Alternative decline in turnover test

Alternative tests for JobKeeper Extension

The government has outlined alternative eligibility tests for the JobKeeper Payment Scheme for businesses that don’t fit into the standard turnover test from 28 September.

To determine if you still qualify for the scheme, your business can use an alternative eligibility test if it can satisfy one of the circumstances below:

  • The business commenced after 30 September 2019
  • An acquisition or disposal after 30 September 2019 has substantially changed your turnover
  • The business has restructured since 30 September 2019 which has substantially changed turnover
  • The business has seen substantial growth in turnover in the last 12 months
  • The business has been affected by drought or a natural disaster in the last 12 months
  • The business has irregular turnover over a 12 month period
  • A sole trader or partner had taken leave during the relevant comparison period which has significantly impacted the turnover of the business

We have explained each of these circumstances below.

Firstly, how to calculate a fall in turnover (starting 30 September 2020)

To work out your fall in turnover, you can compare current quarterly GST turnover for September 2020 with the quarterly GST turnover from September 2019.

The turnover calculation is based on GST turnover, but there are some modifications, including disregarding GST grouping (where two or more associated business entities operate as a single GST group).

Entities that did not exist the prior year can use the average of their actual GST turnover for all the months in which the business was being carried on multiplied by three. Entities whose revenue was not representative the prior year because of significant impacts on trading conditions can use an alternate period as outlined below.

If you work out that you qualify for the JobKeeper payments for the first fortnight because your turnover has declined by the relevant amount, you remain eligible and do not need to keep testing turnover in following months until Expansion 2 which will commence in January. However, you will have ongoing monthly reporting requirements as outlined below.

The Commissioner of Taxation has the discretion to set out alternative tests that can establish your eligibility when turnover periods are not appropriately comparable (for example, if your business has been in operation less than a year).

 

If the business is less than 12 months old

Applies to: new businesses which commenced operating prior to 1 March 2020 but after the comparative period last year (thus has no prior year comparatives).

Alternative test 1 – calculate the average monthly turnover for the time the business has been in operation, multiply by three and compare that against the current GST turnover. The calculation will depend on the relevant comparison period the entity uses and how long they have been in business.

Alternative test 2 – compare the current GST turnover for the relevant period against the current GST turnover of the prior three months immediately before 1 March 2020.

You only need to satisfy one of the alternative turnover tests given.

 

If an acquisition or disposal has substantially changed turnover

Applies to: business that have been through an acquisition or disposal process that changed its turnover, meaning comparing periods is no longer practicable.

Alternative test – use the month directly after the acquisition or disposal multiplied by three as the comparison period.

If multiple acquisitions or disposals, use the month immediately after the most recent.

If there isn’t a month between the last event and the testing period, use the month immediately before the test period.

 

If a business restructure changed turnover significantly

Applies to: business that have undergone a restructure in the past 12 months, meaning comparing periods is no longer practicable.

Alternative test – use the month directly after the restructure occurred multiplied by three as the comparison period.

If multiple restructures, use the month immediately after the most recent.

If there isn’t a month between the last event and the testing period, use the month immediately before the test period.

 

If the business has seen substantial growth in turnover

Applies to: high growth businesses including start-ups which have seen substantial growth in the past 12 months, but have still been affected.

To use this test the business must have seen more than 50% growth in the 12 months leading up to the test period or 1 March 2020.

The alternative test also applies if the business has seen 25% growth in turnover in six months, or 12.5% growth over three months, leading up to the test period or 1 March 2020.

Alternative test – if the business reports GST quarterly, it can use the three months directly preceding the test period or 1 March 2020 as its comparison period.

 

If the business has been affected by drought or a natural disaster

Applies to: entities that conducted some or all of their business in a declared drought or natural disaster zone during the relevant comparison period, and who believe that had a negative effect on their turnover.

Alternative turnover – simply use a comparison period from 2018, instead of 2019.

Instead of comparing September 2020’s revenue, for example, to September 2019, they can compare September 2020 to September 2018.

 

If the business has irregular turnover

Applies to: entities where, over the 12 months leading up to the test period or 1 March 2020, the quarter with the highest GST turnover saw more than twice the revenue of the lowest-performing quarter.

Businesses that have cyclical turnover will not be able to apply this alternative test..

Alternative test – calculate an average monthly GST turnover for the 12 months leading up to the test period or 1 March 2020. That monthly figure is multiplied by three and will act as the comparison turnover figure.

 

If a sole trader or partner has taken leave

Applies to: businesses carried on by a sole traders or partnerships with no employees, where an individual did not work for all or part of the comparison period in 2019, due to illness, injury or other leave. The alternative test applies where that leave caused a negative impact on revenue at the time.

Alternative test – business owners should take the month immediately before the individual’s did not work due to sickness, injury or leave, multiply by three and use this as the comparison period.

 

For special purpose employment entities

Applies to: businesses carried on by a sole traders or partnerships with no employees, where an individual did not work for all or part of the comparison period in 2019, due to illness, injury or other leave. The alternative test applies where that leave caused a negative impact on revenue at the time.

Alternative test – business owners should take the month immediately before the individual did not work due to sickness, injury or leave, multiply by three and use this as the comparison period.

 

For more information please refer to the Australian Government’s Explanatory Statement.

 

Please contact AFS if you have any questions about any of the alternative test methods.

AFS & Associates Bendigo
03 5443 0344
afs@afsbendigo.com.au