2 May 2020
by David Prichard
- Related topics
- Corporate Tax & Regulatory
Late on Friday evening, the Federal Government released what is expected to be the final Legislative Instrument in relation to the JobKeeper stimulus package. The most significant amendment contained within the Legislative Instrument, relates to service entities, however, it also formalises several previously announced changes.
The Legislative Instrument aims to bring service entities within the scope of the JobKeeper stimulus package through a wider turnover test. Under the expanded test, the turnover for service entities includes the projected GST turnovers for each member of the respective group (ie the wider economic group’s performance is tested).
To be eligible for these widened criteria, the service entity’s operations must principally relate to the supply of labour. Additionally, the service entity must be inherently linked with the operating business entity by way of each entity belonging to one of the following:
- Tax consolidated group;
- Consolidatable group – generally 100% common ownership structures that could but haven’t formed a tax consolidated group; or
- GST group – this is broader than the above two options, however, there generally must be at least 90% common ownership between entities.
Where service entities qualify under this widened definition, the relevant turnover tests are altered so that the turnover is assessed on a grouped level, rather than the Basic Test which assesses an individual entity.
If a service entity is already eligible through other testing mechanisms, this does not replace these previous tests. It is intended to widen the availability of the JobKeeper scheme where employees are kept separate to the business structure.
Unfortunately, these widened rules do not cover all types and forms of service entity arrangements. Where staff are employed through a service entity, we recommend a detail review of their current structure and eligibility be undertaken to assess if these widened rules may apply.
One in All In
An amendment has been made to require employers participating in the JobKeeper Stimulus Package to provide all relevant employees with a notification, this allows the employee an opportunity to elect in. This change legislates the ”One in, All in” ethos that was announced but otherwise missing from the rules. There is an exception for ACNC registered charities that have elected to exclude government revenue (refer below).
The notification is required to be provided to employees by the earlier of seven days of the Legislative Instrument being enacted or registration for the scheme.
16 and 17 year old’s
The requirements for 16 and 17 year old’s have been prospectively amended such that they are only eligible if, in addition to the general requirements, on 1 March 2020 they:
- Met the definition of being independent under the Social Security Act 1991; or
- Were not studying full-time as defined in the Social Security Act 1999.
Where these employees were “topped up” for JobKeeper purposes in the first two fortnights, employers will not be required to claw this amount back. That is, this test will apply prospectively. Accordingly, employers with employees in this age group should review their eligibility.
The decline in turnover test has been modified to ensure that ACNC-registered charities can exclude government revenue. This is where the revenue is received in consideration for a supply provided to certain government entities or the United Nations. Importantly, the charity must irrevocably elect for this modified GST turnover rule to apply. The ACNC-registered charity must notify the Commissioner of Taxation by the earlier of 7 days of the Legislative Instrument being enacted or registration for the scheme.
Not for Profits
The range of Not for Profit entities that can access the JobKeeper package has been expanded to broadly apply to public funds that are declared to be developing country relief funds and developing country disaster relief funds.
There are also changes to how the rules apply to Universities.
We are here to help our clients through this challenging COVID-19 era. As such, if you have any questions regarding the changes noted above or the JobKeeper Stimulus Package in general, or any Federal or State stimulus packages, please contact your ESV Engagement Partner.