Business Update: ATO Rulings on Cash Flow Boost and JobKeeper subsidies
Prepared by Anna Bullimore
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The ATO has released formal rulings on the Cash Flow Boost and JobKeeper subsidies that will be applied when making decisions.
Commissioner’s discretion to allow further time for an entity to register for an ABN or provide notice to the Commissioner of assessable income or supplies: PS LA 2020/1
The Cash Flow Boost and JobKeeper subsidies for Business participants currently requires the following:
- Business to have held an ABN on or before 12 March 2020
- Entities are required to have notified the Commissioner by 12 March 2020 of either:
- Assessable income derived in the 2018-19 income year (by lodgement of tax return);or
- Provide notice they have made a taxable supply in a tax period starting on or after 1 July 2018 ending before 12 March 2020, usually by a BAS
(or a longer time allowed by the Commissioner)
These eligibility requirements were included to prevent new entities from being established, or inactive entities being revived, solely to obtain the benefits provided under either measure.
However, this also meant that some entities which were operation over the relevant period were ineligible for the payment businesses who lodge through a tax. As such the Commissioner is allowed to provide additional time for an entity to provide evidence they have made a supply in the relevant period. PSLA 2020/1 sets out guidance to ATO staff in relation to exercising this discretion to allow extra time.
Discretion to grant extra time
Further time to hold an ABN after 12 March 2020
- Key relevant consideration will be evidence that the relevant entity was conducting an active business on 12 March 2020, and was entitled to hold an ABN but did not obtain one because the adverse requirements of not holding an ABN (such as no-ABN withholding) would not apply to the entity
- It is expected that further time will only be granted in limited circumstances where to do so would be consistent with the policy intent.
Further time to give notice that an amount should be included in assessable income, or that the entity had made the taxable supply
Commissioner will likely grant further time where:
- Entity has a pre-existing lodgement deferral in place, such as through the tax agent lodgement program or the deferrals for taxpayers affected by the recent bushfires, or
- they are a new business established from 1 July 2019 that is not registered or required to be registered for GST, but have made supplies during a period ending between the 1 July 2019 to 12 March 2020 period, or
- there were exceptional and unforeseen circumstances; such as the loss of a significant amount of records due to the recent bushfires.
Additional supporting information may be requested depending on the entity such as tax invoices, business contracts and bank statements.
JobKeeper payment – decline in turnover test: LCR 2020/1
This ruling is intended to assist in working out turnover as required under the turnover test. It appears that taxpayers can either use a legislatively accurate approach – timing and amount of a supply- or the ATO compliance approach – alternative methods to working out when a supply is made.
To assist you in working out if you have met the decline in turnover test this Ruling covers the following:
- Step A – what supplies are relevant when calculating projected GST turnover and current GST turnover
- Step B – how you allocate supplies to relevant periods
- Step C – how you determine the value of each supply that has been allocated to a relevant period, and
- the ATO compliance approach, which effectively allow you to work out Step B and Step C at the same time.
ATO compliance approach
Due to practical difficulties of determining when a supply is made, the Commissioner will allow you to use alternative methods to allocate supplies to a relevant period and determine the value of those supplies under the ATO compliance approach These alternative methods are:
- accrual accounting
- GST attribution basis
- income tax accounting – if you are not registered for GST.
Schemes in relation to the JobKeeper payment: PCG 2020/4
This guideline provides guidance on how the ATO will apply their compliance resources to schemes.
The Commissioner will be concerned with an entity that accesses or increases JobKeeper payment entitlements:
- where the entity’s business is not significantly affected by external environmental factors beyond its control, and/or
- in excess of those that would maintain pre-existing employment relationships.
However, the Commissioner will generally not apply compliance resources if:
- the external operating environment is affected by factors beyond the control of the entity (and its related parties), and
- that affected external operating environment significantly impacts the business of the entity or another entity the entity’s employees serve in, and
- the entity enters into the scheme in response to that impact and satisfies the decline in turnover test, and
- the JobKeeper payment the entity receives is for individuals who were employed by the entity and serving in the significantly impacted business prior to that time and who remain employed as a result of that JobKeeper payment.
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