A LIFE JACKET RIDDLED IN RED TAPE
Amie Crichton, Joshua Carton & Zara Coorey
In response to the latest COVID-19 outbreak, which saw Greater Sydney go into lockdown on 26 June 2021, the NSW Government announced a new set of COVID-19 grants to support adversely affected businesses, sole traders, and not-for-profit organisations. The NSW Government continues to publish updated and evolving eligibility criteria for the grants via Service NSW, including as recently as yesterday, 11 August 2021. Whilst this may permit greater access to the financial lifelines, the shifting goal posts have left many businesses and tax professionals confused about how to tackle the bureaucratic red tape (and three iterations of this article!).
HOW MUCH CASH IS ON OFFER?
Businesses adversely impacted by COVID-19 lockdowns can access, subject to separate eligibility criteria, the following support packages implemented and administered by Service NSW (current on the Service NSW website as at the time of publication):
- COVID-19 Business Grant – A one-off payment of between $7,500 to $15,000 depending on the decline in turnover experienced during the first three weeks of the lockdown period – that is, 26 June 2021 to 17 July 2021. The comparison timeframe was initially limited to the same period in 2019 but amendments to the eligibility criteria now enable comparisons with 2020 or the immediate two weeks prior to the lockdown, being 12 June to 25 June 2021, so good news for younger businesses or those with irregular turnover practices.
- COVID-19 Micro-Business Grant – A fortnightly payment of $1,500 for entities with an aggregated annual turnover of between $30,000 and $75,000, including non-employing businesses on the proviso that this represents the primary income source for an associated person. To be eligible, a business must have experienced a decline in turnover of 30% of more over a two-week period commencing 26 June 2021 and ending 30 June 2021, compared to the same period in 2019, 2020 or the 2-week period immediately prior to the lockdown (again expanded criteria). Businesses are not eligible for this stream if they have applied for the COVID-19 Business Grant or JobSaver Scheme.
- JobSaver Payment – A weekly payment backdated to 18 July 2021 (week 4 of lockdown) to help maintain employee headcount for those who have suffered a minimum 30% decline in revenue due to lockdown. The payment will be equivalent to 40% of NSW’s weekly payroll, with a minimum payment of $1,500 and a maximum of $10,000. Non-employing businesses may be entitled to $1,000 per week.
HOW DO I KNOW IF I AM ELIGIBLE?
One of the key factors in determining eligibility is the percentage of ‘decline in turnover’. So, what ‘decline in turnover’ test is to be applied? It seems no one knows for certain (even Service NSW).
Service NSW’s publication around the ‘decline in turnover’ test for the COVID-19 Business Grant initially left applicants in the lurch over eligibility, with guidance being limited to an indication that “the Australian Taxation Office Goods and Services Tax (GST) concept will be applied”. Not entirely helpful given the complexity of the legislative instruments, public rulings and administrative determinations underpinning this concept.
Clarifications to the approach, which were live earlier this week and hidden amidst the ‘Definitions’ section of the 2021 COVID-19 Business Grant Guidelines, eliminated much of this uncertainty with express confirmation that, ”as far as they are relevant, the modifications made to A New Tax System (Goods and Services Tax) Act 1999 (Cth) definition of ‘current GST turnover’ for the purposes of the JobKeeper test will apply”. Service NSW’s reference (and hyperlink) here was to the Federal Government’s all too familiar 2020 JobKeeper Scheme which addressed concerns with the basic decline in turnover test by adopting legislative instruments, including to permit certain entities or classes of entities an alternative basis on which to satisfy the decline in turnover test. The turnover tests and practical compliance approaches to calculate turnover (relevant to the legislative amendments) were in turn considered in detail in the Law Companion Ruling 2020/1, which is administratively binding on the Commissioner of Taxation.
The Service NSW website has, however, as of 11 August 2021, removed express reference to the JobKeeper test and legislative modifications in the guidelines for the COVID-19 Business Grant and replaced the previous definition of ‘decline in turnover’ with guidance on calculating ‘current GST turnover’ by reference to the GST Act, as follows (at the time of publication):
- section 188 15 of the GST Act applies as if a reference to a month were a reference to the fortnight;
- subsection 188 15(1) of the GST Act is to be applied at the end of the fortnight;
- subsection 188 15(1) of the GST Act has effect as if the reference in that subsection to “or are likely to make, during the 12 months ending at the end of that month”, were instead a reference to “during that fortnight”;
- subsection 188 15(2) of the GST Act (about members of GST groups) is to be disregarded;
- each external Territory is treated as forming part of the indirect tax zone (within the meaning of the GST Act).
These amendments are a substantial retreat from the previous clarifications. In addition, the ‘current GST turnover’ concept has been amended at some stage to refer to both the GST Act and the Income Tax Assessment Act 1997 (Cth) definitions of ‘current GST turnover.
The definition for the ‘decline in turnover’ test applicable to the COVID-19 Micro-Business Grant and the JobSaver Payment largely mirrors the above, though with some formatting anomalies.
Struggling to keep up? So are we. Whilst ad-hoc clarifications by Service NSW are inevitability targeted at resolving an unprecedented number of enquiries and enhancing accessibility to the grants – and the expanded comparative periods go a long way to achieve this – the ever-changing criteria around ‘decline in turnover’ have left many confused. With a business’ eligibility for the grants in some cases needing to be supported by a letter of certification signed off by a qualified accountant, certified tax agent or BAS agent, the shifting goal posts may also create issues for these professionals.
HOW CRICHTON & CO LEGAL CAN HELP
From a practical standpoint, we suggest applicants and their advisers’ screen grab a copy of whatever iteration of the criteria their grant application is made pursuant to. This will ensure that this can be referred to if questions are later raised and the criteria are no longer live.
If you are concerned about your legal obligations in relation to the scheme, Crichton & Co Legal has extensive experience acting for financial services professionals and businesses alike and can assist with pragmatic advice to navigate this complex regulatory landscape.
For support, contact us here or on the details below.