JobKeeper 2.0 – are you ready & able?
By Adam Tims, Stable Financial – Stablefinancial.com.au
This was a unique Federal Budget announced by the Treasurer on Tuesday 6th October 2020, the first in 119 years held during the Spring carnival (normally May). It was our first recession budget in 3 decades and boasted the biggest, relative Government spend since the Great Depression.
The Government seems motivated to get the money flowing again now rather than announcing any longer term structural reform. But these are unique times and “The Everest-like” quickfire measures to encourage business investment and job creation is adding as much as 7% to the GDP.
Being a Spring budget, is there particular items of note for the thoroughbred industry in Australia? The answer is a clear yes.
More money in your pocket
At a cost of $17.8 billion, the Government will bring forward by 2 years it’s previously legislated phase 2 of personal tax cuts to take effect retrospectively from 1 July 2020.
In such a labour intensive industry, racing participants from Stable hands to Stud managers should all benefit now. Take for example someone earning $80,000 they will be better off by $2,160 per annum (in comparison to tax paid in 2019 tax year).
The cuts will be a welcome boost to the local economy and is one of the key initiatives of the Government’s JobMaker Plan.
Time for business to have a crack
Significant measures have been announced to support capital investment by business through an expanded instant asset write-off regime, coupled with a tax loss ‘carry-back’ rule, which may provide additional cash to businesses.
Significant expansion to the instant asset write-off
The Government has announced a temporary full deduction for “depreciable assets” for all businesses – this is a massive and unexpected enhancement to the current program which is limited to assets costing up to $150,000.
This is one of the most expensive budget measures costing $26.7 billion. Businesses that acquire eligible “depreciating assets” from 7:30pm (AEDT) 6 October 2020 which are first used or installed by 30 June 2022, can deduct the full cost of the asset in that income year, with no limitation on value.
The cost of improvements to existing eligible assets can also be deducted. For entities with aggregated turnover less than $50 million, full deductions will also apply to second-hand assets.
Some more typical depreciable assets in the horse industry include floats, horse walkers, farm machinery etc. So do horses fit the definition of being a “depreciable asset”? For Thoroughbred breeders the answer is sadly “no” as horse interests are treated as trading stock (Primary production, Livestock – horses) in line with section 70 of the Income Tax Assessment Act 1997.
However for horse Trainers and Syndicators (the buying bench for the Breeders), we believe that horse interests are treated as “depreciable plant”. For instance, a horse Trainer could buy a $500,000 yearling at Magic Millions in January 2021. She might sell down say 50% of the yearling and would be entitled to completely write off her remaining share for the 2021 tax year, now being a $250,000 tax deduction.
When coupled with the loss carry back rule (discussed below), this measure may result in refunds of prior year tax paid to the extent that losses are incurred due to the investment in depreciable assets.
Tax loss carry-back rule
The Government has announced a loss carry-back rule for tax losses that are incurred in the 2019-20, 2020-21 or 2021-22 income years. Corporate taxpayers (not trusts or sole traders) will be provided a choice to carry-back and offset those losses against taxes paid in the 2018-19 or later income years.
The measure allows tax refunds (cash) to be accessed when lodging the 30 June 2021 income tax return. Accordingly, taxpayers will need to wait to access cash returns from this measure. Whilst there is no maximum loss that can be carried back, the offset will be limited to the lower of tax paid in the respective years and the extent of franking credits available.
Again this extra liquidity will be welcomed next year for those Companies eligible and at a time when some other measures such as Jobkeeper will be closed.
The Government announced a large number of expenditure measures which are aimed at kick-starting the economy. Although many of these items have a smaller budgetary cost there are distinct benefits and we have focused on those most relevant to the horse racing industry including employment.
JobMaker Hiring Credit
The JobMaker Hiring Credit will be available to eligible employers over 12 months from 7 October 2020 for each additional new job they create for an eligible employee.
Eligible employers will receive:
- $200 per week if they hire an eligible employee aged 16 to 29 years or
- $100 per week if they hire an eligible employee aged 30 to 35 years.
The JobMaker Hiring Credit will be paid quarterly in arrears. It will be available for up to 12 months from the date of employment of the eligible employee with a maximum amount of $10,400 per additional new position created.
Employers will need to demonstrate that the new employee will increase overall employee headcount and payroll.
To be eligible, the employee will need to have worked for a minimum of 20 hours per week, averaged over a quarter, and received the JobSeeker Payment, Youth Allowance (other) or Parenting Payment for at least one month out of the three months prior to when they are hired.
Temporary visa holders working in Agriculture
The Government has made temporary changes to allow temporary visa holders currently working in the agricultural sector to continue to work in Australia during COVID-19.
Working Holiday Maker (subclass 417 and 462) visa holders currently working in food processing or the agricultural sector will be eligible for a further visa and will be exempt from the six-month work limitation with one employer. Seasonal Worker Program and Pacific Labour Scheme workers, and other visa holders currently in the agricultural sector whose visas are expiring, may have their visas extended for up to 12 months to work for approved employers.
The budget announcements are relying on business having the cash and confidence to have a crack and get our economy moving along again. Until a vaccine is widely available for Covid 19 there must be some uncertainty as to whether the Budget stimulus will be enough to keep Australia’s economic recovery on track. With racing continuing and Spring in the air, Stable Financial senses some momentum and hopefully economic rewards for the resilient Thoroughbred industry.
JobKeeper 2.0 – are you ready & able?
Unfortunately the end is near for some (JobKeeper 1.0 ends on Sunday 27 September) especially given the rescheduled Magic Millions sale in July making it difficult for vendors to meet the new testing period for September quarter (drop in revenue >30%). Employers should act now to assess if they and their employees still qualify for JobKeeper and whether or not the current rate of pay needs to be changed from 28 September.
The Federal Government have released details of its extension to the JobKeeper scheme beyond September 2020. As previously announced, the JobKeeper payment will be extended for two periods, being the December 2020 quarter and March 2021 quarters.
If you are currently receiving JobKeeper you cannot assume that beyond the 28 September you will remain in the system. Employers will need to retest their eligibility and for those in the commercial thoroughbred industry, the first retesting period of September quarter 2020 may be problematic simply due to the rescheduling of the recent Magic Millions sale that commenced on 27 July 20 (previously held in the September quarter each year).
There is a bit of work to complete if you want to participate in the JobKeeper program going forward – not only do you need to consider your eligibility as an employer but you will need to determine the different category/rate of JobKeeper that may apply to your employees based on the number of hours they work for you.
The extended scheme will apply at a top rate of $1,200 per JobKeeper fortnight until 3 January 2021, dropping to $1,000 until 28 March 2021. Lower rates will apply for some part-time and casual employees. The first JobKeeper fortnight under the new scheme will begin on 28 September 2020 requiring prompt consideration of eligibility for the payments and any administrative requirements.
The key features of JobKeeper 2.0 are:
- the duration of the scheme has been extended, for the periods 28 September 2020 to 3 January 2021 (“the First Extension Period”) and 4 January 2021 to 28 March 2021 (“the Second Extension Period”), provided relevant eligibility requirements are satisfied;
- employers are required to separately test their eligibility for each period based on an actual decline in turnover for a quarter; and
- reduced rates of payment apply, determined by the average number of hours worked by an employee during the relevant period.
The new rules provide the ATO with powers around the turnover test and with respect the higher and lower rates. Those powers become effective from 16 September 2020. It is expected there will be additional rules released in the coming weeks. The below answers are subject to change where additional guidance from the ATO is released.
What conditions do I need to satisfy to continue to be eligible under JobKeeper 2.0?
To be eligible to continue receiving payments under the extended scheme, businesses and not-for-profits will need to demonstrate their actual GST turnover has fallen in the September 2020 quarter (for payments during “the First Extension Period”) or the December 2020 quarter (for payments during the “Second Extension Period”) relative to a comparable period (generally the corresponding quarter in 2019).
The decline in GST turnover (usually >30%) for selected period will be with reference to actual numbers ie: put simply, GST turnover reported in G1 of BAS Sept 20 quarter vs GST turnover reported Sept 19 quarter in G1. (This is different to JobKeeper 1.0 where testing periods could be chosen (month/quarter) and a projected turnover figure used where applicable.)
Each of these periods will be tested separately, meaning businesses can be eligible for one or both periods (or neither). Importantly, businesses will still be required to meet the other eligibility conditions that applied under the original JobKeeper scheme (i.e. carried on a business or pursued its non-profit objectives in Australia at 1 March 2020).
Can I qualify for JobKeeper 2.0 without having enrolled in the original scheme?
Enrolment in the original JobKeeper (i.e. prior to 28 September 2020) is not a requirement for payments during the first or second Extension Period. New entrants are permitted to enrol for either of these periods provided they meet the other eligibility conditions that apply.
Are the Commissioner’s alternative tests still available?
The Commissioner retains the power to determine that an alternative test applies to a particular class of entities where there is no relevant comparison period.
The Coronavirus Economic Response Package (Payments and Benefits) Alternative Decline in Turnover Test Rules (No. 2) 2020 legislative instrument has now been registered by the commissioner, setting out the revised alternative tests for JobKeeper fortnights from 28 September onwards.
The new alternative tests remain broadly in line with the original, with the same seven circumstances available to entities where there is not an appropriate relevant comparison period in 2019.
These include businesses that started after the comparison period, businesses that acquired or disposed part of the business, and where a business restructure changed the entity’s turnover.
The alternative tests also account for businesses that had a substantial increase in turnover, were affected by drought or natural disaster, have an irregular turnover, and had sole traders or small partnerships that experienced sickness, injury or leave during the comparable period.
Who is an eligible employee?
The eligibility rules require an individual to satisfy;
- An employment test (full time, part-time or casual employee)
- Age test (18 years or over, unless independent or not studying full-time)
- Residency test as at the relevant date.
For fortnights commencing on 3 August 2020, whether an individual is an eligible employee can be tested as at 1 July 2020, instead of 1 March 2020. This extends the application of JobKeeper to employees that have been engaged by an employer since the scheme was originally introduced.
Employers already enrolled in JobKeeper prior to 3 August 2020 are not required to retest employees that satisfied the eligibility requirements as at 1 March 2020.
Who is an eligible business participant?
The rules regarding eligible business participants have not changed. An individual will only be an eligible business participant if they meet the relevant criteria as at 1 March 2020 and continue to be actively engaged in the business in each JobKeeper fortnight.
What are the new payment rates for employees?
Under the amendments, the maximum payment available under JobKeeper 2.0 will be reduced from 28 September 2020 to $1,200 for the First Extension Period and $1,000 for the Second Extension Period. The maximum payment will be available only to those eligible employees and eligible business participants that satisfy a “work hours test” (more than 80 hours in the relevant period), regardless of their hours of employment within the fortnight itself. Employees or business participants that do not satisfy the work hours test will be eligible for the reduced payment rate of $750 (for the First Extension Period) or $650 (for the Second Extension Period).
For the employer to be eligible for the payment at the higher rate for the employee, the business must notify the Commissioner that the higher rate applies. The employer must additionally notify the employee whether the higher or lower rate applies.
For those that anticipate being eligible for payments under JobKeeper 2.0, employers can now begin assessing whether their employees are likely to be higher or lower rate.
How do I determine which payment rate applies for an employee?
The payment rate for eligible employees and business participants will depend on whether the individual satisfies a work hours test. For an employee, this test requires that the total hours of work, paid leave and paid absence on public holidays was 80 hours or more during the relevant period (“the reference period”) prior to 1 March 2020 or 1 July 2020 (whichever is higher for the employee).
The reference period is determined by the normal pay cycle for the employer. If the employer pays on a weekly or fortnightly basis, the test will consider the number of hours worked in the 28-day period ending at the end of the last pay cycle before 1 March 2020 or 1 July 2020.
For example, a business normally pays its staff fortnightly in arrears. Its last pay cycle prior to 1 March 2020 ended on Tuesday 25 February 2020. The employer will consider the number of hours worked by the individual in the 28-day period ending on 25 February 2020 (i.e. between Wednesday 29 January
2020 and Tuesday 25 February 2020). Where the employee worked more than 80 hours during this period, the employer will be entitled to the JobKeeper payment at the higher rate for that employee for both Extension Periods (if the employer qualifies for both).
Does the payment rate apply to both the First and Second Extension Periods?
As the work hours test is based on a previous period (i.e. February or June 2020), the higher or lower rate for the employee or business participant will apply for both Extension Periods and will only need to be tested once. That is, the hours worked by the employee in the September or December quarters are not relevant in determining whether the higher rate applies.
How do I determine which payment rate applies for an eligible business participant?
The payment rate for eligible employees and business participants will depend on whether the individual satisfies a work hours test. For a business participant, this test requires that the individual was actively engaged in the business for at least 80 hours during the month of February 2020. In addition, the individual must give the business (or to the Commissioner if the individual is a sole trader) a notice outlining that it meets this condition, for the business to be eligible for the payment at the higher rate.
When am I required to pay my employees for the first fortnight?
It continues to be a requirement under JobKeeper 2.0 that an employer is required to meet the wage condition (i.e. pay the minimum JobKeeper payment to each eligible employee) by the end of each JobKeeper fortnight. As outlined in the Explanatory Statement, it is expected that the ATO will provide an extension of time to allow an entity to meet the wage condition for the first fortnights in each extension period.
What are the next steps?
For more information or to review your existing arrangements and determine what steps are required, please contact a Stable Financial team member.
Jobkeeper important update – new employees allowed
A legislative instrument was registered on Friday amending the JobKeeper rules to allow businesses to claim the subsidy in respect of new employees by extending the employee test date to 1 July 2020.
There are strict deadlines for providing notifications under the amended rules, this means that employers that are currently accessing JobKeeper payments need to review the impact of these amendments immediately.
Which employees are now eligible?
From 3 August 2020, the testing date for eligible employees has been extended to 1 July 2020 (previously this was 1 March 2020). This extends the application of JobKeeper to employees that have been engaged by an employer since the scheme was originally introduced.
Employees who are already receiving the payment based on their eligibility at 1 March 2020 remain eligible and do not need to retest their eligibility.
An individual can be eligible for JobKeeper if, on 1 July 2020, the individual meets all three of the following conditions:
- employed (as a permanent or long-term casual) by the business;
- 18 years or older (or if they were 16 or 17, they were independent or not studying full time on 1 July 2020); and
- met the residency test.
If an employee was employed on 1 March 2020 but didn’t satisfy any of the conditions above, but did satisfy those conditions on 1 July 2020, it is possible that those employees could now be eligible for JobKeeper payments. For example, at 1 March 2020 a casual worker may have had 10 months with an employer so was ineligible. However by 1 July 2020 it is 14 months so they satisfy the 12 month (permanent casual test).
Another very positive change relates to the ability for an employee to re-nominate with a new employer (which was previously not allowed). Broadly, if an individual was a 1 March 2020 employee of another entity but is not employed by that entity at any time from the start of 1 July 2020, then the individual is now permitted to give a nomination notice to a new employer. The same applies for eligible business participants, as applicable.
What do I need to do now?
The JobKeeper scheme operates on a ‘one-in all-in’ basis, meaning that employers do not have a choice as to which employees they nominate for the payment. Businesses currently enrolled in JobKeeper will need to review their employees to identify those individuals that may now meet the eligibility conditions (who were previously ineligible under the 1 March 2020 requirements). There is a requirement to provide each of these employees with a nomination notice by 24 August 2020, detailing the steps the employee must take to return the notice.
Businesses will also need to ensure that they have followed the correct processes to identify and confirm these new employees with the ATO for the relevant fortnight, in order to claim JobKeeper payments.
When do I have to pay these employees?
Eligible employers will be able to claim JobKeeper in respect of these new employees from 3 August 2020 (JobKeeper FN10). While ordinarily this would mean that employers would need to have met the wage condition (minimum $1,500 payment) for these employees by the end of the fortnight (being 16 August 2020), the ATO has provided an extension of time to meet this condition (see here). Businesses will have until 31 August 2020 to meet the wage condition for all new eligible employees for the fortnights commencing on 3 August 2020 and 17 August 2020.
Is the entitlement of my existing employees affected?
The entitlement in respect of existing eligible employees will not be affected. Where a business has already enrolled in JobKeeper, employees that previously satisfied the 1 March 2020 criteria will remain eligible employees of the business, providing the employer continues to meet ongoing payment and reporting obligations. They will not be required to submit an additional nomination notice, nor will the business be required to re-assess their work patterns to cover the period up to 1 July 2020.
When can we expect legislation to extend JobKeeper beyond September?
These amendments only enact the announced changes in respect of employee entitlements. It is not clear when amendments to the legislative instrument will be introduced to extend the scheme beyond its original end date in September 2020.
For further information, please refer to:
Coronavirus Economic Response Package (Payments and Benefits) Amendment Rules (No. 7) 2020
ATO – JobKeeper key dates
Financial support and information for business – effective 31st March 2020
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