JobKeeper scheme expanded to service entities

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April 27, 2020
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MEDIA RELEASE: The Federal government’s decision to extend the JobKeeper rules to include those employed through a special purpose entity, not just an operating entity, is a sensible and welcome solution, says Peter Bembrick, tax partner at HLB Mann Judd.

“The original rules did not address the situation where a business has employees in multiple entities, and instead required each entity to be evaluated on a stand-alone basis, regardless of how revenue was generated. 

“The latest update means that certain businesses that operate through multiple entities  can now analyse their eligibility for JobKeeper support on a grouped basis for those entities that exist purely to employ staff and provide services to the operating entities in the group.

“Without this adjustment, there would have been many employees unable to access the JobKeeper scheme, and it’s pleasing to see that commonsense will prevail.

“We have a number of clients that will be affected by this change, and will be very relieved to have some certainty about what they can claim.”

Mr Bembrick uses the example of an organisation that uses two separate service companies to employ 150 staff, with just 20 employed by the operating company.  The service companies provide their labour to the operating company and are remunerated accordingly, and only the operating company generates external revenue from customers.

“All the companies are owned by a holding company, but under the previous rules, only the operating company would have qualified for the JobKeeper scheme.

“This meant that 130 employees would not have received any support.

“Under the announced changes, the service companies will still need to register for JobKeeper separately, but will be able to evaluate their eligibility based on the decline in turnover of the operating company. This in effect means that a single calculation of movements in turnover allows all three employing entities to access JobKeeper payments for the entire workforce of 150 people.

“This is a fair and sensible outcome and a victory for common sense.  The Government is to be applauded for recognising this issue and taking reasonable steps to address it in a very timely manner,” Mr Bembrick says.

The government has also provided an update on other areas of the JobKeeper scheme that were causing some uncertainty, including government revenue received by charities,  and the “one in, all in” principle which means employers can’t select which eligible employees will participate in the scheme.