tax and business measures.

JobKeeper payments of $1,500 a fortnight to employers to retain employees

If employees have been stood down without pay since 1 March 2020, what happens if the employee is able to find a work opportunity where the employees may be able to work, say 3 days per week?

Does the employer pay the difference between the earnings that week and the $1500?

 

The JobKeeper payment is not income-tested, so employees may earn additional income without their payments being affected, provided they maintain their employment (including being stood down) with their employer who is entitled to receive JobKeeper payments.

If an eligible employee has multiple jobs and multiple employers can they receive the JobKeeper payments all the employers from whom do they receive the JobKeeper payment?

 

Employees can also only receive the JobKeeper payment once, from the employer they nominate as their primary employer.

Can I access JobKeeper for an eligible employee if I haven’t received back the JobKeeper employee nomination form?

 

No, it is requirement that the nomination form has been completed by both parties before claiming the JobKeeper payment.

How does an employer pay their employees under an award where they have had to reduce their hours and receive the Jobkeeker allowance for these employees? 

Employers need to continue to comply with their obligations to employees under contracts, enterprise agreements, modern awards, etc., subject to the implementation of lawful measures such as stand down, etc.

 

How does an employer compare turnover to previous periods to confirm that they have experience a decline in turnover?

Turnover is defined according to the current calculation for GST purposes and what is reported on Business Activity Statements. It includes all taxable supplies and all GST free supplies but not input taxed supplies. For businesses that are part of a GST group they must include intra-group transactions in the turnover, which are generally ignored for GST purposes. Under the GST law, only Australian based sales are included and therefore, only Australian based turnover is relevant. A decline in overseas operations will not be counted in the turnover test.

 

The decline in turnover test is based on comparison of projected GST turnover with the GST turnover of the relevant comparative period.

 

While the GST definition of turnover is used for determining the reduction in turnover, determining whether an employer has a $1 billion turnover will be based on aggregate turnover, which is assumed to be based on the general definition of ‘aggregate turnover’ in the income tax law.

 

Do I test the decline in turnover test for my corporate group and/or GST group, or on an employer entity by entity basis?

Under the basic turnover test, only the group employer would be able to claim the JobKeeper payment if its turnover reduced by 30%/50%. If the group employer did not have 30%/50% reduction in turnover but some of the businesses in the group did, there is an alternative turnover test where you can ask the Tax Commissioner to exercise the discretion to consider additional information in agreeing to an alternative turnover test. However, the ATO has not yet indicated whether the group employer situation would be covered by this alternative test. We understand that there may be more details on this situation released soon by the ATO and/or Federal Treasury.

 

Will start up companies that have been operating for less than 12 months and have no revenue figures for the last financial year, qualify for the JobKeeper wage subsidy, which is for businesses that have seen a reduction of revenue since 1 March 2020?

 

Start-ups and other businesses that have variable turnover can apply to the Tax Commissioner to exercise a discretion to consider additional information that the business can provide to establish that they have been adversely affected by the impacts of the COVID-19.

 

If there is a group of related entities each carrying on its own business but there is a group employer company that employees all the employees who work in the businesses of the group entities, how will the rules work if some businesses experience a reduction in turnover of more than 30% whereas others do not – is turnover examined from a group employer’s perspective even though this disqualifies some affected businesses?

 

Only the group employer would be able to claim the JobKeeper payment if its turnover reduced by 30%/50%. If the group employer did not have 30%/50% reduction in turnover but some of the businesses in the group did the group employer could ask the Tax Commissioner to exercise the discretion to consider additional information that the business can provide to establish that they have been adversely affected by the impacts of the COVID-19.

 

When will JobKeeper payments first be received?

 

 

Eligible employers will be paid $1,500 per fortnight per eligible employee with the first payments to be received by employers in the first week of May 2020. Payments to eligible employers will be monthly but in arrears (i.e. the first payment will cover all employees that were eligible on and from 30 March 2020).

 

If my business has not experienced a decline in turnover, but is likely to experience a downturn during the next six months what action should be taken? Example - a business that runs on periodic subscriptions.

 

If a business does not meet the turnover test at the start of the JobKeeper scheme on 30 March 2020, the business can start receiving the JobKeeper payment at a later time once the turnover test has been met.

 

In this case, the JobKeeper payment is not backdated to the commencement of the scheme or extended. Businesses can only receive JobKeeper payments up to 27 September 2020.

 

Employers anticipating a decline in turnover should register their interest with the ATO and ensure that Single Touch Payroll (STP) systems are in place.

 

Are JobKeeper payments available to self-employed persons or businesses subject to the personal services income rules?

JobKeeper payments will be available to self-employed businesses. No details are available at this stage in relation to the interaction with the personal services income rules.

 

What happens when NZ holders of a class 444 visa returns to NZ for a period. Are they still entitled to the payment?

 

Employees eligible for JobKeeper payments include Australian citizens, the holders of a permanent visa, and Special Category (Subclass 444) Visa holders as at 1 March 2020. Employees must be a resident for Australian tax purposes on 1 March 2020.

 

Are JobKeeper payments subject to superannuation and payroll tax, especially where the employee is not usually paid $1,500 per fortnight?

 

No superannuation guarantee payments are required to be paid on any additional payment made because of the JobKeeper payment. Where an employee is having their wages topped up to $1,500 per fortnight by the JobKeeper payment, it will be up to the employer if they want to pay superannuation on any additional wages paid by the JobKeeper payment.

 

Details on payroll tax obligations from the States and Territories are forthcoming.

 

Will reporting on a cash/accruals basis for GST impact calculation of GST turnover?

No, your GST turnover is the value of supplies you have made during the period (not including input taxed supplies). It does not matter whether you have received payment for the supplies or when the supplies are attributable to a Business Activity Statement (BAS).

Your GST turnover for a particular period will not necessarily be the same as what you report in your BAS for the same period.

If you report on a cash basis you need to adjust your comparison figures for March – June 2019 (subject to the period you are testing) to ensure that you are comparing the same data. This means you will not be able to use March – June 2019 BAS data if you report on a cash basis.

 

I have quarterly BASs, can I use monthly projections for the comparison turnover? And vice versa? Yes, you can choose to test your decline in turnover for either a monthly period or a quarterly period, regardless of your BAS periods. At current, all taxpayers can choose between the following periods for testing your decline in turnover:
  • Actual turnover for the month of March 2020, compared to March 2019
  • Projected turnover for the month of April 2020, compared to April 2019
  • Projected quarterly turnover for the quarter beginning 1 April 2020, compared to the quarter beginning 1 April 2019

In the future you will also be able to use the months of May – September 2020 and the quarter beginning 1 July 2020.

 

My business uses substituted accounting periods to report for GST. What is the impact on the comparison turnover?

You will need to test your decline in turnover based on calendar months (for example, the month of March, or the month of April) or quarters starting 1 April 2020 or 1 July 2020. You will need to compare your projected GST turnover for a calendar month or quarter to the same period last year. This means that if you are using a substituted accounting period for your BAS, the period used for the decline in turnover test will not align with your BAS period.

 

My historical BASs do not correctly reflect my supplies for a particular period (e.g. error corrections, NIL BASs, failure to record G1 correctly, failure to include GST-free supplies). Does this affect the relevant comparison period?

Your GST turnover is the value of supplies you have made during the period (excluding input taxed supplies). Your GST turnover will not necessarily be directly reflective of your lodged BASs for a particular period.

However, we note that BASs may at some point be reviewed as part of the ATO’s verification procedures for JobKeeper payments. Where there are large discrepancies between reported GST and turnover test periods/relevant comparison periods, we recommend firstly accurate records and positions are prepared to support the GST turnover for the JobKeeper testing. Following this, further advice in relation to correction of historical BASs should be sought and adjustments made.

 

I have GST branches. Is each GST branch considered separately when determining eligibility for JobKeeper payments?

JobKeeper eligibility is assessed based on an entity satisfying the decline in turnover test. A GST branch is used to separately account for GST from the broader part of the business. However, it is not a separate entity for the purposes of the Income Tax Assessment Act 1997 (Cth). The GST branch will be considered together with the parent entity.

 

I have elected to treat my long-term accommodation in commercial premises as input taxed. What is the impact on my GST turnover?

As you have elected to treat these supplies as input taxed, they will not be included in your GST turnover when determining decline in turnover. At present, it is unclear how the JobKeeper payments will apply to input taxed suppliers. We are expecting the ATO to release more guidance or an alternative test for input taxed suppliers.

 

What is superannuation payable on?

An employee ordinarily receives salary and wages of $3,000/fn, is the employer required to continue to pay SGC on the $3,000 OR is employer only required to pay SGC on the $1,500 i.e. wage in excess of the $1,500 JobKeeper payment. As the ordinary salary and wages the employee would receive is $3000 (regardless of jobkeeper) superannuation will be payable on the $3,000.

Employees currently receiving less than $1,500/fn, i.e. $1,000/fn, the employer is required to pay SGC on the $1,000, with no requirement to pay SGC on the additional $500.

 

Cash flow payments SME employers and charities – $100,000 PAYG Withholding (PAYGW) rebate

Will early lodgement of the March quarter BAS enable employers to realise the benefit of the credit earlier than 28 April 2020?

According to the ATO website, the credits and/or payments will not be available earlier than 28 April 2020.

 

Is there any implication if wages are not physically paid i.e. obligation to continue payment wages but payment is deferred?

To be able to access the credit, the employer must have a PAYGW liability (unless they are only going to be eligible for the $10,000 minimum). This requires wages either to be paid or otherwise be credited to the employee.

 

Is each employer in a group, including a consolidated group, entitled to a credit?

Where the aggregated turnover of the group is less than the threshold, and each employer is lodging BAS/IAS, then each employer should expect to be entitled to a credit where they satisfy all of the requirements of receiving the credit.

 

Does it matter that employees receive different amounts each month i.e. they receive wages rather than salary?

The entitlement to the credit is based on a PAYGW liability and the payment of salary or wages. It does not matter what form the payment takes or how it is calculated. What matters is that there is a payment of salary or wages, or other forms of payment that attracts a PAYGW liability, and that the payment has been made.

 

Are the turnover rules the same as the aggregated turnover rules in the small business rules?

Yes, the employer’s turnover is based on the aggregated turnover rules in Division 328, which relates to small business, which generally is the total of the annual turnovers of the entity, its ‘connected entities’ and ‘affiliates’. 

 

Each entity’s’ annual turnover is generally the total ‘ordinary income’ that the entity' derives in the income year in the ordinary course of carrying on a business but excludes amounts of ‘non-assessable non-exempt income’.

Note that ordinary business income generally does not include ‘statutory income’ such as capital gains. 

 

How will the ATO know if turnover is less than the threshold?

There are provisions in the legislation for the ATO is treat an entity as being below the threshold, otherwise they are expected to base their assessment on available information. For companies that have lodged a recent income tax return, many will have indicated they are either a SBE (less than $10M turnover) or a base rate entity (less than $50M turnover). 

We are not aware of how the ATO will obtain information on the turnover of other entities, however the explanatory memorandum refers to information available to the ATO. As the ATO has indicated they want tax returns or BAS lodged, they may obtain the turnover information through those means.

Is the credit received from the government is tax-free?

The tax boost credit is tax-free to the employer, which should be noted for income tax returns for June 2020 and 2021. It may be preferable to either make sure the expense for wages is accounted for on a Gross basis or create a new revenue account for the non-assessable credit. Employers should ensure the gross PAYGW liability is expensed in their accounts to ensure the tax-free status is recognised in their tax returns.

 

Is there any restriction on what types of entities can access the payment?

There is no restriction on the types on entities that are entitled to the cash flow boost payment other than the requirments in the legislation being satisfied.

 

Do Australian franchisees that have a franchisor that holds 51% of shares in the franchisee company qualify where the turnover of the franchisor is above the thrreshold?

No. Such franchisees do not qualify for the cash flow boost as the franchisor and any other Australian franchisees are all connected entities.

If a 124N trust rollover took place prior to 12 March 2020 so that a trust has been rolled over into a company which has been carrying on the business – will the company still qualify for the cash flow boost payment?

No. According to the legislation the trust has not been carrying on the same business as was carried out in the previous year nor does it have supplies for the purposes of GST or business activity statements to lodge as no income has been derived.

 

Instant Asset Write-Off for assets up to $150,000

Can businesses entitled to the instant asset write off also claim 50% accelerated deduction for new assets?

No. Only businesses not entitled to the instant asset write off from 1 July 2020 may be entitled to the 50% investment incentive as below.

 

What if a business leases assets or uses asset finance arrangements?

 

The instant asset write-off is only available in situations where a business would otherwise be entitled to claim depreciation deductions.

Leased assets would generally not be eligible whereas assets funded from loan finance or acquired under hire purchase arrangements would be eligible.

 

When will the benefit of the Instant Asset Write-Off deduction become available?

For most businesses the benefit of the deduction won’t be obtained until the 2020 income tax return is lodged. For businesses paying PAYG Instalments, an earlier benefit may be able to be obtained by varying these instalment payments, but the risk of penalties for inaccurate variations needs to be considered unless the business approaches the ATO to allow the administrative concession re varying PAYG.

 

50% accelerated depreciation deduction for new assets

Do existing depreciation rules will continue to apply to the remaining balance of the asset’s cost over its effective life?

Yes. An eligible asset will generate the immediate deduction of 50%, plus in the same year will generate a Division 40 depreciation deduction calculated in accordance with the normal depreciation rules. The measure results in businesses bringing forward depreciation deductions from future years to the current period resulting in a reduced tax liability in the current period. A rise in tax liability due to reduced depreciation in subsequent years will offset this reduction.

 

When will the benefit of the accelerated depreciation deduction become available?

The benefit of the accelerated deduction won’t be generally be obtained until the 2020 or 2021 income tax return is lodged. For businesses paying PAYG instalments, an earlier benefit may be able to be obtained by varying these payments, but the risk of penalties for inaccurate variations needs to be considered unless the business approaches the ATO to allow the administrative concession re varying PAYG.

 

What if a business leases assets or uses asset finance arrangements?

 

The accelerated depreciation deduction is only available where a business would otherwise be entitled to claim depreciation deductions. Leased assets would generally not be eligible whereas assets funded from loan finance or acquired under hire purchase arrangements would be eligible.