Chartered Accountants Australia and New Zealand (CA ANZ) has received a lot of member inquiries regarding the operation of the JobKeeper Payment scheme. As at 5 April 2020 there is no legislation for the scheme. Nevertheless, Treasury is updating their Fact Sheets on the Treasury website as more details for the JobKeeper Payment are confirmed.
CA ANZ has been liaising with Treasury regarding issues that have been raised by our members. Set out below is a list of matters that have been raised with Treasury as at 5 April 2020.
- How JobKeeper will apply to self-employed people that operate through business structures other than as a sole trader, such as:
- Discretionary trusts – the business is run in the discretionary trust but working beneficiaries are paid through trust distributions rather than wages.
- Partnerships – partners receive partnership profits rather than wages.
- Corporations – the owners are paid via dividends rather than wages.
- How JobKeeper could be drafted so that businesses whose turnover has not declined (say due to the business issuing on fixed regular invoices) but has suffered a 30% decline in cash payments from those invoices, could access JobKeeper payments.
- Service trusts – Professional firm often use service trusts. In this structure the trading occurs in one entity and the employees are held in another entity. The turnover test may be satisfied by the trading entity, but it does not have employees – they are in the other entity. Our members would like the link between the two entities to be recognised.
- Mum runs one business, Dad runs another business – are they treated separately under the proposed legislation or will they be connected entities (see small business CGT concessions) and treated as one?
- Person has several businesses (e.g. a gardening maintenance business and a separate landscaping business), but only one has been adversely affected. Is the turnover calculation based on all businesses or each separate business?
- Company has different business divisions – one division has declined. The other divisions are surviving. Will the turnover test apply to the company as a whole or separately to each division?
- Consolidated group – A similar issue arises in relation to consolidated groups. One entity in the group could decline whilst the other entities are unaffected. Will the turnover test apply to the consolidated group or each entity in the consolidated group? Will a tax definition rather than the accounting definition of consolidated group apply?
- Multinational companies – some multinational companies have a number of entities in Australia that operate entirely independently of each other but constitute a multiple entry consolidated group for tax purposes. Are they aggregated for turnover testing purposes?
- Turnover reduction – how is this to be calculated? Our audit area is currently looking at this issue and will have more comments later this week.
- Turnover timing - What month needs to be compared – March? What happens if turnover declines in April or May?
- Turnover evidence – what evidence will be expected to have been created/retained by entities to substantiate their eligibility for JobKeeper?
- Turnover calculation – will large unusual events be removed from the calculation?
- Start-ups – with all the government initiatives we have received queries from members about how the measure could be adopted to provide assistance to start ups which may not have been required to lodge tax return paperwork in the timeframes required by the initiatives.
- Restructures – if a restructure has occurred, or will occur to allow the entity to ride out the pandemic, will that disqualify them from JobKeeper?
- Business declines in April 2020 – for example after school music lesson business has term 1 fees but knows it won't have any terms 2 fees. Can it access JobKeeper? What time periods will be compared for the 30% turnover reduction?
- Interaction between JobKeeper and Cash flow boost initiative – can an employer obtain payments under both initiatives?
- Interaction between JobKeeper and apprentice incentive – can an employer obtain JobKeeper and apply for a wage subsidy of 50 % of the apprentice's or trainee's wage for 9 months from 1 January 2020 to 30 September 2020?
- Sole traders that have an employee or employees – A sole trader with no employees can get $1,500 a fortnight. Is a sole trader with one or more employees able to benefit personally from the $1,500?
- Single Touch Payroll needs amendments - consideration needs to be given as to how to identify amounts that are part of the $1,500 but in excess of the employee's usual wage so that the lack of super being paid on that portion does not generate compliance paper work through queries down the track.
- Funding - $1,500 per employee is paid in arrears. Communication about how to fund wages before these payments start flowing needs to be developed.
- Casual employees – how will they be defined? Look to Fair Work definitions?
- JobKeeper/JobSeeker interaction – there is a period of potential overlap. How will a JobSeeker payment be recouped? Will it affect the JobKeeper payment made to the employer regarding that particular employee? How will government systems be designed to minimise this type of payment mismatch?
- If a sole trader puts their business into hibernation and obtains a job, for example as a shelf stacker at Woolworths, will they be still able to apply for JobKeeper? If so, what evidence is required of the "hibernated" business?
- How does JobKeeper interact with awards? Will an employer be able to rehire at an amount that is lower than the person's previous wage but equal to the $1,500?
- Changing work force composition - Will there be mechanisms to prevent an employer from letting go a full-time employee and replacing them with several part-time employees so that the employee gets several $1,500 amount to on-pay rather than one? Will there be requirements that a previous full time person cannot have their hours reduced so that the employer has less gap to pay?
- JobKeeper payment to self employed – These people will not be on single touch payroll. Will the amount be paid to the individual's bank account that is linked to their income tax return or the entity's business activity statement?
- Parental leave – are people who are on or about to go on parental leave going to be eligible for the wage subsidy?
- Defence leave – will JobKeeper payments still occur whilst the employee is on defence force leave?
- Closely held entities – closely held entities are not required to register for Single Touch Payroll until 1 July 2020 and when they do they are allowed to report quarterly. JobKeeper needs earlier registration and more regular reporting. Are there going to be special rules made for closely held entities?
- Companies in start-up phase – such as mining exploration companies do not have turnover to reduce yet may have to reduce staff due to coronavirus. How can they obtain access to JobKeeper?