Posts Categorized: COVID-19 strategies
As we all may now know, a small business can access JobKeeper reimbursements from when turnover fall by 30%. Treasury surprisingly proposed that turnover be defined as being GST turnover.
That’s when the confusion started!
All the big accounting firms and research houses were adamant from the start that a small business could assess a fall in turnover on either an accrual basis (when an invoice is raised) or cash basis (when money is received) where a small business reports GST on a cash basis.
The ATO appeared to agree with this. Then they reversed their position by saying that turnover had to be assessed on the basis of the GST registration. This meant cash for the majority of small businesses.
A cynic would say this was done to reduce the number of firms that could receive JobKeeper.
How would that be?
Well cash is a lagging indicator. A very convenient way to ignore reality – reality being that the true measure of a downturn and when it happens is when the value of invoices raised fall.
Thankfully reality has been recognised. Last Monday the ATO officially stated that a small business that reports income on an accruals basis (as in the accounting software and Tax Return reports income when an invoice is raised) could identify a fall of more than 30% in turnover on either a cash or accrual basis. Yes, you get to pick the best result.
We have since re-visited our clients’ positions.
Please contact us if you would like help assessing whether your turnover has fallen enough for you to know qualify. We have read the ATO’s companion paper and are across all other considerations. We welcome your call.
Today we have the distraction of ATO systems crashing and not being able to complete the JobKeeper enrolment process. That said, we are however pleased to report that some of our clients have today received the JobKeeper payments for the first two fortnights.
Being a reimbursement process, many businesses will be using that to fund the balance of the JobKeeper fortnight ending Sunday, particularly those that have casuals earning less than $1,500pf.
And whilst on the matter of Sunday, please ensure you have topped up employees’ pays where their gross is under $1,500. Our clients will know this given the educational program we have delivered. If we are not your accountant, then we suggest it is time you were.
Tax agents around the country currently can’t log into the Tax Agent Portal to attend to the next stage of JobKeeper reporting.
Once again ATO systems fail to handle the workload they created! Blind Freddie should have seen and PREPARED for all agents to pretty much be logged on at once. And who suffers – all those business owners waiting for the monetary lifeline!
It appears the ATO hasn’t appreciated in any way the rules, systems and requirements that they have put in place.
Take for example the enrolment process. Again even Blind Freddie could have foreseen that:-
Many would presume that registering their interest was actually enrolment.
Seven, yes only 7 days from Monday 20th to Sunday 26th April was never going to be enough time for everyone to enrol. And even then it took them 5 days to work out the process needed to be extended to 5 weeks.
It reminds me of the ATO’s 5 in 5 service when GST was introduced. They promised to reply to any question within 5 days. 5 weeks was quickly the norm; then followed in time by being lucky if ever got an response.
As it is their JobKeeper support is poor – to say the least. We have ATO staff simply hang up or refer us to a link (that didn’t answer the question) and then promptly hang up.
So we will just keep trying to log in and stay back as long as is necessary.
Why didn’t they just adopt the UK system which sounded much simpler and appears to have fewer anomalies?
There are a number of oddities about the JobKeeper system. Whilst designed to support businesses in stress retain their employees, it is a reimbursement system – it requires the employer to pay the employee first and then receive a reimbursement in the following month.
It particularly tough on those with a casual workforce where the average pay is under $1,500 per month. For a casual earning say $600pf, an employer must top it by $900 to $1,500 in order to qualify for a reimbursement. That is a very significant cash hit for a business that is already stressed! No wonder why so many businesses who registered interest haven’t enrolled into the system.
Following a fair amount of political pressure, the four major banks have been requested to provide bridging finance. They will not be giving money away; they will be assessing applications with a short term focus and presumably with some level of security.
As a side point, I have yet to hear of any business yet take out one of the government backed loans.
The four major banks (as well as the next tier of Westpac subsidiaries ) have set up dedicated JobKeeper support hotlines.
They can be contacted on the following numbers:-
CBA: 13 26 07
ANZ: 1800 571 123
NAB: 1800 JOBKEEPER
Westpac: 1300 731 073 and Westpac’s subsidiaries;
– St George: 1300 730 196
– Bank of Melbourne: 1300 784 873
– Bank SA: 1300 669 472
They will of course not consider a bridging application without:-
Confirmation of JobKeeper entitlement, and
At a minimum a detailed cash flow projection, but also expect to be asked for forecast Profit & Loss and Balance Sheet. That said, a business receiving JobKeeper will have to provide the ATO with projected turnover by the 7th day of every month.
Well, we have got through the enrolment process. What a wild ride that was! Whilst many fundamental questions remain unresolved, at least we have more clarity than we had last week.
So we just wanted to update you on upcoming key JobKeeper dates.
Before doing so, we remind you that enrolments only opened on Monday 20th April. And registration prior to that was only of interest in the scheme. If you have not enrolled since 20th April, then you will receive nothing until you do so.
We noted that only some 500,000 out of the 800,000+ businesses that registered their interest in applying for JobKeeper had since enrolled as of last night. In other words, one in every businesses has not enrolled.
Why such a disparity? We reckon there would be four reasons:-
Some don’t realise they still need to enrol.
Many have found out that one way or the other, they are precluded from qualifying.
They don’t qualify yet.
They have a casual workforce and have chosen not to enrol and find they don’t qualify but have topped up casuals’ pays to $1,500 for which they don’t get reimbursed.
So what are the upcoming key JobKeeper dates?
4th May – identify all eligible employees AND notified all eligible employees and update them on process.
8th May – topped up eligible employees to $1,500pf (has been extended).
31st May – enrol to be able to claim for April JobKeeper fortnights (has been extended form last Sunday).
We welcome any question you may have.
So past, current and future JobKeeper tasks can be summarised as follows:-
Determined your turnover in accordance with the modified GST turnover definition.
Assessed yourself against any 9 of the testing periods (or 18 depending on accounting and GST recognition methods).
Assessed against alternative tests when a new business or abnormal period(s).
If you don’t qualify now based off months, monitor when you may apply.
Prepared a full and proper forecast where claiming for June quarter.
Determined eligible employees.
Determined eligible business participant.
Enrolled for JobKeeper.
Pay each eligible employee $1,500 within each JobKeeper fortnight. There is an extension to 30th April for the two fortnights ending 27th April.
Notify each employee that they will receive JobKeeper.
Amend your payroll system.
Consider changing your payroll periods.
Continue to report required information to the ATO.
If I can leave you three thoughts they would be:-
Don’t proceed unless you are 100% certain as to what you are doing, AND
This has been formulated and introduced in a hurry so be up to date with all the changes and clarifications, AND
To quote Donald Rumsfeld, be very mindful that there may be unknown unknowns.
At Maggs Reid Stewart, we are always looking for ways to find customers for our clients. And here’s something of great interest to everyone (whether that be at home or for work) – SANITISER.
Not only can you easily buy something that we all need, but you will be supporting some fabulous causes.
Our client Geoff wishes to advise that:-
Barrs Lane Distillery, like most distilleries in Australia, has redirected their production to hand sanitiser during the COVID19 crisis. The Barrs Lane Distillery project is aimed at selling enough to cover costs and donating the rest to emergency service organisations and community care groups. To date, local police stations, neighbourhood houses, women’s domestic violence refuges, child care centres and outreach support services have received free hand sanitiser through this project.
The sanitiser is 70% ethanol, killing 99.99% of bacteria. It is a liquid, so it can be used as a hand rub and in a spray bottle as a surface spray.
And don’t forget to ask Geoff about his normal product – and one which we all love – gin!
The problem with the first stimulus package with its pay-as-you-go withholding relief (Cash Flow Boost) was that it excluded more than 75% of businesses in Australia.
This problem has been overcome with JobKeeper as it applies to not only employees, but business owners as well. JobKeeper allows a business participant, being either:-
a sole trader
a partner in a partnership
a beneficiary of trust, or
a director of the company
to be able to apply for the JobKeeper as well (subject to additional tests)
The form can be accessed or from the following link:-
You will note however that the form cannot be used by sole traders – sole traders have to register separately as per the shaded box in the top left-hand corner of the form.
We do not recommend filling this form or completing the enrolment process yourself without speaking to your accountant first as there are a number of traps and considerations which are not readily apparent. You also need to be aware that the whole regime is very fluid and far from finalised with some of the information from both the Tax Office and respected sources being incorrect or in dispute.
And please remember enrolments close on Sunday for the first two JobKeeper fortnight payments.
What to do about your Velocity points?
It’s a question many are asking!
Bianca Drieberg from MTA Travel (Mobile Travel Agents) has posted the following Facebook post as to how it stands now:-
Follow the page for latest updates or contact Bianca if you have questions – email@example.com
So we FINALLY have the JobKeeper Alternative Test!
About time! So many people who hanging in day by day so it’s quite unbelievable that it gets released only on the morning of Thursday 23rd April.
Finally new fledgling business can ascertain whether they will receive JobKeeper (either for employees or themselves as a business participant). Or not; in which case many can finally decide whether they should hibernate, contract or close down.
So finally in the short time left before the registration test can we have a full and proper discussion and analysis of clients with new businesses.
If you want to read it, here it is:-