Client Alerts

Temporary full expensing rules are ending on 30 June 2023 – time for your horse business to get the whip out!

As the end of financial year approaches, the temporary full expensing rules will be coming to an end. What must horse businesses do to avoid missing out on accelerated tax deductions for this year?

The temporary full expensing (“TFE“) rules provide for a full deduction to businesses for the cost of eligible depreciating assets in the year they are first used, or installed ready for use, for a taxable purpose prior to 30 June 2023. Horse businesses should bear this strict timeline in mind to avoid missing out on accelerated tax deductions. Merely contracting for the purchase of an asset, or even becoming the owner of the asset by 30 June 2023 is not sufficient.

From 1 July 2023, the accelerated deductions will conclude, and depreciating assets will be required to be written-off for tax purposes over their effective lives.

First used or installed ready for use by 30 June 2023
Horse businesses should ensure that any capital investments are made with sufficient time to allow for delivery and use or installation of the relevant assets by 30 June 2023 to qualify for TFE. The 30 June 2023 date is a hard deadline regardless of whether the business entity has a 30 June year-end or a substituted accounting period. There is no discretion in the law to extend the date by which assets must meet this first taxable use requirement. As such, unexpected delays in the delivery, construction or installation of assets could result in horse businesses missing out.

Second element costs
“Second element costs” being those that contribute to bringing the asset to its present condition or location from time to time (e.g. improvement costs) may also qualify for TFE in the 2023 income year if they are paid or incurred prior to 30 June 2023. However, simply prepaying amounts or incurring amounts for improvements to existing assets that are to be made after 30 June 2023 are not likely to result in those costs qualifying for TFE. Horse businesses should also keep the 30 June 2023 deadline in mind if they are considering making improvements to or relocating existing depreciating assets to ensure that these things can be done in time.

Rules from 1 July 2023
From 1 July 2023, depreciating assets are required to be written-off for tax purposes over their effective lives.

There was some relief for small business as announced in the recent May Federal Budget.​​​​​​​

Small businesses, with aggregated turnover of less than $10 million, will be able to immediately deduct the full cost of eligible assets costing less than $20,000 that are first used or installed ready for use between 1 July 2023 and 30 June 2024.

Next steps

It is critical that if you wish to claim temporary full expensing for capital purchases for the 2022-23 income year that you ensure you meet the necessary conditions by 30 June 2023 and plan accordingly to ensure that the delivery and installation of assets can occur prior to the deadline. If you have any questions please reach out to your Stable Financial contact.

Victorian State Budget 2023-24: Key Items for clients to consider

Treasurer Tim Pallas handed down the Victorian State Budget 2023-24 on the afternoon of 23 May 2023.

It contains several proposed changes to Victoria’s tax regime, the most significant of which for business relate to payroll tax, land tax, work cover scheme and stamp duty reform for commercial and industrial properties.

This Budget sees Victorian businesses shouldering the burden of debt recovery, with the introduction of a 10-year Debt Levy targeting any business with an annual Australian payroll above $10m. Business will also fund the paying down of state debt through higher payroll tax bills for around 4,000 SMEs and large businesses alongside higher land tax bills for around 380,000 landowners.

Payroll tax

The following payroll tax changes have been announced:

• As part of its COVID Debt Repayment Plan, from 1 July 2023, a levy on payroll will apply to businesses with annual Australia-wide taxable wages above $10m
• From 1 July 2024, the payroll tax-free threshold will increase from $700 000 to $900 000, and subsequently increase to $1m from 1 July 2025
• From 1 July 2024, the payroll tax exemption for high-fee non-government schools will be removed

The Debt Levy, operating through the payroll tax regime, is scheduled to begin on 1 July 2023 and businesses with national payrolls above $10m a year will be subject to an additional 0.5% levy on top of the existing payroll tax rate, with a further 0.5% for businesses with a payroll over $100m.

However, there is some tax relief for micro businesses with wages below $1m, who will not be subject to payroll tax due to an increase in the tax-free threshold. This change is estimated to remove payroll tax from 4,200 businesses and reduce taxes for a further 22,000.

Increase in the Payroll Tax Threshold

To ease the payroll tax on smaller businesses, the tax-free threshold will increase from $700,000 to $900,000 from 1 July 2024. The threshold will be increased further to $1m from 1 July 2025.

This is a welcome change for eligible businesses but it will only benefit businesses with relatively small payrolls. The Victorian Government estimates that around 6,000 businesses, who otherwise would have paid payroll tax, will no longer be subject to the tax when the threshold reaches $1m. Furthermore, it is expected that more than 26,000 small businesses will benefit from the increase of the tax-free threshold to $1m.

This change will provide a payroll tax saving of up to $9,700 for the financial year ending 30 June 2025 and a saving of up to $14,550 for eligible businesses for the financial year ending 30 June 2026 and onwards. These estimates are calculated on the expected savings for those businesses that are not based in regional Victoria.

Phase out of Tax-free Threshold

The Government will also ‘phase out’ the tax-free threshold for businesses with taxable Australia-wide wages over $3m. The threshold will be reduced proportionally such that businesses with taxable wages over $5m will no longer be entitled to any tax-free threshold.

This measure will result in an additional payroll tax liability for affected businesses. For a business with taxable wages above $5m, the introduction of the phase out threshold will result in an additional payroll tax liability of $43,650 for the year ending 30 June 2025 (and $48,500 for the year ending 30 June 2026). These estimates are calculated on the assumption that the businesses are not based in regional Victoria.

Land tax

Property investors with landholdings valued above $300,000, as well as trust taxpayers with property holdings above $250,000, will be hit with a temporary land tax rate increase of $975 plus 0.1% of the value of their landholdings above $300,000 (in the case of non-trust taxpayers) or $250,000 (in the case of trust taxpayers).

The relevant land tax measures announced today are as follows:

1. The tax-free threshold for general land tax rates will be cut from $300,000 to $50,000 (therefore subjecting more properties and property owners to land tax)
2. A temporary fixed charge of $500 will be levied on general taxpayers with total landholdings between $50,000 and $100,000*
3. A temporary fixed charge of $975 will be levied on general taxpayers with total landholdings between $100,000 and $300,000*
4. For general (non-trust) taxpayers with total landholdings above $300,000 and trust taxpayers with total landholdings above $250,000, land tax rates will increase by $975 plus 0.1% of the taxable value of their landholdings

The above changes will commence from 1 January 2024 (i.e., the 2024 land tax year) and will apply until 30 June 2033.

Existing land tax exemptions, including for principal places of residence, primary production land and land used by charities, should continue to apply provided the property and the owner continue to satisfy the relevant eligibility requirements.

The above information will be subject to the detail set out in the relevant amending legislation (which has not yet been made public at the time of writing) and is subject to change once the final details are available.

Increase of Absentee Owner Surcharge Rates

From 1 January 2024, the Victorian Absentee Owner Surcharge (“AOS”) (i.e., foreign land tax surcharge) rate will increase from 2% to 4%. Whilst this change has been presented as a measure to harmonise the rate with New South Wales, it is worth noting that New South Wales currently has the highest foreign land tax surcharge rate.

Work Cover scheme

Last week, the Victorian Government announced that it would be modernising the WorkCover Scheme. In doing so, they have advised that the average premium rate would increase from 1.27% to 1.8% of remuneration in order to cover the cost of claims. This compares with average premiums of 1.23% in Queensland and 1.48% in New South Wales.

The increase in average premiums represents a cost increase of 42%. This coupled with other increases in costs announced in the 2023-24 Victorian State Budget puts considerable pressure on businesses operating in Victoria.

The other key reforms relevant to modernising the WorkCover Scheme include:

• Establishing Return to Work Victoria to provide more support for workers to return to employment; and
• Adjusting the eligibility for mental injury claims and introducing a whole person impairment threshold of 20% for claims that receive weekly benefits for more than two and half years

Stamp duty reform for commercial and industrial properties

The 2023-24 State Budget saw the Treasurer announce a significant reform to Victoria’s duty regime, with duty on commercial and industrial properties to be replaced over time with an annual property tax.

The finer details of the new regime are unlikely to be known for some months as we understand the Government intends to consult with industry before introducing the relevant legislation into Parliament. However, based on the Government’s media release we understand the change will involve:

• From 1 July 2024, commercial and industrial properties will transition to the new system as they are sold, with annual property tax equal to 1% of the land’s unimproved value to be payable from 10 years after the sale transaction;
• The first purchaser of eligible property after 1 July 2024 will be able to choose whether to pay the final duty liability as an upfront lump sum, or as fixed instalments over 10 years together with an interest charge; and
• Once the property enters the new system after 10 years, no further duty will be payable when the property is sold and the annual property tax will then apply moving forward

The new regime will not apply to the current owner of any commercial or industrial property purchased before 1 July 2024.

Tax planning opportunities may present for clients after the finer details of the new regime are understood.

Victorian Flood Relief

The unprecedented flooding crisis experienced last Friday by individuals and businesses throughout Victoria is devastating.  The challenges are ongoing for many but the strength of support, particularly in the thoroughbred breeding and racing community, is Group 1.

Stable Financial would like to help in a small way by providing information that may assist those affected from a financial standpoint.  Both the Australian and Victorian Government have announced funding packages to assist those impacted by the Victorian floods in October 2022.

For Individuals

1. Disaster Recovery Payment

– serious injuries/deaths/missing family members/extensive damage to personal home
(More info and guidelines can be found here: https://www.servicesaustralia.gov.au/victorian-floods-october-2022-australian-government-disaster-recovery-payment)

1. Disaster Recovery Allowance
   – loss of personal income as a direct result of floods and earn less than the average Australian wage of $1,737.10 per week
   (More info and guidelines can be found here: https://www.servicesaustralia.gov.au/victorian-floods-october-2022-disaster-recovery-allowance)

For Businesses (excluding Primary Producers)

1. Small Business Immediate Flood Relief Program
   – $5,000 one off payment for significant damage
   (More info and guidelines can be found here: https://business.vic.gov.au/__data/assets/pdf_file/0016/2112424/Small-Business-Immediate-Flood-Relief-Program-Guidelines.pdf)

For Primary Producers

1. Primary Producer Flood Clean Up and Relief Grant
   – $10,000 one off payment for direct impact of floods
   – covers activities such as the removal/disposal of debris and injured/deceased livestock, replacing or repairing essential equipment, fixing and replacing fencing, buying fodder, water and water storage, salvaging damaged crops, grain or feed, and hiring or purchasing materials to clean up a property or equipment
   – additional supporting documentation is required to be submitted with the application, which is submitted through Rural Finance
   (More info and guidelines can be found here: https://www.ruralfinance.com.au/industry-programs/victorian-primary-producer-flood-relief-program#flood)
2. Primary Producer Transport Support Program
   – claim up to 50% of transport costs up to a total of $15,000 for the transport of emergency fodder or stock drinking water, and moving stock to agistment/sale/slaughter due to flooding
   – to claim this support, you can use the same application form as the Flood Clean Up and Relief Grant
   (More info and guidelines can be found here: https://www.ruralfinance.com.au/industry-programs/victorian-primary-producer-flood-relief-program#flood) 
3. Primary Producer Concessional Loans
   – eligible to apply for concessional loans of up to $250,000 to restore or replace damaged assets
   (More info can be found here: https://www.ruralfinance.com.au/industry-programs/victorian-primary-producer-flood-recovery-concessional-loans)

If you have any questions or require assistance with the Government funding application process, please feel free to reach out to the team at Stable Financial.

Are you a Company Director?

Director I.D. is here for your action.

Earlier this year ASIC introduced the requirement for all company directors to hold a director identification number (director ID).  This means directors are now obliged to verify their identity as part of the new requirements.

Under the legislation, each person who holds the position of director for an Australian or registered foreign corporation, will be required to confirm their identity by obtaining a personal director ID, which they will use for all director appointments.  These requirements therefore extend to any director of a trustee company as well as directors of corporate entities.

When to apply for a director ID

The director ID application is now available, with transitional arrangements for existing and new directors.  When you need to apply for a director ID will depend on when you became a director, as set out below.

How to apply for a director ID

To apply for your director ID you will need to set up a myGovID account which you will use to verify your identity at https://www.mygovid.gov.au/set-up

Once you have verified your identity, you need to apply for a director ID via the Australian Business Registry Services website from November 2021.

This process must be done by the director.

Once you have obtained a director ID, you will be required to register this against any existing director appointments.  It will be retained permanently by you, similar to the way a tax file number is applied to each individual.

The benefits of the director ID

The Act is designed to increase director accountability and traceability, substantially limiting the potential for fraudulent activity and ‘phoenixing’ (where directors of a company wind up a company to avoid paying its liabilities and incorporate a new company to carry on substantially the same business).  It will also prevent the use of fictitious identities.

A further benefit will be that sensitive personal director information held on publicly accessible corporate registers will no longer be available.  By removing this information, directors’ private information will be better protected from identity theft and privacy breaches.

While the transitional provisions will be in place for the first twelve months of operation, criminal and civil penalties will apply for directors who do not apply for a director ID within the allowed time.  Until the appointment of the Registrar to the Commonwealth Business Registry, ASIC will remain the corporate regulator.

A member of the Stable Financial team will soon be in touch with all companies registered with Stable Financial to discuss the director ID registration process.  If you have any questions regarding your directorship or the director ID, please contact your Stable Financial team member.

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 6^th 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.

Expenditure measures

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.

Summary

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.

Background

The key features of JobKeeper 2.0 are:

1. 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;
2. employers are required to separately test their eligibility for each period based on an actual decline in turnover for a quarter; and
3. 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.

Eligible employers

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.

Eligible employees

Who is an eligible employee?

The eligibility rules require an individual to satisfy;

1. An employment test (full time, part-time or casual employee)
2. Age test (18 years or over, unless independent or not studying full-time)
3. 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.

Payment rates

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.

Wage condition

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:

1. employed (as a permanent or long-term casual) by the business;
2. 18 years or older (or if they were 16 or 17, they were independent or not studying full time on 1 July 2020); and
3. 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

https://www.legislation.gov.au/Details/F2020L01021

ATO – JobKeeper key dates

https://www.ato.gov.au/General/JobKeeper-Payment/JobKeeper-key-dates/

Financial support and information for business – effective 31st March 2020

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Like all our clients, families and friends, Stable Financial is closely monitoring the latest developments in relation to Coronavirus (COVID– 19).

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