JobKeeper Part 7 – Service Entities and Various Updates from the ATO & Treasury about JobKeeper
In the last few days, both the ATO and the Treasurer have released additional guidance and legislative materials clarifying the operation of several aspects of the JobKeeper scheme.
JobKeeper Amendment Rules
On 1 May 2020, the Treasurer issued Coronavirus Economic Response Package (Payments and Benefits) Amendment Rules (No. 2) 2020, which gave legislative effect to several refinements to the eligibility criteria for the JobKeeper scheme as flagged by the Treasurer in the previous week.
Of most relevance to our clients are the following changes:
- Providing an additional modified decline in turnover test which is applicable to group structures whereby a member of the group (the employer entity) provides employee labour services to other members of the group. This type of entity can also be known as a “service entity”. This modified test only applies to groups where the employer entity is a member of a consolidated group, consolidatable group, or a GST group. Therefore, it is unlikely these rules will be applicable to some of the standard professional service type arrangements in the fields of law, accounting and medical.
- Confirming the requirement for employers to give written notice to employees of the employer’s decision to register for the JobKeeper scheme. This written notice must occur within seven days of the employer’s registration with the ATO for JobKeeper. Employers generally will have met this requirement provided they have emailed their employees the Jobkeeper Employee Nomination Notice to complete.
- For employees or business participants aged 16 or 17 years as at 1 March 2020, restricting their eligibility for JobKeeper payments to those who either are financially independent or are not undertaking full-time study. NOTE: This restriction only applies to JobKeeper payments made from JobKeeper Fortnight 4 (i.e. 11 May 2020) onwards.
ATO Practical Compliance Guide 2020/4
The ATO has issued ATO PCG 2020/4 to address artificial schemes entered into or manufactured by businesses in relation to the JobKeeper payment. The purpose of this Guide is to alert taxpayers to the factors which will increase the risk of attracting the attention of the ATO’s compliance resources in relation to JobKeeper. The possible outcome of such attention is the ATO retrospectively retracting an entity’s eligibility to receive JobKeeper payments and requiring that entity to repay past amounts received to the ATO (along with interest and penalties).
The Guide outlines several examples of situations potentially confronting businesses in the current economic climate and hence affecting their ability to qualify for Jobkeeper by satisfying one of the decline in turnover tests. The ATO’s primary concern appears to be the manipulation of the time when income is recorded by a business.
The common theme reinforced by the ATO across all these examples is that the ATO will accept that a business legitimately satisfies the decline in turnover test so long as it can be proven that the decline in turnover is a result of the business being significantly affected by external environmental factors beyond its control.
For the avoidance of doubt, the ATO clarifies that COVID-19 need not be the external environmental factor beyond a business’ control affecting its turnover. So long as there is a clear link between an uncontrollable external factor and a business’ decline in turnover, the ATO will not initiate compliance actions.
Law Companion Ruling 2020/1
Finally, the ATO has issued LCR 2020/1 to provide further explanation about the application of the decline in turnover tests. It is intended to assist those who have not yet applied the turnover test and are still considering their eligibility for JobKeeper. It will not be used to jeopardise JobKeeper eligibility assessments already made by entities in good faith in reliance upon guidance materials previously released on the ATO’s website.
We believe that most, if not all, of our advice previously issued to clients on this matter is consistent with this Ruling but we will review and individually contact clients if we believe that there is cause for concern.
Please contact a member of our team today if you wish to discuss any of these matters in further detail.
Date published: 6 May 2020