By Ross Higgins, Partner 

On Tuesday 15 September the new rules for JobKeeper 2.1 were released by the Treasurer. On 16 September 2020 the Commissioner registered three legislative instruments on key components of the rules. This update focusses on the new aspects of the rules and the legislative instruments.

1. Decline in turnover test

To qualify for JobKeeper 2.1, entities are required to demonstrate that their actual GST turnover has declined by the required percentage, rather than projected GST turnover under the first phase of the wage subsidy scheme. To qualify for JobKeeper fortnights from 28 September 2020 to 3 January 2021, the comparison is between the September 2020 quarter and the September 2019 quarter.  To qualify for JobKeeper fortnights from 4 January to 28 March 2021, the comparison is between the December 2020 quarter and the December 2019 quarter.

Currently, GST turnover is determined based on when supplies are made, not the period to which any tax payable on the supplies is attributable, which has led to widespread confusion. Accordingly, under a legislative instrument, the calculation of current GST turnover will align with how entities would attribute GST payable on supplies to a reporting period when completing their GST return (business activity statement). The existing rules exclude certain supplies such as input taxed supplies. Some special rules apply for registered charities.

The rules also set out the basis of accounting – either a cash basis or a non-cash basis- that an entity is required to use, so that if an entity:

1. is not registered at any time in the test periods that apply to the entity – then the entity must determine whether GST is attributable to all test periods on the basis that the entity:
   1. chooses to account on a cash basis; or
   2. did not choose to account on a cash basis; and
   3. uses the same accounting basis for all test periods
2. becomes registered during the relevant comparison period or is registered at the beginning of the relevant comparison period – then the entity must determine whether GST is attributable to a test period using the same accounting basis applying to the entity under the GST Act in the first tax period that applied to the entity in the relevant comparison period; or
3. registered after the relevant comparison period – then the entity must determine whether GST is attributable to a test period using the same accounting basis applying to the entity under the GST Act that the entity has at the beginning of its turnover test period.

2. Employee reference period to determine applicable payment rate

A new concept in the JobKeeper extension is the requirement to test the number of hours worked by an employee in the 28-day period before either 1 March 2020 or 1 July 2020 (reference periods) to determine if the higher of lower JobKeeper rate applies.

The applicable payment rates are shown in the following table:

 2.1. Employees in respect of whom there are no records or incomplete records of hours including where remuneration is not tied to hourly or contracted rates

Under a legislative instrument, where an employer does not have any record, or has incomplete records, of the identified employee’s total hours of work, paid leave and paid absence on public holidays in the individual’s employment with that entity in the reference period, including where the amounts paid by the employer to an employee or class of employees are by way of salary, wages, commission, bonus or allowances that are not tied to an hourly rate or contracted rate in the reference period, the Commissioner is satisfied that those hours for that class of employees are not readily ascertainable.

If this situation applies and the individual employee falls within one or more of the following specified circumstances, then the higher payment rate will apply to that employee:

1. in the reference period, the wages paid per JobKeeper fortnight were $1,500 or more in respect of an eligible employee (excluding amounts which were not for the performance of work by the eligible employee (including taking leave) and were reasonably attributable to amounts paid for the purpose of satisfying the wage condition under the JobKeeper rules);
2. under a written industrial award, enterprise agreement, individual contract or other similar instrument governing the employment relationship, an eligible employee was required to work 80 hours or more (including paid leave and paid absence on public holidays) in the reference period; or
3. although not readily ascertainable, it can be determined based on reasonable assumptions that an eligible employee’s hours in the reference period was 80 hours or more (including paid leave and paid absence on public holidays).

Alternative reference periods

Under a legislation instrument, the following matters have been determined for eligible employees and eligible business participants. There are also alternative reference period rules for eligible religious practitioners.

Eligible employees

An alternative reference period applies to an individual who is an eligible employee of an entity if:

1. the employee’s total hours of work, paid leave and paid absence on public holidays in the individual’s employment with that entity in the reference period:
   1. was less than 80 hours; and
   2. when compared to earlier 28-day periods ending at the end of a pay cycle for the employee, was not representative of the employee’s total number of those hours in a typical such 28-day period;
2. the employee was not employed by that entity during all or part of the reference period;
3. the start of the employee’s employment with that entity was on or before the reference time but their first pay cycle ended on or after the reference time; or
4. the employee, due to a business changing hands, is treated as having also been employed by that entity at an earlier time but apart from that, the employee was not employed by the entity for all or part of the reference period.

The instrument notes that paragraph (a) would cover, but is not limited to, scenarios such as:

• an eligible employee taking various types of unpaid leave during the reference period, for example, sick leave, parental leave and leave to be on emergency services leave duty during bushfires; or
• a scenario where the eligible employee’s total number of hours of work, of paid leave and of paid absence on public holidays, in the reference period was affected due to the employee’s employer entity conducting business or some business in a declared drought zone or declared natural disaster zone.

If an alternative reference period applies it will be:

• where paragraph (a) applies, the 28-day period ending at the end of the most recent pay cycle for the employee for that employer before the reference time in which the employee’s total number of hours of work, of paid leave and of paid absence on public holidays was representative of a typical such 28-day period; or
• where paragraphs (b), (c) or (d) apply, the first 28-day period ending on or after the reference time that wholly occurs during consecutive pay cycles, or a pay cycle, of the employee for that employer (if such an employee was stood down in the first 28-day period, then use the first 28-day period starting on the first day of a pay cycle on or after the reference time in which they were not stood down).

Eligible business participants

An alternative reference period applies to an individual who is an eligible business participant for an entity if:

1. the total number of hours the eligible business participant was actively engaged in the business carried on by the entity in February 2020:
   1.  was less than 80 hours; and
   2.  when compared to earlier 29-day periods (each wholly within a calendar month), was not representative of the total number of those hours in a typical such 29-day period;
2. the individual first began to be an individual sole trader/partner/adult trust beneficiary/company shareholder or director for the entity on or before 1 March 2020 but after 1 February 2020; or
3. the entity conducted business or some of its business in a declared drought zone, or declared natural disaster zone, during February 2020.

The instrument notes that paragraph (a) would cover, but is not limited to, scenarios such as the eligible business participant not being actively engaged in the business for all or part of February 2020 due to sickness, injury or leave.

If an alternative reference period applies it will be:

• where paragraph (a) applies, the most recent 29-day period, wholly within a calendar month, ending before 1 March 2020 in which any circumstances that cause the eligible business participant’s total number of hours of active engagement not to be representative of the eligible business participant’s total number of those hours in a typical such 29-day period did not exist;
• where paragraph (b) applies, the 29-day period starting on the day the individual first began to be an individual sole trader/partner/adult trust beneficiary/company shareholder or director for the entity; or
• where paragraph (c) applies, the most recent 29-day period, wholly within a calendar month, ending before 1 March 2020 during which the entity did not conduct business or some of its business in a declared drought zone, or declared natural disaster zone.