As COVID-19 restrictions gradually lift, many of us are still grappling with the paperwork around financial survival. This is not the time to be afraid of filling in forms or asking your accountant for help.
Last week, the Victorian chapter of Women in Film and Television (WIFT) ran an online seminar for members to explain the JobKeeper payment for individuals and businesses. The presentation was conducted by Laura Davidson, WIFT Victoria Treasurer and a chartered accountant with over 12 years experience.
Davidson, who was a founding board member for a mental heath not-for-profit in Sydney, and has been working with WIFT Victoria for the last year, is Principal and Chief Operating Officer of Koustas + Co Accountants. She says she’s passionate about female representation on Boards and helping women succeed.
Davidson sent us her notes for the online seminar (delivered on Thursday, 7 May) and says the response was very positive and that participants found it ‘beneficial and practical given their individual circumstances.’ There were about 20 minutes of questions at the end of the presentation and some notes on them are included at the end of this article.
Davidson says to remember that accountants and finance professionals are there to hold your hand, but reading these notes might save you the trouble.
JOBKEEPER: THERES AN ART TO IT. Notes from WIFT VIC Webinar
As we all know, the Prime Minister announced the JobKeeper payments to assist businesses and sole traders who have been significantly impacted by COVID-19. In short, the purpose of this scheme is to keep employees connected with their employers and keep people in jobs.
So what is the JobKeeper payment? Basically, it’s a subsidy to assist businesses, including sole traders who have suffered significant reductions in turnover. The Commonwealth will provide $1,500 per fortnight before tax per employee and/or one eligible business participant that’s covered by the scheme, for up to six months. Payments will commence from the first week of May 2020 (NOW) but will be backdated to 30 March 2020.
Payments will be administered by the ATO
Key points covered in Webinar:
- KEY ELIGIBLITY CRITERIA
- THE TURNOVER TEST – BASIC TEST or ALTERNATIVE TEST
- GST TURNOVER – what is it?
- JOB KEEPER REGISTRATION PROCESS – for sole traders with employees, and for sole traders with no employees
- PRACTICAL IMPLICATIONS OF MEETING THE FORTNIGHTLY PAYMENT REQUIREMENT
- MONTHLY REPORTING OBLIGATION
It’s important that you know you aren’t alone in trying to navigate your way through this. Tax agents and professionals are available to help, and it’s important that you contact them if you do require assistance in accessing the various stimulus measures available from the Commonwealth and State governments and local councils.
The aim of the webinar is to simpify the JobKeeper scheme for you and provide some guidance as to how this relates to sole traders in the Arts.
1. ELIGIBILITY – FOR SOLE TRADERS
- On 1 March 2020, you carried on a business in Australia;
- Have employees or have a non employee individual (eligible business participant) who is actively engage in the operation of the business;
- Satisfied certain conditions at 12 March 2020;
- Had an ABN on 12 March 2020, and
- Had lodged on or before 12 March 2020 at least one of
- A 2018-2019 income tax return
- An activity statement or GST return for any tax period that started after 1 July 2018 and ended before 12 March 2020’
There has been a further announcement that the Commissioner can apply discretion if you did not have a requirement to lodge until after 12 March 2020 or you had deferral granted under an extension. There is an ATO form that should be prepared to request discretion.
What is a non-employee individual – or ‘eligible business participant’? It is one individual that is not on the entity’s or sole trader’s payroll, you either receive a dividend, a distribution from a partnership or trust, or you report business income in your Individual Tax Return.
To be an Eligible Business Participant, you need to meet all of the following:
- You are an individual not employed by your entity;
- You are activity engaged in the business carried on by your entity (at 1 March 2020 and for the fortnight you are claiming)
- You are one of the following (at 1 March 2020 and for the fortnight you are claiming):
- A sole trader
- A partner in a partnership
- An adult beneficiary of the trust
- A shareholder or director in the company
In addition to that:
- You are not currently receiving government parental leave or Dad and Partner Pay
- You are not currently totally incapacitated or receiving payments under Workers Compensation Law
- You are not an employee (other than a causal) of another entity
- You have not previously given another entity or the ATO a JobKeeper nomination notice
- You are age 16 of over on 1 March 2020, and an Australian resident for income tax purposes.
YOU CAN ONLY HAVE ONE ELIGIBLE BUSINESS PARTICIPANT per ENTITY.
If you have a different structure such as a holding company, or a family trust owning units in a trading unit trust you will need to review your eligibility.
If you do not have an ABN, you can apply for one and have the registration date backdated.
2. SATISFY THE TURNOVER TEST
There are two tests:
- Basic Test
All businesses need to first see if they pass basic test. If they fail the basis test, they can then review the Alternative Tests to see if one may be available for their business.
THE BASIC TEST
- Identify the Turnover test period
- Identify the relevant comparison period
- Work out the relevant GST Turnover
- Determine which shortfall percentage applies
- Determine if GST turnover has fallen by the specified shortfall percentage
For qualification from the start of the scheme, turnover month used can be either March 2020 or April 2020 – and fortnightly payments commence from 30 March 2020.
To qualify at a later time, the turnover month can also be May, June, July, August or September 2020.
You will only be eligible for JobKeeper payments for fortnights that end on or after your turnover test period starts i.e. if your turnover test period is April you are eligible from 30 March for the fortnightly payments.
Relevant shortfall turnover less than $1 billion, entity needs to have a reduction in turnover or more than 30%
Relevant shortfall turnover of $1 billion or more, entity needs to have a reduction in turnover or more than 50%
BASIC TEST PUT SIMPLY:
- Determine month/quarter for test period (between March 2020 to September 2020)
- Comparison period is the same period in the previous year (between March 2019 to September 2019)
- Work out relevant GST turnover (cash or accruals)
- 30% or 50% shortfall percentage
- Review revenue and calculate shortfall percentage
THE ALTERNATIVE TEST
The alternative decline in turnover test recognises that sometimes it may not be appropriate for an entity to compare their current monthly or quarterly GST turnover with the same period a year ago.
Circumstances where an alternative test applies:
1. Commenced business after the relevant comparison period (the business did not exist in that period) but not on or after 1 March 2020.
2. Acquired or disposed of part of the business after the relevant comparison period (the business is not the same business in that period as it is now).
3. Undertook a restructure after the relevant comparison period
4. The entity’s turnover substantially increased by
50% or more in the 12 months immediately before the applicable turnover test period, or
25% or more in the 6 months immediately before the applicable turnover test period, or
12.5% or more in the 3 months immediately before the applicable turnover test period.
5. Affected by drought or other declared natural disaster during the relevant comparison period.
6. Large irregular variance in their turnover for the quarters ending in the 12 months before the applicable turnover test period, excluding entities that have cyclical or regular seasonal variance in their turnover, or
7. Sole trader or small partnership where sickness, injury or leave have impacted an individual’s ability to work which has affected turnover.
3. GST TURNOVER
The turnover is calculated based on the time you make the sale/supply. As a practical matter, the ATO expect you will use the GST accounting method that you would normally use.
- If you account for GST on a cash basis, you can use either cash or accruals (non-cash) to calculate your GST turnover.
- If you use accruals to account for GST, the ATO expect in most cases you would continue to use this method. However, if you choose to use the cash basis the ATO may want to understand why the different approach is an appropriate reflection of turnover.
Whichever basis, must be used consistently in comparing month or quarter
4. JOBKEEPER REGISTRATION PROCESS
4.1 JOBKEEPER REGISTRATION PROCESS – SOLE TRADER WITH EMPLOYEES
- Check employee eligibility requirements
- Continue to pay at least $1,500 to every eligible employee per JobKeeper fortnight and ensure all staff have been paid a minimum of $1,500 per fortnight from the fortnight you wish to claim JobKeeper
- Rehire or re-engage any employees that were stood down and you MUST pay them if you want to claim JobKeeper
- Send JobKeeper employee nomination notice to all eligible employees to complete and return BEFORE you can claim;
- Each eligible employee must agree to be nominated by you
- STP nomination and then lodge STP event or login to ATO Online Services to nominate
4.2 JOBKEEPER REGISTRATION PROCESS – SOLE TRADER NO EMPLOYEES
- If eligible business participant is a partner, adult beneficiary of a trust or shareholder or director in a company, need to complete Eligible business participant nomination notice (excl. sole traders)
- Enrol by 31 May 2020 in respect of claims for JobKeeper fortnights ending in April and May 2020.
- Within 7 days your entity must inform the eligible business participant and employee that it has done so (unless you are a sole trader)
- Enrolment process is through the Business Portal or ATO online services using myGov – you may need to set up your systems or contact a registered tax/BAS agent for assistance
5. PRACTICAL IMPLICATIONS OF MEETING FORTNIGHTLY PAYMENT REQUIREMENT
5.1 SOLE TRADER
The payment is made to you and assessable on your tax return as you are both the entity and the eligible business participant
No requirement to pay a wage as you physically receive the money
Entity receives the payment on behalf of you
You receive the money in the same way that you have previously taken money from the entity
i.e. via a Dividend, trust distribution or directors fee
There is no requirement to commence STP
If you have employees that you are also claiming JobKeeper for there are a number of other requirements that need to be met.
6. MONTHLY REPORTING OBLIGATIONS
You must make a monthly business declaration. This is not to re-test eligibility, but rather an indication of how your business is progressing under JobKeeper.
To make the declaration:
You will not receive your JobKeeper payment until you lodge your monthly declaration.
CONCLUSION: JOBKEEPER STEPS SUMMARISED
- Review key eligibility criteria and ensure you meet them as at 1 March 2020
- Apply the turnover test to determine the test period for entry into JobKeeper scheme using either the basic test or alternative test
- Notify employees and receive signed declarations from employees/eligible business participant
- Register for JobKeeper through online services, tax agent or BAS agent;
- Notify any eligible employees within 7 days of registering
- Ensure to complete monthly business declarations – April is available now!
NOTES ON QUESTIONS FROM THE ONLINE SEMINAR
- One participant wasn’t aware of the monthly declaration.
- One participant asked how they would calculate their turnover given they didn’t lodge BAS. They were advised to use their bank statements, invoice book, account system to determine what their revenue was for the 2020 test month, and to do the same for the 2019 month.
- One participant asked regarding future turnover – they stated that they had no revenue in April and May but were expecting for revenue in future months and asked whether this would impact their future JobKeeper payments. Which it doesn’t because their turnover for April and May was Nil, and they would enter JobKeeper for April and once you enter the system, your future revenue doesn’t stop payments.
- One participant hadn’t lodge their tax return and I referred them to the commissioner discretion.
Visit WIFT Victoria for membership details and to stay up to date with more of their news and events.