The $130 billion JobKeeper payment may enable your organisation to access a wage subsidy to assist you to continue paying your employees. Government guidance is helpful, but be aware of conditions of the scheme that only apply to charities and not-for-profits.
Since the release of the Jobkeeper Rules on 9 April 2020, details of the scheme have been outlined in Treasury factsheets and unpacked in extensive expert commentary. While much of this information is helpful in relation to the general structure of the scheme, it glosses over important details that may affect charities and not-for-profits.
Below we outline these key issues related to JobKeeper eligibility for charities and not-for-profits.
The big picture
Under the scheme, eligible employers experiencing a decline in turnover may be able to claim a fortnightly payment of $1,500 per eligible employee. Fall in turnover is typically assessed with reference to the comparable period in 2019 and must meet the relevant threshold for the entity. Payments may be made for the duration of the scheme, being 30 March through to 27 September 2020.
Charities and not-for-profits with significant overseas activities or expenditure may not be eligible
Unless it qualifies as an entity that ‘carries on a business in Australia’, a charity or not-for-profit is only eligible to participate in the scheme if it ‘pursues its objectives principally in Australia’.
The phrases ‘pursues its objectives’ and ‘principally in Australia’ are not defined in the Rules or the accompanying Explanatory Statement. These phrases have, however, been considered by the ATO in a recent Taxation Ruling[1] that gives some guidance on how it may be interpreted for the purposes of the scheme. The Taxation Ruling indicates that:
- the term ‘principally’ carries its ordinary meaning of ‘mainly’ – more than 50% will ordinarily meet this requirement;
- an entity ordinarily ‘pursues its objectives’ in the place where it seeks to realise its purposes. Consider factors such as:
- what are your purposes (these are usually in your governing document)?
- where you seek to realise those purposes – where are your beneficiaries located?
- where do you incur the majority of your expenditure?
Government owned charities and not-for-profits are not eligible
A charity or not-for-profit that is wholly owned by a government body will not be eligible for the JobKeeper payment. For example, a company limited by guarantee whose sole member is a local Council will not be eligible. This overlaps with, but is different to the ‘government entity’ test – even if your organisation is not a government entity, it may still be wholly owned by government and unable to qualify for the scheme.
The turnover threshold
The relevant threshold for decline in turnover is:
- ACNC registered charities (other than schools and universities) – 15%; and
- all other not-for-profits (including those ACNC registered charities that are schools and universities) – 30%.
What counts as turnover?
GST turnover always counts for the purposes of assessing decline in turnover – this applies to all charities and not-for-profits. In addition to this:
- tax deductible gift recipients can also take into account the value of tax deductible gifts (other than gifts from an ‘associate’);
- ACNC registered charities (excluding deductible gift recipients) can also take into account the value of gifts of money, listed Australian shares and property with a market value of more than $5,000 (other than gifts from an ‘associate’).
This means that any decline in donations received by ‘mere’ not-for-profits (that is, not-for-profits that are not charities or deductible gift recipients) cannot be taken into account for the purposes of the turnover test.
Mergers, changes in structure or change of control
Any interruption to employment due to a merger, change in structure or change of control of your organisation that results in a change of the legal employer may affect the eligibility of employees. For example:
- individuals (other than casual employees) who were employed on 1 March 2020 may cease to be eligible under the JobKeeper scheme if the legal employer changes; or
- casual employees may not have been employed on a ‘regular and systematic basis’ during the twelve months ending on 1 March 2020 (and therefore may not be eligible) if their legal employer changed during that period.
The JobKeeper Rules attempt to ensure individuals are not disadvantaged in these circumstances, introducing the rather unhelpful concept of a ‘non-profit body’ whose purposes are currently ‘carried on by’ an entity and but were previously ‘carried on by a different entity’. Not-for-profit entities and charities that may be affected by a change in control, change in structure or merger should seek legal advice regarding the impact on the eligibility of their employees.
What about payments to directors?
JobKeeper payments may be able to be claimed by a business for certain ‘business participants’ that are not employees of the business, including directors. Not-for-profits and charities cannot claim JobKeeper payments for business participants.
General application of the scheme
If you’ve jumped these hurdles and the JobKeeper scheme may still apply to your organisation, you can find more details about the scheme here.
How Moores can help
Moores is currently providing advice and support to our clients who are navigating the complex requirements of the JobKeeper Scheme. For further information and guidance, please do not hesitate to contact us.
[1] TR 2019/6, which considers (among other things) the meaning of the requirement for certain entities to have a physical presence in Australia, and to that extent, pursue their objectives principally in Australia in order to be exempt from income tax.