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COVID: applying for JobKeeper

business participant company corona covid eligible employee employer jobkeeper jobseeker partnership small business sole trader tax Apr 20, 2020

***as at 23 April 2020***

Let's say you ARE eligible for JobKeeper and you are ready to make your application... and then you get totally confused and roll on the floor crying. Same here. 

But, it is my job to translate the mumbo jumbo and get you the help you need. So, I got myself off the floor, picked my laptop back up, and got to work. This is what I found...

This blog is specifically covering applying for JobKeeper. It is based on the info provided by the ATO. If you want to learn more about this payment please check out my other two blogs:

NEW INFO: The ATO was previously saying if you had not lodged your tax return by 12 March 2020 then you would be ineligible but they have (thankfully) just amended that...

"We have the discretion to give further time, but only in limited circumstances, including if you:

  • did not have a requirement to lodge your 2018-2019 return until after 12 March 2020
  • have deferred your lodgment under an extension of lodgment date we initiated.

Examples include:

  • You are included in a registered agent’s lodgement program whereby your lodgement due date is after 12 March 2020.
  • You have an automatic ATO lodgement deferral in place as you were affected by the Australian bushfires in late 2019, and you are not registered or required to be registered for GST, so will not have lodged a BAS before 12 March 2020."  

We believe this is applicable for all entity types.

The catch? You might have had to be on your tax agent's list AS AT 12 March 2020. Still looking into this 'technicality'. 

 

Turnover Test

In order to apply, you need to pass the turnover test... ONCE. 

Then you will need to report to the ATO regarding the turnover information each month. When I know more about the monthly reporting, I will let you know. 

Fun facts:

  • No, you do not have to be registered for GST

NEW INFO:

  • There are two tests - Basic and Alternative
  • If you pass the Basic, you don't need to worry about the Alternative
  • If you don't, then you can try to Alternative but only if you fit one of the 7 scenarios when it is allowed to be used

 

What is "turnover"?

Think of it like INCOME.

Not profit (which is income minus expenses). 

Technically speaking, the JobKeeper rules state that an entity satisfies the decline in turnover test at a test time if:

"(a) the entity’s projected GST turnover for a turnover test period in which the test time occurs falls short of the entity’s current GST turnover for a relevant comparison period..." (Rule 8(1)(a))

So... what is projected GST turnover?

"Projected GST turnover has the meaning given by the GST Act" (per the definitions section of the super boring Act I had to read for you guys).

Cool, that doesn't really help...

The GST Act defines in s188.20:

"Projected GST Turnover: Your projected GST turnover at a time during a particular month is the sum of the values of all the supplies that you have made..."

FYI we're going to refer to this as "turnover" from here on out because the GST and 'projected' bits are confusing the matter, in my opinion.

Now, this all sounds like it is talking about BAS stuff, right!?

Nope. Surprise. 

GST Turnover is not actually BAS turnover. It is turnover as defined in the GST Act.

So, what does this actually mean?

  • Income for the period, compared to income for the other period
  • You can use cash or accrual accounting of that income

The ATO have said that technically accruals is the correct method, but if you use cash method on your BAS (or for your tax return I imagine) then you can use cash for this calculation too.

Projected GST turnover and current GST turnover excludes the following:

  • GST you included in sales to your customers (if any)
  • sales that are input taxed sales (e.g. bank interest, sale of shares, residential rental income)
  • sales not connected with an enterprise that you carry on (e.g. sale of private car)
  • sales that are not made for payment (unless a taxable supply to an associate)
  • payments for no supply (e.g. JobKeeper payments)
  • gifts and donations (except for deductible gift recipients and ACNC-registered charities as discussed above)
  • sales not connected with Australia, for example:
    • sales of services made through a business you carry on outside Australia
    • sales of goods purchased and sold from a place outside Australia
    • sale of real property situated outside Australia

 

KEY MESSAGE: Pick any method (cash or accrual), just be consistent with the same method between the comparison periods.

Thanks to the total legend accountant who posted about this in the Xero Partners group. My clients and I thank you for the clarity. 

If you are still confused, just flick me an email. 

 

How to apply the turnover test

The ATO have allowed us to use either of the two tests, as long as you apply them consistently. 

Great news, if you are using XERO accounting software, the incredible development team have whipped up a cheeky 'basic test' turnover calculation tool within Xero. More on that later!

BASIC TEST

  1. Test period: Choose if you are going to compare a monthly turnover or a quarterly turnover.
    - If you are applying now (April 2020) then you can use either March or April 2020.
    - If you are applying later on, then you can use May, June, July, August or September 2020, provided that the turnover month is the month in which the first fortnight for which you claim the JobKeeper payment ends, or another earlier month. In other words, you will only be eligible for JobKeeper payments for JobKeeper fortnights that end on or after your turnover test period starts.

    If using quarterly turnover periods then it is April to June 2020 for the first quarter. Sounds silly for most of my clients, so let's go monthly my friends :)

  2. Comparison period: identify the appropriate comparison period. This must be the same period in 2019 that corresponds to the turnover test period. So, if you are using March 2020, then compare to March 2019. 

    If this that is not suitable for you, then please skip ahead and try out the alternative test method below.

  3. "Projected GST Turnover": as we already identified this is a confusing term. Nonetheless, you need to calculate it for the test period and for the comparison period i.e. for March 2020 and March 2019. 
    - If you operate more than one 'business activity' for the same entity, combine the turnover numbers. 
    - Please refer above to see some specific elements that might be considered 'income' by you but that cannot be included in the calculation of "projected GST turnover".
    - Given that you can test eligibility part way through a period (i.e you can apply in April 2020 and use April 2020 as the test period), when applying the fall in turnover test, you need to consider what you expect to happen for the remainder of that period. 

  4. Shortfall % to apply: Generally, the shortfall percentage will need to be 30% or more.

    If you have more than $1 billion (get out of here Dr Evil), or you run a ACNC, then check out the detail relevant to you on the ATO website. 

  5. Determine if turnover has dropped by more than 30%: You are trying to workout the % by which your turnover has fallen when comparing the two periods. If the shortfall percentage is greater than or equal to the specified percentage (30%), you satisfy the basic fall in turnover test.

For those of you using Xero, you should send flowers to the software developers at HQ who have developed you a tool, inside Xero, using your real data, to calculate  your turnover drop % for you. This applies the BASIC test.

    1. Log into Xero
      2. Navigate the Xero's covid support pages and follow the prompts. 

Note the actual location of this is changing as JK announcements and changes are made.

  1. Select Cash or Accrual from the drop down
  2. Or play with the numbers if you want to test how it all works (you can always hit reset!)

Apparently there are more updates and functions to come. I will keep you in the loop.

 

You do not have to have Xero to calculate this though!

Formula:
[(Old - New) / Old]
= %  of change (presented as a decimal)

Example:

  • $20,000 in March 2019
  • $15,000 in March 2020

$20,000 - $15,000 = $5,000
$5,000 / $20,000 = 0.25
This is 25%, which is not more than 30%, so this would not qualify. 

If you do the basic test and seem ineligible then you might be able to try the alternative test.

 

ALTERNATIVE TEST

Who wants to be a basic b!tch anyway? Kidding.

NEW INFO: The ATO just gave us more info on this testing method. You can read the full legislation right here if you are stupidly bored and love law and tax. Otherwise, read on and we will break it down for you!

There are 7 situations where you are allowed to take this test, and each has a different way of doing the calculations. Fun. I know.

So, your first task is figure out if you fit one of these. We have detail of your applicable calculations and conditions after this section.

  1. Business Commenced: Your business commenced before 1 March 2020, but after the relevant comparison period (i.e. March 2019 or April 2019).

  2. Business Acquisition or Disposal (which changed the entity's turnover). i.e. there was an acquisition or disposal of a part of the business after the relevant comparison period (March or April 2019) and before the applicable turnover test period (March or April 2020). 

  3. Business Restructure (which changed the entity's turnover). i.e. there was a restructure after the relevant comparison period (March or April 2019) and before the applicable turnover test period (March or April 2020). 

  4. Substantial Increase in Turnover 
    1. 50% or more in the 12 months immediately before the applicable turnover test period (March or April 2020), or
    2. 25% or more in the 6 months immediately before the applicable turnover test period (March or April 2020), or
    3. 12.5% or more in the 3 months immediately before the applicable turnover test period (March or April 2020).

  5. Fire or Drought affected your business

  6. Irregular Turnover is common your for business - I am looking at you my creative friends! But, this is not based on our gut feel. The ATO have specific ways to figure this out. 

    Your turnover is irregular if...
    1. for the quarters ending in the 12 months immediately before the applicable turnover test period (April or March 2020), the entity’s lowest turnover quarter is no more than 50% of the highest turnover quarter, and

    2. the entity's turnover is not cyclical.

  7. Sole Trader or Small Partnership with sickness, injury or leave taken - again the ATO has some conditions:
    1. Your entity type is Sole Trader or Partnership
    2. You have no employees
    3. You (sole trader or one of the partners) did not work for some part of the year because of leave or sickness, and the turnover was impacted because of this leave.

If none of those fit you... then JobKeeper might not be for you right now. 

If you do... scroll down until you see your relevant scenario and read about how to calculate.

Key terms to remember: 

  • "turnover test period" = the month or quarter (generally you choose). If it is a month, it is March 2020 or April 2020.If it is a quarter it is the quarter of April, May, June 2020.
  • "comparison period" = the period we compare the test period to. In the Basic Test this was March or April 2019... but we are now doing the Alternative Test so it might be something different!
  • Refer above for the "GST turnover" definitions. Basically... it is income, but accounting hard and there are all sorts of inclusions and exclusions depending on the complexity of your business.

I have included examples where I think it will be particularly useful for the majority of my clients. 

 

SCENARIO ONE: Business Commencement

There are two tests that can be used. 

I recommend you first calculate the monthly average turnover.

  • If the entity commenced business before 1 February 2020, use the turnover for each whole month after the entity commenced business and before 1 March 2020 added together and divided by the number of whole months, OR
  • If the entity commenced business before 1 March 2020, but on or after 1 February 2020, use to turnover before 1 March 2020, divided by the number of days the entity was in business and multiplied by 29.

    Example: you commenced business on 1 January 2020. Your average monthly turnover will be the sum of January 2020 and February 2020 turnover, divided by the 2 (being the number of whole months before 1 March).

First Test:

  • If you chose a period of a MONTH, use the monthly average turnover (that you just calculated).
  • If you chose a period of a QUARTER, use the monthly average turnover (that you just calculated), and multiple by 3

    Example: compare March 2020 to the average we calculated above.

If the commencement date of the business is after 30 November 2019 (being 3 months before 1 March 2020), then you cannot use the 2nd test.

Second test:

  • If you chose a period of a MONTH, grab the 3 months immediately prior to 1 March 2020 (i.e. Dec 2019, Jan 2020 and Feb 2020) and divide by 3 (i.e. you calculate the average), and use that average as the comparison amount. 
  • If you chose a period of a QUARTER, grab the 3 months immediately prior to 1 March 2020 (don't divide).

    Example: commencement date was 1 October 2019. Compare March 2020 to the average turnover of Dec 2019, Jan 2020 and Feb 2020.

 

SCENARIO TWO: Business Acquisition or Disposal

  • If you chose a period of a MONTH, use the month immediately after the month in which the acquisition or disposal occurred.
  • If you chose a period of a QUARTER, use the month immediately following the month in which the acquisition or disposal occurred, and multiple by 3

 

SCENARIO THREE: Business Restructure

  • If you chose a period of a MONTH, use the month immediately following the month in which the restructure occurred.
  • If you chose a period of a QUARTER, use the month immediately following the month in which the restructure occurred, and multiple by 3.

    Example: if you had a restructure in September 2019, then use October 2019 and compare to March or April 2020. 

 

SCENARIO FOUR: Substantial Increase in Turnover

  • If you chose a period of a MONTH, grab the 3 months immediately prior to the test period and divide by 3 (i.e. you calculate the average), and use that average as the comparison amount. 
  • If you chose a period of a QUARTER, grab the 3 months immediately prior to the test period (don't divide).

    Example: compare March 2020, to the average of the turnover of December 2019, January 2020 and February 2020.     

 

SCENARIO FIVE: Fire Drought :(

  • For your comparison period, use the entity’s turnover for the same period in the year immediately before the declaration (of the fire/drought).

 

SCENARIO SIX: Irregular Turnover

  • If you chose a period of a MONTH, use the monthly average turnover. 
  • If you chose a period of a QUARTER, use the monthly average turnover, and multiply by 3. 
  • The monthly average GST turnover is the GST turnover for each whole month in the 12 months immediately before the applicable turnover test period (i.e. before March or April 2020) added together and divided by 12. 

    Example: March 2020 gets compared to the monthly average of February 2019 to February 2020. 

 

SCENARIO SEVEN: Full Sick Sole Trader (Or Partner)

... or one that took leave.

  • If you chose a period of a MONTH, use the GST turnover from the month immediately after the month in which sole trader or partner returned to work.

    Example: you returned to work in September 2019, then use October 2019, and compare it to March or April 2020.

  • If you chose a period of a QUARTER, multiply the GST turnover from the month immediately after the month in which the sole trader or partner returned to work by three.

    Example: you returned to work in September 2019, then multiply the turnover of October 2019 by 3, and compare it to the turnover of quarter April, May, June 2020.

If you also received drought or fire relief then refer to the legislation or get in contact.

 

 

IDEA: 

  • Get your books in order so you have the numbers ready to go
  • Lodge all returns so you are up to date with the ATO
  • Chat to your accountant
  • Sign up to our newsletter for updates
  • Grab a glass of wine and have a bath, you deserve it
  • Apply, if and when you are eligible and good to go

 

How to Apply

You are all special and unique :) But, I am going to do my best to summarise each different 'type' of applicant and then outline the best approach for each. Remember, you might wear a few hats within your organisation (Director of Company and employee), or you might have a few different 'jobs' (like sole trader, and casual employee or permanent employee somewhere else).

Be sure to check our other blog re eligibility criteria before applying. 

 

EMPLOYEE

Lucky you - your employer actually needs to do most of the leg work for you, but you can help them out and make sure you don't miss out. Be proactive, I say!

  1. Check my blog and the ATO website to figure out if you might be an eligible employee.

  2. Choose which employer you want to claim the JobKeeper payment for you. You can only choose one employer. If you are a long-term casual but also have a permanent employer, you can only choose a permanent employer. 

    Note: pretty sure this impacts you if you are a permanent employee that runs a sole trader side hustle... read more in that section!

  3. Inform your chosen employer know that you want them to claim the JobKeeper payment for you. Let the other employers know you have nominated a different employer for the JobKeeper payment.

  4. Complete the JobKeeper employee nomination notice provided by your chosen and agreed employer and return it to them as soon as possible. Be awesome and do this FAST. 

HOT TIP: If you are receiving or in the process of applying for a Services Australia income support payment, like JobSeeker payment, contact Services Australia External Link and let them know that your employer has applied for the JobKeeper payment. If you do not report the income or cancel your JobSeeker payment, you may incur a debt that you will be required to pay back.

 

EMPLOYER

With great power comes great responsibility. How much do you hate being an adult right now? Me too. Let's get through it together though.

There are a couple of things to do if you are an employer. 

Note: this applies to all entities that employ people. If you are one of my clients who runs a Company through which it is employed, then pop your "Company" (employer) hat on and read this bit. 

Key Dates:

  • From 20 April: enrol for JobKeeper payment. Be patient with your accountant... we have a few days up our sleeve!

  • By 30 April: enrol and pay your employees to claim JobKeeper payments for April. 

    If you want to 'claim' the full $1,500/employee/fortnight, then you need to have paid them the full $3,000 by this date. Check out my separate blog re setting up Xero to handle this!

  • 4 May onwards: identify your employees.
    If you have an eligible business participant, remember not to include them as an employee.

  • Each month: reconfirm eligibility. 
    I am excited that now everyone will be keen to have tidy books!

  • If you need more time, you have until the end of May to enrol and identify your employees.

How to apply

For you babes that are using STP (single touch payroll) reporting, then these are the instructions for you.

  1. Check your entity eligibility (blogs and ATO site)
  2. Check your employee eligibility (blogs and ATO site)
  3. Check your turnover (see above)
  4. Send each eligible employee the form (grab a copy here)
    Make sure they get it back to you before 30 April.
  5. Update your accounting software to identify your eligible employees.
  6. Pay your employee/s in April (assuming you are applying for the April period). Get on this ASAP. 
  7. Access your Business Portal - you will need a myGovID linked to your ABN in relationship Authorisation Manager (RAM). You can find out how to set this up at ato.gov.au/mygovid.

    Yes, your accountant can do this for you but you are not their only client and they are probably extremely stressed and tired. If you are confident and capable of having a go yourself, I am sure they would appreciate it. Of course, we are here to help if you do need us though. Always!

  8. Report Monthly to the ATO to confirm the eligibility of the business and employees. 

    You must also provide information as to your current and projected GST turnover. This is not a retest of your eligibility, but rather an indication of how your business is progressing under the JobKeeper Payment scheme.

 

HOT TIP: You need to pay each eligible employee at least $1,500 (before tax) per JobKeeper fortnight or a combined payment of $3,000 by the end of April. JobKeeper fortnights start from 30 March.

HOTTER TIP: Put the monthly reporting requirement in your diary now. Put a reminder in around the 28th of the month to check that your payroll is in order and everyone eligible has been paid appropriately.

 

If for whatever reason you are not reporting through STP, then refer to the ATO's info on what you need to do. All of my clients who employ people are on STP... just make sure you are filing on time my dears.

 

SOLE TRADER, PARTNER, TRUST BENEFICIARY, COMPANY DIRECTOR

You are known as a business participant now. There is some very comprehensive info on the ATO website, as always. Please do check out the blogs we have covering eligibility too because there are a few key things to consider like:

  • Being active in the business
  • Only one per entity, etc.  

The entity, not the eligible business participant, receives the JobKeeper payment.

The exception is a sole trader, who is both the business entity and an eligible business participant, and so receives the JobKeeper payment themselves. You are your business. 

If you have employees, scroll back up in relation to how to apply regarding eligible employees. 

HOT TIP: If you have an eligible business participant, remember not to include them as an employee.

This section is focused more on those of you without employees, only business participants. I understand some situations will call for a bit of both - refer to the detail on the ATO website or get in touch if you are confused. 

Key Dates:

  • From 20 April: enrol for JobKeeper payment. Be patient with your accountant... we have a few days up our sleeve!

  • By 30 April: enrol and pay your employees to claim JobKeeper payments for April. 

    If you want to 'claim' the full $1,500/employee/fortnight, then you need to have paid them the full $3,000 by this date. Check out my separate blog re setting up Xero to handle this!

  • 4 May onwards: identify your employees.

  • Each month: reconfirm eligibility. 
    I am excited that now everyone will be keen to have tidy books!
  • If you need more time, you have until the end of May to enrol and identify your employees.

How to apply

SOLE TRADER

 

  1. Check your eligibility
  2. Log in to ATO online services via myGov or the Business Portal using myGovID.
  3. Enrol and nominate by confirming:
    - your business has experienced a fall in turnover of at least 30%
    - expected number of eligible employees (if you have them)
    - your bank and contact details for payment
    - you are a sole trader nominating as an eligible business participant.
  4. If you don't have employees, confirm that you don’t have any employees to identify by logging in to ATO online services via myGov, or the Business Portal using your myGovID.
  5. Report Monthly to the ATO to confirm the eligibility and report turnover. 

    You must also provide information as to your current and projected GST turnover. This is not a retest of your eligibility, but rather an indication of how your business is progressing under the JobKeeper Payment scheme.

 

PARTNERSHIP, TRUST, COMPANY

  1. Check your business eligibility
  2. Download, complete and save this form re the business participant
  3. Log in to ATO online services via myGov or the Business Portal using myGovID.
  4. Enrol and nominate by confirming:
    - your business has experienced a fall in turnover of at least 30%
    - expected number of eligible employees (if you have them)
    - your bank and contact details for payment
    - if you are identifying an eligible business participant, add them in the Business Portal and remember to not include them in the eligible employee number.
  5. If you don't have employees, confirm that you don’t have any employees to identify by logging in to ATO online services via myGov, or the Business Portal using your myGovID.
  6. Report Monthly to the ATO to confirm the eligibility and report turnover. 

    You must also provide information as to your current and projected GST turnover. This is not a retest of your eligibility, but rather an indication of how your business is progressing under the JobKeeper Payment scheme.

 

KEY INFO TO REMEMBER

  • You can only get the $1,500 per fortnight from one source
  • There can only be one business participant per entity (i.e. 1 partner of the partnership)
  • Payment from the ATO is received after the fact - you need to have paid the person in April to receive the money back from the ATO in May.
  • The ATO love audits so keep tidy books and records of all applications and reports made. 
  • Tell your accountant you love them.

 

There are some pretty handy examples on the ATO website.

 

So, I know that probably took a week to read and get through.

I hope this has been helpful, because otherwise writing this has been a massive waste of time!

If you need further clarification on anything, just reach out.

xxx Lauren

 

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