JobKeeper 2.0 Extension – Decline in Turnover Alternative Tests

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The government has now passed legislation for the extension of the Job Keeper Payment scheme from 28 Sep 2020 to 28 Mar 2021 (see our previous Blog here)

Job Keeper 2.0 Extension – Decline in turn-over Alternative Testings

If circumstances or events outside usual business operations that resulted in the relevant comparison 2019 period (Sep or Dec 2019 qtr) not being appropriate, then the Alternative Testing might apply.

To refresh, the basic test is a decline in actual GST turn-over of 30 percent or more for the current test period qtr (the Sep 2020 qtr or the Dec 2020 qtr) compared to the relevant comparison period in the prior year (the Sep 2019 qtr or the Dec 2019 qtr).  If you meet this test you will generally be eligible for the Job Keeper Extension.

If your entity fails the basic test, the Alternative test for turn-over can be used to calculate if the entity has met the turn-over decline test for Sep 2020 or Dec 2020 qtr for eligibility purposes under Job Keeper extension program.

There are seven (7) Alternative Tests:

  1. Business that commenced after the comparison period  but before 1 Mar 2020
  2. Business disposal or acquisition that changes the turn-over of the entity
  3. Restructure of business that changed turn-over of the entity
  4. A substantial turn-over increase of the business 
  5. Business has been affected by natural disaster or drought
  6. Irregular turn-over of the business
  7. Sole trader or a small partnership with leave, injury or sickness

The Alternative Tests are explained below.

  1. Test for businesses that commenced after comparison period but before 1 Mar 2020

Use this test if your business started operations after the first day of the relevant comparison period but not on or after 1 Mar 2020.

Alternative Testing 1

If your entity started business before 1 Feb 2020:

  • to determine if your GST turn-over has fallen by at least 30 percent, take your average monthly current GST turn-over since your entity started business (before 1 Mar 2020) and multiply by 3. Then, compare this figure with your applicable current GST turn-over for the Sep or Dec 2020 qtrs.
  • your average monthly GST turn-over will be the total of the current GST turn-overs for each whole month since your entity started business and before 1 Mar 2020 divided by the number of those whole months.

If your business started in Feb 2020:

  • to determine if your GST turn-over has fallen by at least 30 percent, compare your average monthly current GST turn-over for Feb 2020 with your applicable current GST turn-over for the Sep or Dec 2020 qtr
  • your average monthly GST turn-over for Feb 2020 is your total current GST turn-over for the days your business was in operation in Feb 2020 divided by the number of days you were in business in Feb 2020 and then multiplied by 29 (the number of days in Feb 2020).

Alternative Testing 2

You can use this test if your business started operations after the first day of the relevant comparison period but before 1 Dec 2019.

To determine if your GST turn-over has fallen by at least 30 percent, compare your applicable current GST turn-over for the Sep or Dec 2020 qtr with your current GST turn-overs for the months of Dec 2019, Jan 2020 and Feb 2020.

  1. Test for a business disposal or acquisition that changed the turn-over of the entity

Use this test when:

  • the entity disposed of or acquired part of its business from the beginning of the relevant comparison period (including multiple disposals and acquisitions) but before the applicable turn-over test period, and
  • the disposal or acquisition changed the current GST turn-over of the entity.

Example, for the Sep 2020 qtr turn-over test period, you can use this test if you disposed of or acquired part of your business from, 1 Jul 2019 but before 1 Jul 2020. The disposal or acquisition must also have changed the current GST turn-over of the entity during that time.  If the disposal or acquisition made by the entity did not impact the business in a way that changed the current GST turn-over, then you cannot use this test.

Alternative Testing

Use your current GST turn-over from the month immediately after the month the acquisition or disposal occurred multiplied by three.

To determine if your GST turn-over has fallen by at least 30 percent, compare that figure with your applicable current GST turn-over for the Sep or Dec 2020 qtr.

Multiple disposals or acquisitions Alternative Testing

  • If your entity made multiple disposals or acquisitions after the relevant comparison period, you can use the whole month immediately after any of the acquisitions or disposals, multiplied by three, for the Alternative Testing.

No whole month after disposal or acquisition Alternative Testing

  • If there is no whole month between the disposal or acquisition your entity made and the turn-over test period, then your entity uses the month immediately before the applicable turn-over test period.
  1. Test for a restructure of business that changed the turn-over of the entity

Use this test:

  • if you restructured part or the whole of the entity’s business from the start of the relevant comparison period but before the applicable turn-over test period (including multiple restructures), and
  • the restructure changed your current GST turn-over of the entity.

For example, in calculating the actual decline in turn-over for the Sep 2020 qtr turn-over test period, you use this test if you restructured your business, or part of it, from 1 Jul 2019 and before 1 Jul 2020.  The restructure must also have changed your entity’s current GST turn-over. If the restructure did not impact the business in a way that changed its current GST turn-over, then you cannot use this test.

Alternative Testing

Use your current GST turn-over from the month immediately after the month the restructure undertaken was completed and multiply that current GST turn-over from that month by three.

To determine if your GST turn-over has fallen by at least 30 percent, compare that figure with your applicable current GST turn-over for the Sep or Dec 2020 qtr.

Multiple restructures Alternative Testing

  • If your entity undertook multiple restructures after the relevant comparison period, you can use the whole month immediately after any restructure undertaken was completed for the Alternative Testing.

No whole month after restructure Alternative Testing

  • If there is no whole month between the restructure your entity undertook and the turn-over test period, then your entity uses the month immediately before the applicable turn-over test period.
  1. Test for a business that has had a substantial increase in turn-over

Use this test if your entity had a substantial increase in its current GST turn-over of:

  • 50 percent or more in the 12 months immediately before the applicable turn-over test period or before 1 Mar 2020, or
  • 25 percent or more in the 6 months immediately before the applicable turn-over test period or before 1 Mar 2020, or
  • 12.5 percent or more in the 3 months immediately before the applicable turn-over test period or before 1 Mar 2020.

To test if your entity’s current GST turn-over increased, by at least the applicable percentage (50 percent, 25 percent or 12.5 percent), in the 12 (or 6 or 3) months immediately before the applicable turn-over test period or before 1 Mar 2020, compare:

  • your current GST turn-over for the month immediately before the applicable turn-over test period or 1 Mar 2020, with
  • your current GST turn-over for the month immediately before the start of the 12 (or 6 or 3) months.
Table 1: Testing percent increase in current GST turn-over
To test percent increase in turn-over immediately before 12 months

(50%)

6 months

(25%)

3 months

(12.5%)

Sep 2020 qtr (Jul to Sep 2020) Test Jun 2019 turn-over with Jun 2020 turn-over Test Dec 2019 turn-over with Jun 2020 turn-over Test Mar 2020 turn-over with Jun 2020 turn-over
Dec 2020 qtr (Oct – Dec 2020) Test Sep 2019 turn-over with Sep 2020 turn-over Test Mar 2020 turn-over with Sep 2020 turn-over Test Jun 2020 turn-over with Sep 2020 turn-over
1 Mar 2020 Test Feb 2019 turn-over with Feb 2020 turn-over Test Aug 2019 turn-over with Feb 2020 turn-over Test Nov 2019 turn-over with Feb 2020 turn-over

 

Alternative Testing

To determine if your turn-over has declined by 30 percent, in applying this Alternative Testing:

  • if you are using the period immediately before the applicable turn-over test period to test whether you had a substantial increase in turn-over, compare
    • the total of your entity’s current GST turn-over for the 3 months immediately before the applicable turn-over test period, with
    • the applicable current GST turn-over in the turn-over test period (the Sep or Dec 2020 qtr).
  • if you are using the period immediately before 1 Mar 2020 to test whether you had a substantial increase in turn-over, compare
    • the total of your entity’s current GST turn-over for the three months immediately before 1 Mar 2020, with
    • the applicable current GST turn-over in the turn-over test period (the Sep or Dec 2020 qtr).
  1. Test for businesses affected by natural disaster or drought

Use this test if:

  • your entity conducted all or some of your business in a declared natural disaster or drought zone during the relevant comparison period in 2019, and
  • the natural disaster or drought changed the turn-over of the entity.

For the purposes of this test, a declared drought zone includes an area subject to a formal declaration of drought by a commonwealth, state, territory or local government agency. It also includes an area for which there has been a public identification or acknowledgment that the area is drought affected by such an agency.

For example, the following public information sources provide declarations, acknowledgments, statistics, maps and other guidance as to what are declared drought zones and drought affected areas for the purposes of this test:

  • the National Drought Map
  • Australian Government Bureau of Meteorology Monthly Drought Statements, maps, rainfall and rainfall deficiency statistics
  • in Queensland – the drought situation map
  • in NSW – the Combined Drought Indicator map
  • in South Australia – the Drought Affected Areas map.

Alternative Testing

Calculate the current GST turn-over of your entity for the Sep or Dec qtr in the year immediately before the year when the natural disaster or drought was declared, instead of those qtrs in 2019. To determine if your GST turn-over has fallen by at least 15 percent, 30 percent or 50 percent, compare that figure against your current GST turn-over for the Sep or Dec 2020 qtr.

  1. Test for a business that has an irregular turn-over

Use this test if:

  • for the consecutive 3-month periods ending in the 12 months immediately before the applicable turn-over test period or 1 Mar 2020, the lowest of your entity’s current turn-over for any of those 3-month periods is no more than 50 percent of the highest of the entity’s current GST turn-over for any of those 3-month periods, and
  • the entity’s current GST turn-over is not cyclical.

Your entity cannot use this Alternative test if your entity’s turn-over is cyclical. For example, a fruit growing business that is seasonal and usually has less turn-over during certain months of the year cannot use this test. Or, for example, a business that usually has increased turn-over in Dec from Christmas trade cannot use this test.

Alternative Testing

In applying this Alternative Testing, you must use your entity’s average monthly current GST turn-over. To work out your entity’s average monthly current GST turn-over, add the total of your current GST turn-overs for each whole month in the 12 months immediately before the applicable turn-over test period or 1 Mar 2020, and divide the total by 12.Then multiply your entity’s average monthly current GST turn-over by three and compare that to the current GST turn-over for the applicable turn-over test period.

  1. Test for a small partnership or sole trader with leave, injury or sickness

Use this test if:

  • you are a partnership with four or fewer partners or a sole trader, and your entity has no employees
  • one of the partners or the sole trader has not worked for all or part of the relevant comparison period due to leave, injury or sickness and
  • the turn-over was affected as a result of the partner or sole trader  not working for part or all of the period.

Alternative Testing

Use your current GST turn-over from the month immediately before the month in which the sole trader or partner did not work due to sickness, injury or leave and multiply that by three and then compare that with your current GST turn-over for the applicable turn-over test period.

Bushfire or Drought Affected?

There are also various sub-tests for entities that fail an Alternative Testing (excluding Alternative Testing 5) where your entity has been affected by drought or bushfires.

At Solve Accountants we specialise in helping clients with complex and challenging issues.  If you have questions or need assistance: Contact us now

#economicstimulus #covid19 #coronavirus #Job Keeper #Job KeeperScheme #tax #Job Keeper2.0

Sources: Australian Taxation Office and Australian Taxation Office

 

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