JobKeeper 2.0 Extension – Decline in Turnover Alternative Tests

Bruce Mars 8yg31xn4dsw Unsplash

The government has now passed legislation for the extension of the JobKeeper Payment scheme from 28 September 2020 to 28 March 2021 (see our previous Blog here)

JobKeeper 2.0 Extension – Decline in Turnover Alternative Tests

If there were events or circumstances outside the usual business setting that resulted in your relevant comparison period in 2019 (September or December 2019 quarter) not being appropriate, then an alternative test may apply.

To refresh, the basic test is a decline in actual GST turnover of 30% or more for the current test period quarter (the September 2020 quarter or the December 2020 quarter) compared to the relevant comparison period in the prior year (the September 2019 quarter or the December 2019 quarter).  If you meet this test you will generally be eligible for the JobKeeper Extension.

If your entity fails the basic test, the alternative turnover tests can be used to determine whether an entity has satisfied the actual decline in turnover test for the September 2020 quarter or the December 2020 quarter for the purpose of eligibility under the JobKeeper program extension.

There are seven (7) alternative tests:

  1. Business that started after the comparison period started but before 1 March 2020
  2. Business acquisition or disposal that changes the entity’s turnover
  3. Business restructure that changed the entity’s turnover
  4. Business that has had a substantial increase in turnover
  5. Business affected by drought or natural disaster
  6. Business that has an irregular turnover
  7. Sole trader or small partnership with sickness, injury or leave

The Alternative test are explained below.

  1. Test for a business that started after the comparison period started but before 1 March 2020

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

Alternative test 1

If your entity started business before 1 February 2020:

  • to determine if your GST turnover has fallen by at least 30%, take your average monthly current GST turnover since your entity started business (before 1 March 2020) and multiply by 3. Then, compare this figure with your applicable current GST turnover for the September or December 2020 quarters.
  • your average monthly GST turnover will be the total of the current GST turnovers for each whole month since your entity started business and before 1 March 2020 divided by the number of those whole months.

If your business started in February 2020:

  • to determine if your GST turnover has fallen by at least 30%, compare your average monthly current GST turnover for February 2020 with your applicable current GST turnover for the September or December 2020 quarter
  • your average monthly GST turnover for February 2020 is your total current GST turnover for the days your business was in operation in February 2020 divided by the number of days you were in business in February 2020 and then multiplied by 29 (the number of days in February 2020).

Alternative test 2

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

To determine if your GST turnover has fallen by at least 30%, compare your applicable current GST turnover for the September or December 2020 quarter with your current GST turnovers for the months of December 2019, January 2020 and February 2020.

  1. Test for a business acquisition or disposal that changed the entity’s turnover

Use this test if:

  • your entity acquired or disposed of part of its business from the start of the relevant comparison period (including multiple acquisitions or disposals) but before the applicable turnover test period, and
  • the acquisition or disposal changed your entity’s current GST turnover.

For example, for the September 2020 quarter turnover test period, you can use this test if you acquired or disposed of part of your business from, 1 July 2019 but before 1 July 2020. The acquisition or disposal must also have changed your entity’s current GST turnover during that time.  If the acquisition or disposal made by your entity did not impact the business in a way that changed its current GST turnover, then you cannot use this test.

Alternative test

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

To determine if your GST turnover has fallen by at least 30%, compare that figure with your applicable current GST turnover for the September or December 2020 quarter.

Multiple acquisitions or disposals alternative test

  • If your entity made multiple acquisitions or disposals 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 test.

No whole month after acquisition or disposal alternative test

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

Use this test:

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

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

Alternative test

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

To determine if your GST turnover has fallen by at least 30%, compare that figure with your applicable current GST turnover for the September or December 2020 quarter.

Multiple restructures alternative test

  • 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 test.

No whole month after restructure alternative test

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

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

  • 50% or more in the 12 months immediately before the applicable turnover test period or before 1 March 2020, or
  • 25% or more in the 6 months immediately before the applicable turnover test period or before 1 March 2020, or
  • 12.5% or more in the 3 months immediately before the applicable turnover test period or before 1 March 2020.

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

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

(50 percent)

6 months

(25 percent)

3 months

(12.5 percent)

September 2020 quarter (July to September 2020) Test June 2019 turnover with June 2020 turnover Test December 2019 turnover with June 2020 turnover Test March 2020 turnover with June 2020 turnover
December 2020 quarter (October – December 2020) Test September 2019 turnover with September 2020 turnover Test March 2020 turnover with September 2020 turnover Test June 2020 turnover with September 2020 turnover
1 March 2020 Test February 2019 turnover with February 2020 turnover Test August 2019 turnover with February 2020 turnover Test November 2019 turnover with February 2020 turnover

 

Alternative test

To determine if your turnover has declined by 30%, in applying this alternative test:

  • if you are using the period immediately before the applicable turnover test period to test whether you had a substantial increase in turnover, compare
    • the total of your entity’s current GST turnover for the 3 months immediately before the applicable turnover test period, with
    • the applicable current GST turnover in the turnover test period (the September or December 2020 quarter).
  • if you are using the period immediately before 1 March 2020 to test whether you had a substantial increase in turnover, compare
    • the total of your entity’s current GST turnover for the three months immediately before 1 March 2020, with
    • the applicable current GST turnover in the turnover test period (the September or December 2020 quarter).
  1. Test for a business affected by drought or natural disaster

Use this test if:

  • your entity conducted business or some of your business in a declared drought or natural disaster zone during the relevant comparison period in 2019, and
  • the drought or natural disaster changed your entity’s turnover.

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 test

Calculate your entity’s current GST turnover for the September or December quarter in the year immediately before the year when the drought or natural disaster was declared, instead of those quarters in 2019. To determine if your GST turnover has fallen by at least 15%, 30% or 50%, compare that figure against your current GST turnover for the September or December 2020 quarter.

  1. Test for a business that has an irregular turnover

Use this test if:

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

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

Alternative test

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

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

Use this test if:

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

Alternative test

Use your current GST turnover 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 turnover for the applicable turnover test period.

Drought or Bushfire Affected?

There are also various sub-tests for entities that fail an alternative test (excluding alternative test 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 #JobKeeper #JobKeeperScheme #tax #jobKeeper2.0

Share this great article

Subscribe to our newsletter

Get the latest udpate to our website

Share This

Select your desired option below to share a direct link to this page

Share on facebook
Share on twitter
Share on linkedin
Share on skype
Share on pinterest
Share on email