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The ATO has clarified that JobKeeper payments are considered ordinary income but will not count towards the calculation of an entity’s aggregated turnover.
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ATO settles JobKeeper ordinary income debate
07 September 2020
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The Tax Office has now updated its web guidance to confirm that while JobKeeper payments are ordinary income, they are not earned in the ordinary course of business, and hence are not included in the calculation of aggregated turnover.
“The ATO considers that JobKeeper payments received by a business are ordinary income,” an ATO spokesperson told Accountants Daily.
“However, the ATO does not consider that JobKeeper payments are included in the calculation of ‘aggregated turnover’.”
The Institute of Public Accountants’ general manager of technical policy, Tony Greco, said the ATO’s confirmation would bring relief to businesses.
“There would have been some ugly and anomalous outcomes if JobKeeper payments were held to be income in the ‘ordinary course of business’,” Mr Greco said.
The clarification comes after the possibility of JobKeeper payments needing to be accounted for in the calculation of annual turnover was raised by RSM’s Tracey Dunn on LinkedIn, dividing tax professionals of the treatment of the $1,500 a fortnight payments.
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Concerns were focused on the fact that inclusion of JobKeeper payments in aggregated turnover would have an impact on entities being able to access tax concessions based on aggregated turnover thresholds.
These included small business income tax concessions, small business CGT concessions, the instant asset write-off, the refundable R&D tax offset, and the base rate entity tax rate.
The ATO was pressed into action by the Tax Practitioners Stewardship Group early last week, leading to the updated guidance on Friday, and has since been described as a “sensible outcome” by the Tax Institute’s senior advocate, Robyn Jacobson.
You can view the ATO’s update guidance here.
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