JobKeeper Alternative Turnover Test

Our Shoebox Bookkeepers have received extensive training in the use of our Jobkeeper Kits. These kits allow our bookkeepers to determine whether you are eligible using the BASIC TURNOVER TEST or the ALTERNATIVE TURNOVER TEST. These tests are the most important aspect of eligibility. If these are wrong, then you may be liable to pay the ATO back up to 5 years into the future.

The alternative tests apply in the following cases:

commencement of a business;
acquisition or disposal of a business;
business restructures;
substantial increases in turnover during a prior period;
drought or natural disasters;
irregular turnover periods that are not cyclical;
where there is sickness, injury or leave of a sole trader or a partner of a small partnership.

Background to the Alternative Tests

At the heart of the JobKeeper payment scheme is a requirement that, in order to be eligible to participate, an entity must satisfy a decline in turnover test. The Coronavirus Economic Response Package (Payments and Benefits) Rules 2020 (the Rules), which were registered on 9 April 2020, set out the "basic test” and provided the Commissioner of Taxation with a power to determine alternative tests. The alternative tests are set out in the Coronavirus Economic Response Package (Payments and Benefits) Alternative Decline in Turnover Test Rules 2020 (the Alternative Test Rules), which were registered on 23 April 2020.

What are the Alternative Tests?

Where the entity meets the requirements to apply an alternative test, the entity is provided with an alternative period or amount that may be used to compare against the projected GST turnover for the relevant "test period”. The table below provides a high-level summary of the Commissioner’s alternative tests that may be used in the scenarios identified above.

Circumstances when an Alternative Test is appropriate

The Alternative Test Rules identify the following scenarios when the comparison required under the basic test is not appropriate.

START-UP'S

- Entity commenced business before 1 March 2020 and after the comparison period in 2019

To be used when a business began to actually turnover revenue prior to the comparison period, i.e. Using March month, prior to 1st March 2019 OR using May month, prior to 1st May 2019. This will be sliding as we progress through the months of the scheme.

ACQUISITIONS AND DISPOSALS

- Entity acquired or disposed of part of their business and the acquisition or disposal changed the entity's turnover

To be used if a business acquired or sold an asset that changed the nature of their turnover. Examples include, rent rolls, machinery and/or transport vehicles, purchase of another business to incorporate into existing business.

RESTRUCTURE OF BUSINESS

- Entity restructured part or all of it's business and the restructure changed the entity's turnover

To be used if the business restructured internally. Examples include a business with a sales, production and warehouse capabilities. The business may have put the warehousing arm into a separate entity.

SUBSTANTIAL INCREASE IN TURNOVER

- Entity's turnover has increased substantially under the 50% / 25% / 12.5% rule

If the entity grew significantly by 50% over the last 12 months, or 25% over the last 6 months, or 12.5% over the last 3 months then this rule can apply.

IRREGULAR TURNOVER

- Non-cyclical business has irregular turnover during a quarter over the last 12 months

If your turnover in your lowest quarter in the last 12 months is 50% or less of your best quarter in the last 12 months, and your business is not cyclical in nature. For example, entities with regular seasonal variance in their turnover have an appropriate comparison period same time last year, so can use the basic test. i.e. a ski resort would not be able to use the test.

SOLE TRADER OR PARTNERSHIP

- Impact where the sole trader or partner of small partnership is effected by sickness, injury or leave

To be used for a sole trader entity or a partnership that have NO employees. To be used if the sole trader of one of the partners of the small partnerships could not work and produce revenue for the entity for reasons or sickness, injury or leave.

DROUGHT OR NATURAL DISASTERS

- Some or all of the business carried on in a declared drought or other natural disaster zone

For business where the Australian Government have declared them to be affected by a natural disaster and have already been given.

What are the next steps?

The application of the Alternative Test Rules is very fact specific and requires a number of GST turnover calculations to be made for the various alternative periods. Due to the breadth of the alternative tests, taxpayers will likely be able to test using at least one of these alternative methods. Furthermore, in some cases, it may be possible for an entity to be able to access multiple tests (for example, where the business commenced, there was a restructure and an acquisition during the 12-month period).

Given the 30 April deadline for access to the first two JobKeeper payments is drawing near, taxpayers should start looking at these alternative tests now. Please contact your Pitcher Partners representative for further information or for assistance in applying these measures.

Note, there are additional adjustments to each of the tests where the entity qualified for the ATO’s Bushfires 2019-2020 lodgement and deferral program or receive Drought Help concessions during the relevant period.