Simeoni News Update: Important: Service entities and other changes05th May 2020
Late on Friday, the updated JobKeeper rules were released, including the modified decline in turnover test for service entities. Some of the key developments are discussed briefly below:
Service entity rules
As previously announced by the Treasurer, the modified test applies where a special purpose entity employs staff rather than staff being directly employed by the operating entity, and the employment entity cannot past the basic test in its own right. The modified test allows you to take the turnover of the operating entities in the group into account rather than looking at the turnover of the service entity.
However, the modified test only applies where the entity is a member of a GST group or a consolidated or consolidatable group for income tax purposes. Unfortunately this means that some service entities may not have access to these new rules because of the way the group is structured.
We’ve added an explainer on the alternative decline in turnover tests on the Simeoni website.
Alternative tests – substantial increase in turnover
The ATO issued some additional guidance on the alternative decline in turnover tests over the weekend, including an explanation of how to determine whether an entity has had an increase in turnover of 50%, 25% or 12.5% in the 12, 6 or 3 months prior to the test period. Basically, you compare the turnover of the month prior to the start of the turnover test period with the turnover for the month immediately before the start of the 12, 6 or 3 month period. For example, if you are testing a decline in turnover for the month of April 2020, if the current GST turnover for the month of March 2020 was at least 25% more than the current GST turnover for the month of September 2019 then the entity is able to apply the substantial increase in turnover test.
New rules for 16 and 17 year olds
The updated rules prevent someone who was 16 or 17 years of age on 1 March 2020 from being eligible for JobKeeper unless they were financially independent or was not undertaking full-time study. Social security law concepts are used for this purpose. It seems like an individual who is not able to meet these conditions at 1 March 2020 is excluded from JobKeeper completely.
‘One in, all in’ principle
New rules ensure that an entity that elects to participate in the JobKeeper scheme for one or more employees must give written notice of this decision to all relevant employees. This normally needs to be done within 7 days of enrolling for JobKeeper and must explain to employees what they need to do in order to be nominated by the entity for JobKeeper.
Paul Simeoni & Team