Alternative turnover test for JobKeeper released

May 2, 2020

When JobKeeper was initially legislated in April, it became quickly apparent that many businesses could not satisfy the prescribed fall-in-turnover tests for eligibility.  Particularly, those businesses that had commenced in the last 12 months, had lumpy and irregular revenue, or substantial increases in revenue prior to COVID-19 appeared to fall through the cracks. An alternative decline in turnover test for the JobKeeper payment scheme has now been registered by the ATO. The ATO says the alternative tests will only kick in if an entity cannot satisfy the basic decline in turnover test.

The instrument applies to provide alternative bases for a class of entities (more below) to satisfy the decline in turnover test for the purposes of seeking to be a qualifying employer for JobKeeper payments, when the Commissioner is satisfied that there is not an appropriate relevant comparison.

The explanatory statement says these alternative tests will only apply to certain circumstances, of which there are seven dealt with in the instrument. The legislative instrument applies to classes of entities to which the following circumstances apply:

  • An entity commenced business after the relevant comparison period in 2019 with the event or circumstance outside the usual business setting being that the business did not exist in the relevant comparison period and as a result there was no relevant comparison period in 2019. This applies to entities that were not operating any business, it does not apply to an entity that was operating one or more businesses and commenced a new additional business.

 

  • An entity acquired or disposed of part of their business after the relevant comparison period in 2019 including more than one acquisition or disposal and the acquisition or disposal, or acquisitions or disposals, changed their turnover. The event or circumstance outside the usual business setting being that the business was not the same business and as a result is not comparable after the acquisition(s) or disposal(s) to as it was in relevant comparison period in 2019.

 

  • An entity has restructured part or all of their business after the relevant comparison period in 2019, including more than one restructure, and that restructure, or restructures, has changed the entity’s turnover. The event or circumstance outside the usual business setting being that the business was not the same business and as a result is not comparable after the restructure(s) to as it was in relevant comparison period in 2019.

 

  • An entity has had an increase in turnover by 50% or more in the 12 months immediately before the applicable turnover test period, or 25% or more in the 6 months immediately before the applicable turnover test period, or 12.5% or more in the 3 months immediately before the applicable turnover test period. The event or circumstance outside the usual business setting being that as a result of undergoing such rapid growth the business of the entity is not comparable after the growth to the business as it was in the relevant comparison period in 2019.

 

  • An entity has been affected by a drought or other natural disaster in the relevant comparison period in 2019. The event or circumstance outside the usual business setting being the drought or other natural disaster which adversely affected the business and as a result the relevant comparison period in 2019 is not appropriate.

 

  • An entity has an irregular turnover that is not cyclical, such as can occur in the building and construction sector. The event or circumstance outside the usual business setting is the non-cyclical irregular turnover and as a result the relevant comparison period in 2019 is not appropriate. An entity with a cyclical turnover such as an entity that operates a seasonal business which generates most of its turnover at a particular time of year has an appropriate relevant comparison period – a cyclical turnover is within the usual business setting.

 

  • An entity is a sole trader or a small partnership and the sole trader or one of the partners did not work for all or part of the relevant comparison period because they were sick, injured or on leave during the relevant comparison period and those circumstances affects the turnover of the sole trader or partnership. The usual business setting is the sole trader or partner working in the business generating turnover and so their absence from work is an event or circumstance outside the usual business setting resulting in the relevant comparison period in 2019 not being appropriate.

 

Outside of these, the ATO says it may not be able to determine an alternative decline in turnover test in all circumstances. “For example, an entity being subject to a severe drought from 2018 until September 2019 that reduced the amount of the crop that it could grow.”

In some cases, a business’s eligibility can be assessed by applying for the Commissioner’s Discretion. Instructions for applying this way may be available soon.

 

More information:

Read the JobKeeper legislation and the Alternative Rules here

Read the ATO guidance here

Seek professional advice regarding your particular business circumstances.


 

Please note that the JobKeeper rules are something of a moving feast at the moment and therefore it is vital to get professional assistance in relation to eligibility for the support. The ongoing reporting obligations to ensure continued eligibility and payments will probably be the most difficult aspect for those who enrolled themselves without completely understanding how JobKeeper works, and could bring some undone.

We are available to assist our clients with ATO Representation regarding all aspects of JobKeeper.

We also encourage businesses that have not yet moved to cloud accounting and employers who are not yet using Single Touch Payroll to set this up as soon as possible, as it makes administrating JobKeeper a great deal more manageable. As Xero Gold Partners, we can establish your cloud accounting system correctly for your business and provide holistic ongoing services to keep you on top of JobKeeper and cash flows and ready to make the most of new opportunities.


We hope this was helpful. Please contact us for assistance with your JobKeeper enrolment, and any ongoing accounting, payroll and reporting needs.

The material and contents provided in this publication are general and informative in nature only. This article is not intended to be advice and you should not act specifically on the basis of this information alone. If expert assistance is required with your own affairs, professional advice should be obtained.

Category: Covid-19
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