Many in the automotive industry have put their hand up to claim eligibility for the Federal Government’s ‘JobKeeper’ program and received support payments for eligible employees and eligible business participants. With the ATO ramping up JobKeeper review activity, and JobKeeper phasing into ‘JobKeeper 2.0’, it is an important time for businesses to review their JobKeeper position.
ATO review activity
The ATO have been gearing up for JobKeeper reviews for some time now, with a number of JobKeeper reviews already starting to be seen in the motor vehicle industry.
These reviews have initially focused on circumstances where figures reported on Business Activity Statements (BAS) are not consistent with what the ATO would expect for a business that has claimed JobKeeper (e.g. reported sales have not decreased to the extent expected, generally 30% or greater).
Whilst BAS figures are a logical starting point, it is noted that this approach is reflective of certain limitations in information available to the ATO. There are various reasons why BAS figures may not appear consistent with the decline in turnover required for JobKeeper eligibility though despite this the business is eligible for JobKeeper.
There may also be circumstances where BAS figures suggest a business has experienced the required decline in turnover, though the JobKeeper eligibility requirements are not met. Accordingly, we expect the ATO to expand the circumstances in which it conducts JobKeeper reviews.
In this context, it is important for all businesses claiming JobKeeper to ensure they have information on hand to support their entitlement
What information should businesses have on hand in anticipation of an ATO review?
We have set out below some of the information that should be held:
- Decline in turnover calculations, including details of the test period selected, calculation performed, and method adopted to allocate supplies to the comparison and test periods.
- If tests other than the ‘basic’ test were applied, support for why the relevant test was selected (e.g. ‘modified basic’ test for group employer entities or ‘alternative’ tests).
- Evidence of meeting JobKeeper administrative requirements, including nomination notices completed by employees, evidence of notifying employees of enrolment for JobKeeper purposes and evidence of notifying employees of identifying them to the ATO for JobKeeper purposes.
The ATO expects this information to be on hand and readily accessible by businesses. Accordingly, when conducting JobKeeper compliance reviews the ATO requests businesses provide this information within short timeframes (generally 1 week).
Potential areas of focus for the industry
JobKeeper started with a simple policy objective. However, the rules in implementing JobKeeper have become complicated.
Potential areas of complexity to consider in advance of any ATO review, include:
- Allocation of supplies to relevant periods – the ATO has released a ruling which allows taxpayers some flexibility to choose from different approaches for allocating supplies to relevant periods for comparison purposes. Whilst GST attribution is broadly one permitted approach, this does not necessarily mean that businesses can compare figures from BASs. There may be amounts included or excluded from BAS figures that should or should not be included in JobKeeper decline in turnover testing calculations.
- Manufacturer incentives/support payments – incentives and support payments received by Dealers that do not represent consideration for the supply of a car (or any other supply) made by Dealers (e.g. holdback, retail target incentives, wholesale target incentives etc.) may not count towards current or projected GST turnover as relevant for JobKeeper decline in turnover testing purposes. However, other incentives and support payments may count (e.g. fleet rebates and run-out model support payments).
- Capital assets – the sale of a capital asset should not count towards a Dealer’s projected GST turnover as relevant for JobKeeper decline in turnover testing purposes (though may count towards current GST turnover).
At the time of writing this article the Department of Treasury is yet to release the rules for the recently announced JobKeeper 2.0, which broadly covers the period from 28 September 2020 to 28 March 2021. Accordingly, much of the finer detail regarding JobKeeper 2.0 is not yet known with certainty. However, from the Federal Government’s announcement regarding the extension of JobKeeper there are a few key points to note:
- JobKeeper 2.0 will have two phases. Phase 1 from 28 September to 3 January 2021 and phase 2 from 4 January 2021 to 28 March 2021.
- Businesses will be required to reassess eligibility for each phase, meaning businesses that have been eligible for JobKeeper to date may no longer be eligible. The approach for testing eligibility may also differ to that which has been applied to date.
- JobKeeper payment amounts will differ for each phase and within each phase there will be two-tiers of payment broadly based on the average number of hours worked per week by eligible employees within defined reference periods.
The release of the JobKeeper 2.0 rules is imminent. Businesses should keep an eye out for these rules and consider their application.
Businesses that were eligible for JobKeeper but not eligible for JobKeeper 2.0 may still be able to give directions to employees as contemplated by COVID-19 related modifications to Fair Work Act 2009 (Cth) if broadly their turnover has declined by 10% or more, and they hold a ‘10% decline in turnover certificate’. Contact your tax adviser if one of these certificates is required.
In summary, there have been a number of updates and changes to JobKeeper and other government support programs for businesses to keep abreast of in recent months. Businesses should be prepared to demonstrate they have complied with relevant requirements and consider the implications of further changes over the coming months.
This article was written by André Spnovic, Partner, Indirect Tax, Deloitte Tax Services Pty Ltd, and Andrew Cheney, Manager, Indirect Tax, Deloitte Tax Services Pty Ltd.