NSW 2021 COVID-19 JobSaver – A moving feast

The High Level Summary

The good news is as follows:

• Payments of 40% of weekly payroll for employees who usually worked or were based in NSW can be claimed by businesses that have suffered a decline in turnover of 30% or more.
• Payments will range from $1,500 to $100,000 per week and will be paid fortnightly.
• Businesses located anywhere in NSW can claim, and
• Businesses can also claim the NSW Business Grant which reimburses expenses incurred during the period from 1 June to 17 July 2021. Applications for the Business Grant must be lodged by 13 September 2021.

The two critical qualification tests that most businesses will need to focus on, are:

• Can they meet the Required Decline in Turnover of 30% or more due to Public Health restrictions, and
• Can they maintain their Employee Headcount as at 13 July 2021, or as at the start of the fortnight in which the business first experienced the Required Decline in Turnover, for as long as they continue to receive JobSaver payments. 

Each of the critical tests is discussed in detail below.

Qualification – the business entity itself

Business employers such as operating businesses and not-for-profit organisations can claim. Major banks, certain tertiary education institutions, insolvent businesses, bankrupt individuals, government agencies and entities primarily earning passive income such as rents, interest and dividends cannot claim. It is not known at this stage whether entities genuinely carrying on independent, viable trading enterprises with employees are still eligible to claim even if the passive income they derive amounts to more than 50% of total income.

A business entity can claim if it has the following features:

• An ABN registered in New South Wales, or it can demonstrate it was physically located and operating in New South Wales, as at 1 June 2021, and
• An Aggregated Annual Turnover (based on the ATO’s income assessment concept) of between $75,000 and $250 million for the year ended 30 June 2020. Aggregated Annual Turnover means includes the annual turnover of entities (including foreign entities) that are connected with or affiliates of the business entity.

New Claim Category – Tourism, Hospitality & Recreation sectors

Businesses in the hospitality, tourism and recreation industries with an Aggregated Annual Turnover of more than $250 million and up to $1 billion may be eligible for support under the JobSaver Extension scheme. The listed industries include accommodation, cafes & restaurants, pubs & clubs, transport & travel, cinema & the arts, sport, gambling and racing.

Eligible businesses will receive the equivalent to 40% of Weekly Payroll for work performed in New South Wales up to a maximum weekly payment of:

• $300,000 per week for businesses with an aggregated annual turnover of more than $250 million and up to $500 million, provided they experienced a JobSaver Extension Required Decline in turnover of at least 50%, and
• $500,000 per week for businesses with an aggregated annual turnover of more than $500 million and up to $1 billion, provided they experienced a JobSaver Extension Required Decline in turnover decline of at least 70%.

The weekly payment cap will be applied at the Corporate group level.

The Decline in Turnover Test

The Required Decline in Turnover of 30% or more must be due to the NSW Public Health Movement and Gathering Restrictions. Certain businesses can prove that easily as they fall within a Highly Impacted Industry as listed in the Terms & Conditions (JobSaver T&Cs). Other businesses will need to be able to demonstrate, when their claim is reviewed, that their 30% turnover decline has been caused by the movement and gathering restrictions in NSW. 

The NSW Government has provided minimal guidelines regarding when the claimed fall in turnover will be accepted as due to the restrictions. There has been no comment discerning when a fall in turnover is due to the restrictions in NSW versus those in other states or due to the incidence of COVID-19 in other countries, for example. It appears, with the exception of turnover declines caused by structural changes, acquisitions and divestments, that the precise and main cause of claimant’s turnover decline is not currently an area of close scrutiny.

Turnover is as measured for GST purposes which excludes, among other things, the sale of capital assets. It will be measured usingthe accounting basis that is adopted for the BAS, being either accruals or cash. It is important to note that it is not restricted to income derived in NSW. 

The turnover decline will be measured by comparing the turnover, during a minimum two-week period that commences on or after 26 June 2021, to the turnover during:

• The same period in 2019, or
• The same period in 2020, or
• The two week period immediately before the lockdown commenced (12-25 June 2021).

Maintenance of the Employee Headcount

The business will be required to maintain its Employee Headcount for as long as it continues to receive JobSaver payments.  The headcount is the total number of persons:

• Employed in New South Wales, and
• Who are permanent (full time or part time), or
• Casual staff who have been employed by the business for more than 12 months, as at 13 July 2021, or as at the start of the fortnight in which it first experienced the Required Decline in Turnover.

A business will maintain its Employee Headcount provided the end of an employment relationship with an employee is not due to its actions. An “employee” has the same meaning as its ordinary or common law meaning. Employees who have been stood down are still included in the headcount as long as their employment has not been terminated.  The headcount does not include independent contractors.  While still to be confirmed, it also does not appear to include an employee on an existing fixed-term contract that terminates during the period from 13 July 2021.

Cessations after 13 July 2021 resulting from circumstances outside the control of the business (such as voluntary resignations, retirement or death of an employee) will not be taken as a reduction in the Employee Headcount. The business will remain eligible for JobSaver even if it does not replace those employees.

All claiming businesses are required to notify Service NSW if, due to their actions, their Employee Headcount declines over the period that JobSaver payments are received. While it is still to be confirmed, it appears that JobSaver payments received by a business for the period until immediately before the Employee Headcount declines will not be clawed back by Service NSW if the business fulfils the notification process above.

Applying for JobSaver

Service NSW has different application processes for various business segments. Each are discussed below.

Highly Impacted Industries applying for weekly payments of $10,000 or less

The JobSaver T&Cs conditions list more than 100 Highly Impacted Industries with their ANZSIC code. Typically, a business will have previously self-selected its most applicable ANZSIC code, for example, when it applied for its ABN. The Highly Impacted Industries include most retailing and various food services, accommodation, entertainment, arts, health, and personal services businesses.

A business in a Highly Impacted Industry applying for weekly payments of $10,000 or less is not required to provide evidence of its decline in turnover at the time of claiming. Rather, the business is required to:

• Declare it has experienced the Required Decline in Turnover.
• Submit an Australian Income Tax Return or other documentation to demonstrate that the business had an Aggregated Annual Turnover of between $75,000 and $250 million for the year ended 30 June 2020.
• If it does not have employees, declare the business is the primary income source for the owner of the business
• If it has employees, make declarations of the following:
  • Its Employee Headcount
  • That it will maintain that headcount for the period that JobSaver payments are being received, and
  • That it will notify Service NSW if there is any reduction in Employee Headcount during the period due to its actions. 
• Provide details of its qualified accountant, registered tax agent or a registered BAS agent for Possible compliance checking.
• Provide evidence of Weekly Payroll being its most recent BAS/IAS within the 2020/21 financial year that was lodged prior to 26 June 2021 with a W1 amount reported (refer Calculating the JobSaver Payment below),and
• Lodge other supporting document after the claim if required by Revenue NSW.

Highly Impacted Industries claiming more than $10,000 weekly and all other applicants

A business in a Highly Impacted Industry that is applying for JobSaver payments of more than $10,000 per week and an applicant in any other industry is required to:

• Submit an Australian Income Tax Return or other documentation to demonstrate that the business had an Aggregated Annual Turnover of between $75,000 and $250 million for the year ended 30 June 2020.
• If it does not have employees, declare the business is the primary income source for the owner of the business.
• If it has employees, make declarations of the following:
  • Its Employee Headcount
  • That it will maintain that headcount for the period that JobSaver payments are being received, and 
  • That it will notify Service NSW if there is any reduction in Employee Headcount during the period due to its actions. 
• Submit a letter from its qualified accountant, registered tax agent or a registered BAS agent that it experienced the Required Decline in Turnover over the relevant period.  Note that there have been instances where a Practitioner’s signature on that letter via AdobeSign or similar has not been accepted,
• Provide evidence of Weekly Payroll being its most recent BAS/IAS lodged prior to 26 June 2021 with a W1 amount reported (refer Calculating the JobSaver Payment below), and
• Lodge other supporting document after the claim is lodged if required by Revenue NSW.

Applicants for JobSaver Extension Payments – Tourism, Hospitality & Recreation

A business in a JobSaver Extension Industry is required to:

• Submit evidence that it has experienced the JobSaver Extension Required Decline in Turnover as advised, which may include one or more of the following:
  • A letter from a Practitioner, who is familiar with the workings of the business attesting to the decline in turnover
  • BAS statements for the comparison periods, and
  • Monthly Balance Sheets and Profit and Loss Statements, or workpapers supporting GST turnover for eligible entities within a group.
• Declare its JobSaver Extension Employee Headcount.
• Declare that it will maintain their JobSaver Extension Employee Headcount for the period for which the business is receiving payments under the JobSaver Extension Program.  It is required to notify Service NSW if there is any reduction in Employee Headcount during that period, where the reduction is due to any actions of the business. Where the business is part of a group, the group will only need to maintain their JobSaver Extension Employee Headcount for the entities within the group receiving the JobSaver Extension payment.
• Submit an Australian Income Tax Return and available audited financial statements to demonstrate the business had an Aggregated Annual Turnover of more than $250 million and up to $1 billion for the year ended 30 June 2020 or, if it has a substituted accounting period, the Income Tax Return for the most recent financial year.
• Submit evidence of how weekly payroll was calculated and copies of the payroll report/s filed with the ATO using single touch payroll.
• Provide contact details of the business’s Chief Financial Officer or equivalent; and 
• Submit any other documents or information requested by Service NSW or  Revenue NSW.

Authorisation

Service NSW requires the person applying for JobSaver on behalf of a business to be authorised to do so, even if they are an employee of the business. It has a required authorisation template that is to be completed by either:

• A director of the business entity (as reported to ASIC), or
• An associate or point of contact for the business as listed within the ATO Portal for the relevant ABN. While it is still to be confirmed, this includes the tax agent who can authorise his/her staff to apply for and represent the named business.

Calculating the JobSaver Payment

At this stage the payments will be based on average Weekly Payroll as submitted in the application. The stipulated basis for calculating average Weekly Payroll is to:

• Refer to the W1 figure inthe most recent BAS/IAS for the 2021-21 financial year that was provided to the ATO before 26 June 2021.
• Ensure that W1 figure excludes superannuation contributions, amounts subject to salary sacrifice, interest or dividends.
• Deduct amounts of wages or salaries for workers who usually worked or were based outside of NSW.
• Deduct amounts that have been withheld on behalf of contractors under voluntary agreements, and
• Convert that to a weekly amount.

If a W1 figure is not reported in the BAS/IAS, the business will be required to lodge the following documents from which the average Weekly Payroll average is determined:

• For businesses that lodge a BAS without a W1 amount – its 2019-20 annual payroll tax reconciliation return and copies of payroll reports filed with the ATO under Single Touch Payroll (STP) for the periods April and May 2021, and
• For businesses that do not lodge a BAS - copies of payroll reports filed with the ATO under Single Touch Payroll (STP) for the periods April and May 2021.

Applicants declare their Weekly Payroll and are not required to calculate the JobSaver payment itself.

Non Employing Businesses

Non-employing businesses, such as non-employing sole traders, can apply for payments of $1,000 per week for the period from 18 July 2021 for the duration of the restrictions. They are subject to a series of other requirements including a declaration that the business is the primary income source for the owner and that they have not received the Commonwealth COVID-19 Disaster payment since 18 July 2021. Where an individual owns or operates more than one non-employing business, an application for payment can only be made for one non-employing business.

It appears, but is yet to be confirmed, that a non-employing business will not include a company whose sole employee is the owner of its shares. Provided the shareholder has a pre-existing employment contact enforceable under the Fair Work legislation, including receipt of payments for director services only, such a business should be able to claim a minimum of $1,500 per week.

Corporate or Family Groups

Subject to the turnover thresholds, there appears to be nothing to prevent applications being lodged by more than one entity in a corporate or family group provided all are Employing Businesses. It has been confirmed that where an entity is part of a GST Group, it will calculate its GST turnover as if it was not part of a Group. Supplies made by one group member to another will be included in the GST turnover for the Required Decline in Turnover test.

In a recent change, it has been clarified that JobSaver payments can be made to a Group Employing entity that has the principal function of supplying employee labour to other members of the Group. To demonstrate the Required Decline in Turnover, the Group Employer is required to provide evidence of the sum of the current GST turnovers of the group members to which it supplied employee labour services during the period within the period of restrictions and the relevant comparison period. Where the annual turnover of non-employing businesses is required to be aggregated with employing business(es) for the purpose of calculating Aggregated Annual Turnover, the non-employing businesses are ineligible to apply.

There are only a narrow set of corporate and family group structures where the JobSaver payment equal to 40% of Weekly Payroll can be claimed for the Employing Business and a $1,000 a week JobSaver payment can be claimed by one non-employing entity.

Alternative Circumstances

Businesses that were not operating at critical dates, whose comparative turnover was not representative of their usual or average turnover, who otherwise do not meet the eligibility criteria or who cannot providedprovide the specified supporting evidence are not automatically precluded from receiving JobSaver payments. They should contact Service NSW to discuss alternative means of satisfying eligibility and the evidentiary conditions. It is unlikely that general economic downturn, hardship or fairness will be accepted as reasons for eligibility for those who do not meet the prescribed conditions. Reaching a decision maker at Service NSW is very difficult at the moment. Businesses may need to consider lodging a detailed explanation of their special circumstances with their application rather than attempting to contact and to achieve resolution from Service NSW before applying.

Expenses claimable under JobSaver

The Terms and Conditions indicate that the JobSaver payment is a reimbursement of Eligible Expenses incurred from 26 June 2021 that enable the employer to maintain its NSW Employee Headcount including, but not limited to, the following:

• Business operating expenses, such as salary and wages, utilities and rent;
• Financial, legal or other advice;
• Marketing and communications;
• The cost of perishable goods that can no longer be used; and
• Other business costs necessary for business survival and employee retention.

However, the payment will not reimburse costs incurred from 26 June to 17 July 2021 for which the business applied any NSW Business Grant that it received. Businesses that claim both Business Grant and JobSaver will, if their JobSaver payments are audited, be required to substantiate their claims from other expenses incurred.

The typical basis of calculation of JobSaver payments, being 40% of Weekly Payroll, appears generous for many scenarios.  For example, a business may be able to receive JobSaver payments based on the Weekly Payroll calculated for May 2021 even though it had no payroll in July and August because it has shut its doors and all employees had been stood down.  Such a business should expect that Services NSW will require them to substantiate non-payroll expenses incurred that at least equal the amount of JobSaver payments received. Otherwise, it is not known how Service NSW will address businesses whose actual payroll during the period of health restrictions is significantly less than the Weekly Payroll submitted with the application. 

Evidence of the incurred expenses does need to be submitted at the time of claiming but may be required by Revenue NSW when it reviews the claim. Inconsistent messages are coming from Service NSW regarding whether it will require substantiation of actual expenses incurred by recipients of the lower amounts of JobSaver payments.

Claim Deadline

Claims must be made before 11:59PM on 18 October 2021. 

Income Tax

The JobSaver payments received from the NSW Government are exempt from income tax.

What to do Next

Mazars has summarised all the relevant current conditions for qualification for JobSaver, but the scheme has changed and may change further as the NSW Government addresses the recent COVID-19 outbreak.  For businesses that wish to claim themselves, the links to the Service NSW website are:

Guidelines

Terms & Conditions

Mazars can advise you on qualification and your entitlements in your business circumstances. We can assist you to assemble the supporting evidence including preparing the Independent Practitioner letter where required.

Should you have any questions, please contact your usual Mazars advisor, the author, or if you require assistance with claims or want to know more, please contact your local office below.

Author: Stephen Baxter