In response to the continuing economic effects from the COVID-19 pandemic, the Government announced on 21 July 2020 that the JobKeeper program will be extended to 28 March 2021. Further changes were announced on 7 August 2020.
The combined effect of the extension to JobKeeper and the recent economic deterioration in Victoria bring the total estimate of the cost of the JobKeeper program to $101.3 billion.
Under the current JobKeeper legislation, the Government is unable to make JobKeeper payments beyond 31 December 2020 (the Treasurer’s legislative instrument set an original end date for the JobKeeper program of 27 September 2020).
The Coronavirus Economic Response Package (Jobkeeper Payments) Amendment Bill 2020 (‘the Bill’) was introduced into Parliament on 26 August 2020. The Bill proposes to extend the JobKeeper program and allow the Government to make JobKeeper payments until 28 March 2021.
Detailed rules setting out the new reduced two-tiered rates and the modified decline in turnover test will supplement the amending legislation. These will be contained in a separate legislative instrument to be issued by the Treasurer.
Further details will be available once the legislative instrument is released and updated ATO guidance is published.
The Bill was before the House of Representatives at the time of writing this article.
Changes to the Fair Work Act
In separate legislation enacted on 9 April 2020, the Coronavirus Economic Response Package Omnibus (Measures No. 2) Act 2020 contained amendments which inserted Part 6-4C into the Fair Work Act 2009 (FWA). These measures temporarily allow employers to vary the working arrangements (by way of JobKeeper enabling directions or agreements under Part 6-4C) of employees for whom the employer is receiving JobKeeper payments. In the absence of these amendments, the more rigid terms and conditions under awards and enterprise agreements would apply.
The measures in Part 6-4C are time limited and were originally set to be repealed on 28 September 2020, the day after the JobKeeper program was originally due to end. To support the extension to JobKeeper, the Bill proposes to extend the temporary measures in Part 6-4C — albeit in a modified way — until 29 March 2021, the day after the extended JobKeeper program is now due to end.
Access to the temporary measures in Part 6-4C will depend on whether the employer is a qualifying employer or a legacy employer.
Employers who continue to be eligible for JobKeeper after 28 September 2020 are termed ‘qualifying employers’. These employers will retain access to the full range of flexibility measures in Part 6-4C until 29 March 2021, with the exception of the annual leave provisions which are being repealed on 28 September 2020.
The annual leave provisions enables employers and employees to make agreements for increased flexibility around annual leave arrangements. More particularly, the provisions govern how an employee (whose employer qualifies for the JobKeeper payment scheme in relation to them) considers their employer’s request to take paid annual leave and to agree (despite any designated employment provision) to take annual leave at half pay.
Employers who have received one or more JobKeeper payments between 30 March 2020 and 27 September 2020, who no longer qualify for JobKeeper payments after 27 September 2020, are termed ‘legacy employers’.
A legacy employer who has a certificate stating that they have suffered at least 10% decline in turnover (DIT) will have access to modified flexibility measures in Part 6-4C from 28 September 2020 until 29 March 2021.
For a JobKeeper direction given:
- before 28 October 2020 — the employer must satisfy the 10% DIT test for the June 2020 quarter;
- between 28 October 2020 and 27 February 2021 — the employer must satisfy the 10% DIT test for the September 2020 quarter;
- on or after 28 February 2021 — the employer must satisfy the 10% DIT test for the December 2020 quarter.
These dates align with the quarterly BAS lodgment dates rather than the JobKeeper DIT test rules because legacy employers are no longer participating in JobKeeper so those dates are not relevant to them. The use of the BAS lodgment dates is designed to minimise the regulatory burden on businesses that are still in financial distress.
To illustrate the operation of this, if a legacy employer sought to access the temporary FWA measures in November 2020, they would have had to suffer at least a 10% decline in their GST turnover in the September 2020 quarter compared to the September 2019 quarter.
There will be two groups of legacy employers:
- the first group will be those employers exiting JobKeeper on 28 September 2020 because they no longer meet the new DIT test for the September quarter under JobKeeper 2.1; and
- the second group will be those employers exiting JobKeeper on 4 January 2021 because they no longer meet the new DIT test for the December quarter under JobKeeper 2.1.
Issues with calculating the decline in turnover
Proposed new s 789GCB of the FWA sets out the requirements of the 10% DIT test.
In determining whether a legacy employer satisfies the DIT test for FWA purposes:
- the turnover test period is assumed to be the June, September or December 2020 quarter instead of the period determined under the JobKeeper rules;
- current GST turnover is used rather than projected GST turnover — this will result in the proceeds from sales of capital assets being included in the turnover calculation;
- the specified percentage is 10% rather than 30% or 50% which apply for JobKeeper purposes;
- the JobKeeper alternative DIT tests can be used in calculating the decline;
- it is unclear whether the alternative methods of calculating GST turnover set out in LCR 2020/1 will continue to be available under JobKeeper 2.1 and for the purposes of applying the 10% DIT test.
It is possible that there could be two sets of rules to calculate GST turnover: one for JobKeeper for qualifying employers and one for the FWA for legacy employers. This would likely cause confusion for employers and accountants and lead to inadvertent errors.
A legacy employer will have access to modified flexibility measures in Part 6-4C after exiting JobKeeper until 29 March 2021, provided they have a certificate stating that they have suffered at least a 10% DIT in the designated quarters.
The certificate must be issued by an eligible financial service provider, defined to mean:
- a registered company auditor or qualified accountant under the Corporations Act 2001;
- a registered tax agent, BAS agent or tax (financial adviser) under the Tax Agent Services Act 2001.
The meaning of an eligible financial service provider does not include a lawyer.
The written certificate must relate to a specified employer and state that:
In the opinion of the eligible financial service provider, the employer satisfied the 10% decline in turnover test for the designated quarter applicable to a specified time.
A certificate cannot be issued by an eligible financial service provider if they are:
- a director or employee of the employer;
- an associated entity1 of the employer; or
- a director or employee of an associated entity
This ensures that the certificate can only be issued by someone who is independent of and external to the employer.
There is no prescribed form for the certificate.
Exception for small business employers
There is an exception for small business employers (fewer than 15 employees2) who are not required to obtain a 10% DIT certificate from an eligible financial service provider.
As an alternative, small business employers may choose to make a statutory declaration to the effect that the employer satisfies the 10% DIT test for the designated quarter applicable to a specified time. If a small business employer makes such a statutory declaration, it is taken to be a 10% DIT certificate.
Small business employers may choose to obtain a certificate from an eligible financial service provider rather than making a statutory declaration.
A small business employer who chooses to make a statutory declaration should use the Commonwealth statutory declaration form (available from the Attorney-General’s Department website).
Impact of these changes on the accounting profession
Employers exiting from JobKeeper will need to undertake extensive calculations to determine whether they qualify as a legacy employer. The requirement for legacy employers to obtain a certificate from an eligible financial service provider (unless they are a small employer and choose to make a statutory declaration) will place a significant burden on accounting practitioners.
They will need to undertake this work in addition to the significant work arising from the changes under JobKeeper 2.1, on top of their usual workloads. Accountants have been working, and continue to work, extremely hard to assist their clients to determine whether they are eligible for JobKeeper, and assisting with their clients’ enrolment and reporting obligations if they are eligible. These proposed changes will necessitate them now also having to undertake similar calculations for their clients who exit JobKeeper to determine whether they qualify as a legacy employer.
Who will pay for this work to be undertaken? It is unlikely that employers exiting JobKeeper will see the value in paying their accountants to undertake this work.
Further, there is a risk that this work won’t be done (because accountants may not have the capacity to do the work or employers refuse to pay for it). Accordingly, while some employers may be eligible to be legacy employers, they may decide not to take advantage of this concession. There is also a risk of self-assessment where employers decide to undertake the calculations themselves instead of seeking advice from an accountant. This may lead to erroneous data unwittingly being relied upon by accountants to issue certificates, and a risk of mis-steps by small business employers.
Determining whether an employer satisfies the DIT test involves complex and detailed calculations which require a thorough understanding of the operation of provisions in the GST Act (and currently, under JobKeeper 1.0, associated ATO guidance such as LCR 2020/1). While registered tax agents are familiar with these provisions and guidance, and are authorised to give advice on these matters, registered company auditors, BAS agents and tax (financial) advisers may be less familiar with the relevant provisions in the tax law and associated ATO guidance. Would this latter group of practitioners be operating within the Tax Agent Services Act 2009?
Finally, given the 10% DIT certificate is issued under proposed new s 789GCD of the FWA, accountants will be required to operate under the FWA. This is an area of legislation that most accountants would be unfamiliar with and not qualified to provide advice on.
This raises the following questions:
- What is the risk for accountants who will be required to operate under the FWA?
- What defences are available to them where they get it wrong notwithstanding that they have applied reasonable care and diligence?
- To what extent will accountants be exposed to liability where they have, in good faith, relied upon information provided by their client?
Update on 1 September 2020
On 1 September 2020, the Government amended the Bill in the Senate to make the following changes:
- Remove ‘registered company auditor’ and ‘tax (financial) adviser’ from the list of eligible financial service providers. This means that only registered tax agents, registered BAS agents and qualified accountants will be able to issue the 10% DIT certificates.
- Replace the requirement that the certificate state “in the opinion of the eligible financial service provider …” with “confirms that”. This makes it clear that the issuing of the certificate involves a declaration from an eligible financial service provider that relates to a specific employer and confirms that the employer satisfied the 10% DIT test for the designated quarter applicable to a specified time. This requires the eligible financial service provider to confirm that the test has been met based on the information provided, and does not constitute an audit or assurance engagement.
These changes were agreed to by the House of Representatives on 1 September, so the Bill has been passed by the Parliament. The Bill now awaits Royal Assent.
1 ‘Associated entity’ has the meaning given by s 50AAA of the Corporations Act 2001.
2 Defined in s 23 of the FWA.