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On 1 May 2020, Treasury released amendments to the JobKeeper rules, which have effect from the start of the JobKeeper scheme. Included in the amendments was a change to adjust the way in which certain payments made by Federal, State and Territory governments to an ACNC registered charity (‘charity’) are treated when calculating the charity’s turnover.
The intent of the policy was to enable more charities to qualify for the JobKeeper program. Broadly, a government grant will be included in a charity’s turnover for GST purposes where the grant is conditional on the charity undertaking particular obligations or providing goods or services in return for the grant.
Under the original JobKeeper rules, the inclusion of these conditional grants meant many charities were unable to satisfy the 15% decline in turnover test, despite being impacted by COVID-19 and being under increased pressure to provide services to the community.
The decline in turnover test has now been modified to enable charities to elect to disregard Australian government grant income where the grant represents consideration for supply. The election must be in the approved form and be made within seven days of the charity electing into the JobKeeper scheme.
To assist charities in determining GST turnover for the purposes of JobKeeper payment we have summarised common sources of income and the respective treatment under the JobKeeper GST turnover tests in the table below:
Eligible charity employees
Under the amendments to the JobKeeper rules, a charity may choose to treat an employee as not being an eligible employee for the purposes of JobKeeper payment. This option is only available where the charity reasonably concludes the full amount of the employee’s salary and wages are funded for a relevant JobKeeper fortnight by a grant that has been disregarded for the purposes of determining GST turnover.
It is important to note, this exception from the ‘one-in all-in’ rule does not exclude charity employees from being eligible employees, so it is not designed to prevent charities from claiming JobKeeper for employees who satisfy the basic eligibility criteria.
We are of the view the exclusion may have limited application, however, it will provide certain charities with the option not to claim JobKeeper payment in respect of a particular employee where they receive grant funding specifically to cover the full salary and wage cost of that employee.
Where a charity receives grants from multiple government agencies, the grants are not specifically tied to the employment of a particular employee (or employees) and / or the charity receives income from other sources, it would be less likely a charity could reasonably conclude the salary and wages of an employee are ‘fully funded’ from one of the grants excluded in the GST turnover test. This will depend on the specific facts and circumstances of each case, so charities are advised to review the specific conditions of any government grants received and seek appropriate advice where necessary.
There has been a substantial amount of uncertainty expressed by charities, with particular apprehension surrounding eligibility for JobKeeper payment based on the modified rules. Provided charities have not manipulated turnover with the sole or dominant purpose to satisfy the 15% decline in turnover test, they should take comfort in knowing the rules have been changed to enable more charities to qualify – there is no catch.
The change in rules will enable charities to continue to provide much needed assistance to the community during these difficult times, and in some cases, to expand their support services to meet a greater need.
The change in rules does not apply to universities or schools.
For more information
If you require further information or have any questions regarding the JobKeeper for ACNC registered charities, please contact your local RSM adviser.
