Following this new guidance from the ATO, Treasury announced a number of other measures which will be implemented in due course to provide further clarification and guidance to the JobKeeper Rules.
Importantly, the alternative tests become available where an entity cannot satisfy the 'basic test'. If the basic test cannot be satisfied, only one of the alternative tests needs to be satisfied in order to obtain the JobKeeper payments. It does not matter that more than one of the alternative tests could be applied to an entity, or if one alternative test is failed but another can be satisfied as there does not appear to be a hierarchy or order in which the alternative tests must be applied.
What are the alternative tests?
We have set out the alternative tests below.
The ATO has provided concessions for entities that qualified for the ATO's Bushfires 2019-2020 lodgement and payment deferrals or received Drought Help to exclude the months covered by that assistance when calculating their turnover in each of the relevant alternative tests (unless those are the only months available).
Entity is new to business
Eligibility
Entities that commenced business before 1 March 2020, but after the relevant comparison period (i.e. entities that have been in business for less than a year).
Calculating alternative turnover:
Option 1: Compare projected GST turnover for the relevant 2020 period with the average GST turnover since the entity commenced business (Note: The calculation of average GST turnover will depend upon when the entity commenced business and whether the entity's relevant comparison period is a month or a quarter).
Option 2: Compare projected GST turnover for the relevant 2020 period with the average GST turnover for the three months immediately before the applicable turnover test period (Note: This test is not available to entities that had not commenced business at least three months before 1 March 2020).
Acquisitions and disposals
Eligibility
Entities that acquired or disposed of part of their business after the relevant comparison period and before the applicable turnover test period, which changed the entity's turnover.
Calculating alternative turnover
Compare projected GST turnover for the applicable turnover test period with the current GST turnover for the month* immediately after the month in which the disposal or acquisition occurred (* or quarterly equivalent, if the taxpayer reports on a quarterly basis). (Note: If there is more than one acquisition or disposal, the entity can use the whole month immediately after the last acquisition or disposal, or if there is no whole month after the last acquisition or disposal and before the applicable turnover test period an entity can use the month immediately before the applicable turnover test period).
Business restructure that changed the entity's turnover
Eligibility
Entities that have had a restructure of their business after the relevant comparison period and before the applicable turnover test period which changed the entity's turnover.
Calculating alternative turnover
Compare projected GST turnover for the applicable turnover test period with the current GST turnover for the month* immediately after the month in which the restructure occurred (*or quarterly equivalent, if the taxpayer reports on a quarterly basis).
Business had substantial increase in turnover
Eligibility
An entity that had an increase in turnover of:
- 50% or more in the 12 months immediately before the applicable turnover test period;
- 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
Calculating alternative turnover
Compare projected GST turnover for the applicable turnover test period with the average turnover from the three months immediately before the turnover test period.
Businesses affected by drought or natural disaster
Eligibility
An entity that conducted business in a declared drought zone or a declared natural disaster zone during the relevant comparison period and the drought or natural disaster changed the entity's turnover.
Calculating alternative turnover
Compare projected GST turnover for the applicable turnover test period with the current GST turnover for the same period in the year immediately prior to the year when the drought or natural disaster was declared, rather than 2019.
Business has an irregular turnover
Eligibility
An entity with a large variance in its turnover ('irregular turnover'). Irregular turnover is considered to occur where the entity's lowest turnover quarter is no more than 50% of the highest turnover quarter in the 12 months immediately prior to the applicable turnover test period, and the entity's turnover is not cyclical.
Calculating alternative turnover
Compare projected GST turnover for the applicable turnover test period with the average turnover from the 12 months immediately before the applicable turnover test period.
Sole trader or small partnership with sickness, injury or leave
Eligibility
If an entity is a sole trader or small partnership that has no employees, the sole trader or at least one of the partners did not work for all or part of the relevant comparison period due to sickness, injury or leave and this affected the turnover of the partnership or sole trader.
Calculating alternative turnover
Compare projected GST turnover for the applicable turnover test period with the current GST turnover for the month* immediately after the month in which the sole trader or partner returned to work (* or quarterly equivalent, if the taxpayer reports on a quarterly basis).
How do I calculate GST turnover?
After an appropriate alternative test is chosen, an entity will need to work out the projected GST turnover for the chosen test period and the current GST turnover for the comparison period consistent with the modifications to the GST law under the JobKeeper rules.
What has the ATO not addressed?
These measures have not attempted to address a widely reported issue with the 'basic test" in the rules, being that business organisations who use separate 'service entities' to employ staff and provide administrative services to the revenue-generating parts of their business will continue to have difficulty satisfying these alternative tests. On Friday 24 April, the Treasury announced measures to deal with this issue.
The Commissioner has acknowledged in the Explanatory Statement to the Legislative Instrument that it cannot determine an alternative decline in turnover test in all circumstances, but rather only those that are outside the usual business setting for a class of entities. It is hoped that the Commissioner will be open to providing additional alternative decline in turnover tests (if required to address currently unforeseen circumstances) in order to assist taxpayers.
If you would like assistance in determining whether alternative decline in turnover tests could apply to your business and assist you in obtaining the JobKeeper payment, please contact us.
