To claim the higher-tier JobKeeper rate from 28 September onwards, eligible business participants will be required to demonstrate that they were actively engaged in their business for 80 hours or more over the 29-day reference period in February 2020.
ATO web guidance now notes that an individual will be actively engaged in the business if they perform, or manage the performance of, services the business provides; sell or manage the sale of goods of the business; perform other activities associated with managing the business; and exercise control over activities related to business strategy and growth.
Individuals will not be considered to be actively engaged if they only own an interest in the business or invest capital in it, or provide advice or other assistance to the business from time to time.
The ATO’s guidance states that records to prove the 80 hours over the 29-day reference period will need to be kept, and these include business diaries, appointment books, log books, hours billed, invoices issued, time sheets or attendance records, or records prepared for other business or statutory purposes.
Once determined, eligible business participants will be required to provide a written declaration confirming they have satisfied the 80 hours actively engaged requirement.
Penalties for false and misleading declarations will be enforced, with individuals jointly and severally liable for overpayments that occur because of the false statement leading to the higher-tier payment rate.
Tax & Super Australia tax counsel John Jeffreys believes the definition of actively engaged remains open to broad interpretation and could be a ripe source of dispute between the ATO and businesses.
More crucially, Mr Jeffreys is concerned that small businesses will have insufficient records to prove the 80 hours and that they qualify for the higher-tier payment rate.
“By and large, these records don’t exist within many businesses, including small businesses, family businesses and partnerships,” Mr Jeffreys said.
“Will business owners need to go back through their email, phone calls, invoicing and accounting activity and cobble together a story that shows they have worked more than 80 hours?”
While the commissioner has issued a determination for three circumstances where the higher-tier payment rate will apply if there are insufficient records to determine the 80-hour threshold, they only apply to employees and not eligible business participants.
Mr Jeffreys has urged the Tax Office to adopt a position where the word of the eligible business participant is, prima facie, correct unless there is information that would strongly suggest the individual is lying.
“We anticipate a lot of queries from accountants and business owners over this issue,” Mr Jeffreys added.
“The key question will be, what quality of records will the ATO require to prove that a person has worked more than the 80 hours needed in order to claim the higher-tiered amount?”
View the ATO’s guidance for partnerships, trusts and companies here.
View the ATO’s guidance for sole traders here.
Jotham Lian is the editor of Accountants Daily, the leading source of breaking news, analysis and insight for Australian accounting professionals.
Before joining the team in 2017, Jotham wrote for a range of national mastheads including the Sydney Morning Herald, and Channel NewsAsia.