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JobKeeper Scheme – Alternative Decline in Turnover Tests
One of the main eligibility rules to become an eligible employer under the JobKeeper scheme is to be able to demonstrate that the businesses turnover has declined by more than 30% (where the business’ aggregate turnover was less than $1.0b) to a comparable period.
Under the Basic Test the comparable period is the month of or quarter in the previous financial year (being the comparable period in 2019). While this may have catered to a large number of businesses, there were also a significant number of businesses that failed the eligibility test because of various factors. Last Thursday, legislation was released that provided rules to cater for the following situations:
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Business commenced before 1 March 2020 but after the relevant comparable period
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A business acquisition or disposal occurred that changed the entity’s turnover
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Business restructure that changed the entity’s turnover
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Business had a substantial increase in turnover
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Business was affected by drought or natural disaster
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Business has an irregular turnover
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Sole trader or small partnership with sickness, injury or leave
The rules applicable for each of the above situations are set out below.
1. Business commenced before 1 March 2020 but after the relevant comparable period
A business entity can apply either of the alternative tests if the entity commenced business before 1 March 2020 but after the relevant comparison period. That is, the business did not exist in the relevant comparison period. There are 2 alternative tests if you commenced a business and these are:
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First Alternative Test:
If the relevant comparison period is a calendar month the entity uses the average monthly GST turnover instead of the entity’s current GST turnover. If the relevant comparison period is a quarter, the entity multiplies the average monthly current GST turnover by 3 and uses that figure instead of the entity’s current GST turnover.
Average monthly current GST turnover is defined as follows:
+ if the entity commenced business before 1 February 2020, the entity’s current GST turnover for each whole month after the entity commenced business and before 1 March 2020 added together and divided by the whole number of months; or
+ if the entity started business before 1 March 2020 but on or after 1 February 2020, the entity’s current GST turnover before 1 March 2020 divided by the number of days the entity was in business and multiplied by 29.
Current GST Turnover is defined in the GST Act (Section 188-15) to mean the sum of all supplies that you have made or likely to make during the 12 months ending at the end of the month other than input taxed supplies, supplies that are for no consideration (promotional give aways etc) or supplies that are not made in connection with an enterprise that you carry on.
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Second Alternative Test:
If the relevant comparison period is a calendar month, the entity divides the 3 months’ current GST turnover by 3 and uses that figure. If the relevant comparison period is a quarter, the entity uses the 3 months’ current GST turnover.
If your business was affected by the bushfires or your business received Drought Help assistance then there are additional specific rules to determine eligibility if unable to become eligible under the above tests.
2. Business Acquisition or Disposal of Part of the Business that Changed the Entity’s Turnover
An entity may apply this alternative test to determine eligibility if there was an acquisition or disposal of part of the business after the relevant comparison period and before the applicable turnover test period and that change resulted in the entity’s turnover changing. Under these circumstances the alternative test is as follows:
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If the relevant comparison period is a calendar month, the entity uses the current GST turnover from the month immediately after the month in which the acquisition or disposal occurred.
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If the relevant comparison period is a quarter, the entity multiplies the current GST turnover from the month immediately after the month in which the acquisition or disposal occurred by 3 and uses that figure.
Note that if there is more than one acquisition or disposal that changes the entity’s turnover then you use the whole month immediately after the last acquisition or disposal.
If your business was affected by the bushfires or your business received Drought Help assistance then there are additional specific rules to determine eligibility if unable to become eligible under the above tests.
3. Business Restructure that Changed the Entity’s Turnover
An entity may apply the business restructure rules if there was a restructure of your business (or part thereof) after the relevant comparison period and before the applicable turnover test period and the business’ turnover changed as a consequence of that restructure. The alternative test where there has been a business restructure are as follows:
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If the relevant comparison period is a calendar month, the entity uses the current GST turnover from the month immediately after the month in which the restructure occurred.
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If the relevant comparison period is a quarter, the entity multiplies the current GST turnover from the month immediately after the month in which the restructure occurred by 3 and uses that figure.
Note that if there is more than one restructure that changes the entity’s turnover then you use the whole month immediately after the last acquisition or disposal.
If your business was affected by the bushfires or your business received Drought Help assistance then there are additional specific rules to determine eligibility if unable to become eligible under the above tests.
4. Business had Substantial Increase in Turnover
Where an entity has experienced substantial increase in turnover during a period immediately before the applicable turnover test period then you can use this alternative test to determine eligibility. To utilise the substantial increase in turnover test the business’ increased turnover must satisfy one of the following criteria:
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Increased turnover of 50% or more in the 12 months immediately before the applicable turnover test period; or
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Increased turnover of 25% or more in the 6 months immediately before the applicable turnover test period; or
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Increased turnover of 12.5% or more in the 3 months immediately before the applicable turnover test period
The alternative test to be applied is as follows:
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If the relevant comparison period is a calendar month, the entity divides the 3 months’ current GST turnover by 3 and uses that figure.
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If the relevant comparison period is a quarter, the entity uses the 3 months’ current GST turnover.
The 3 months’ GST turnover is the total current GST turnover in the 3 months immediately before the applicable turnover test period. For example, if the applicable turnover test period was the month of April 2020, the 3 months GST turnover would be the sum of the GST turnover for January, February and March 2020. If the applicable turnover test period was the month of March 2020, the 3 months GST turnover would be the sum of the GST turnover for December 2019, January and February 2020.
If your business was affected by the bushfires or your business received Drought Help assistance then there are additional specific rules to determine eligibility if unable to become eligible under the above tests.
5. Business Affected by Drought or Natural Disaster
If an entity conducted business (or part of its business) in a declared drought zone or declared natural disaster zone during the relevant comparison period and its turnover changed as a consequence, the business is able to determine eligibility for the JobKeeper Scheme by using an alternative test. The alternative test in this situation is the entity uses its current GST turnover for the same period in the year immediately before the drought or natural disaster declaration.
6. Business has Irregular Turnover
If, for the quarters ending in the 12 months immediately before the applicable turnover test period the entity’s lowest turnover quarter is no more than 50% of the highest turnover quarter and the entity’s turnover is not cyclical then the entity may use the following alternative turnover test:
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If the relevant comparison period is a calendar month, the entity uses the average monthly current GST turnover
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If the relevant comparison period is a quarter, the entity multiplies the average monthly current GST turnover by 3
The average monthly current GST turnover is the current GST turnover for each whole month in the 12 months immediately before the applicable turnover test period added together and divided by 12.
If your business was affected by the bushfires or your business received Drought Help assistance then there are additional specific rules to determine eligibility if unable to become eligible under the above tests.
7.Sole Trader or Small Partnership with Sickness, Injury or Leave
An alternative test has been introduced where a sole trader or small partnership (o one of the partners in the small partnership):
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Has no employees
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Did not work for all or part of the relevant comparison period due to sickness, injury or leave; and
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The turnover was affected by the sole trader or partner not working for all or part of that period.
The alternative test to be used in these circumstances is:
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If the relevant comparison period is a calendar month, the entity uses the current GST turnover from the month immediately after the month in which the sole trader or partner returned to work
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If the relevant comparison period is a quarter, the entity multiplies the current GST turnover from the month immediately after the month in which the sole trader or partner returned to work by 3
If your business was affected by the bushfires or your business received Drought Help assistance then there are additional specific rules to determine eligibility if unable to become eligible under the above tests.
These alternative tests can be complex to apply. If your business did not qualify for the JobKeeper Scheme under the basic test, you should consider these alternative tests as the JobKeeper reimbursement could be very helpful in assisting your business to navigate through the next 5 months and also help your workforce manage through this difficult time. We are here to assist.
If you would like to discuss the alternative tests or any other matter to do with the JobKeeper Scheme, please do not hesitate to contact our office 03 9629 1433.
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