New JobKeeper ‘alternative’ turnover tests

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The JobKeeper regime has moved at breakneck speed.

Businesses can now enrol in JobKeeper via myGov, their Australian Tax Office (ATO) business portal or via their Tax Agent.

As of Tuesday, to get JobKeeper from March 30, 2020, a business must have ensured that all eligible employees were paid $1,500 per fortnight from this time, and furthermore, these employers must formally apply for JobKeeper with the ATO by the required May 30, 2020. So, if you are a compliant employer, you still have just under two weeks to apply for JobKeeper to be paid the full entitlement from March 30.

In the past week or so, updated turnover tests have been developed to ensure that an alternative decline in turnover test for an entity is provided where there is not an appropriate relevant comparison period in 2019 for the purpose of an entity satisfying the decline in turnover test under the original rules. 

Other JobKeeper changes

Before I note these new alternative turnover tests, also note some recent changes to the JobKeeper also of relevance:

• 16 or 17 year-olds can be eligible (nominated as employees or “business participants”), however they need to be 
• • financially “independent” AND not in full time study; and
  • included in the nomination notice.
• Once an employer has notified the ATO of election to participate in JobKeeper, there is a requirement to give “relevant”/”eligible” employees notice 
• • Within seven days and
  • State that the employee must provide an employee nomination notice and provide steps for the employee to do so (i.e. the whole of the eligible workforce must be captured) 

There are six new business trading conditions where alternative tests can apply. Those relating most to breeders/owners and primary producers, and thus the subject of this article, are:

1. An entity that is new to business; and
2. Businesses have been impacted by drought or a natural disaster.

Refer to our website www.carrazzo.com.au for further detailed discussion on alternative tests relating to:

• Businesses that have been acquired, disposed of, or restructured within the last year
• Businesses that have experienced substantial growth within the last year
• Businesses that have irregular turnovers
• The business owner of a sole trader or partnership business has been sick, injured or taken other leave

Background

All businesses (including sole traders) can now register their interest to receive the JobKeeper payments for their employees (or themselves if sole traders) if they meet the various turnover tests, the most applicable test to the industry is that their turnover has been reduced by more than 30 per cent relative to a comparable period a year ago (of at least a month).

This basic test to ascertain if there has been a 30 per cent decline in turnover is based on the entity’s turnover in a relevant comparison period in 2019. However, it is recognised that such a test would not be appropriate where there is an event or circumstance, be it internal or external to an entity, that is outside the usual business setting for entities of that class which results in the relevant comparison period in 2019 not being appropriate for the purpose of an entity in the class of entities satisfying the decline in turnover test the relevant comparison period. For example, the entity did not exist during the relevant comparison period. 

The Government has recognized this and released alternative tests that businesses can apply to prove that they have been impacted by Covid-19 and thus are eligible for the JobKeeper assistance. The alternative tests can be applied where the basic 30 reduction in turnover test does not adequately demonstrate the impact of Covid-19.

It is our recommendation that the tests be applied on a case by case basis, depending on your own unique set of circumstances, in consultation with your Tax Advisor. Only one test has to be passed for a business to be eligible for JobKeeper.

Insurance proceeds not part of “projected GST turnover”

Below, you will find constant reference to “projected GST turnover”.

With this concept, it is important to note that proceeds from livestock insurance are not included in working out current or projected GST turnover, thus are to be ignored for the purpose of a projected GST turnover under these alternative tests. Hopefully this overlooked exception enables many of you to meet the required 30 per cent reduction.

As noted above, the most relevant alternative tests for breeders and primary producers are:

1. Entity is new to business 

The updated turnover laws apply to give alternative tests to entities that commenced business after the relevant comparison period in 2019 but not on or after March 1, 2020. Such new businesses cannot compare with a relevant comparison period in 2019 as they do not have one. Note it is that the entity commenced the business after the relevant comparison period. 

1. The first alternative test compares the entity’s projected GST turnover for the relevant 2020 period with the average turnover since the entity commenced business. The calculation will depend on the relevant comparison period the entity uses and how long they have been in business. 
2. The second alternative test compares the entity’s projected GST turnover for the relevant 2020 period with the average turnover of the three months immediately before the applicable turnover test period. This test will use the most recent three months, which give a more accurate reflection of the entity’s GST turnover where the business has grown throughout the course of the year and the turnover in the earlier months is not reflective of the current business. 

Example 1 – New to Business & second alternative test

The Enterprise Company (TEC) assesses its eligibility for JobKeeper payments on April 3, 2020 based on a projected GST turnover for April, 2020 of $4 million. The relevant comparison period is not available because TEC was incorporated and commenced business on October 3, 2019. The following monthly current GST turnovers have been recorded by TEC:

Month GST Turnover                                                               

recorded by TEC

October 2019 $2 million 

November 2019 $4 million 

December 2019 $10 million 

January 2020 $2 million 

February 2020 $2 million 

March 2020 $4 million 

April 2020 $4 million 

The average monthly current GST turnover figure for these months is $4 million. The projected GST turnover for the month of April 2020 does not fall short of the average monthly current GST turnover. The first alternative decline in turnover test is not satisfied. 

Example 2 – New to Business & first alternative test

The Creative Enterprise Company (CEC) assesses its eligibility for JobKeeper payments on April 6, 2020 based on a projected GST turnover for April, 2020 of $1 million. The relevant comparison period is not available because CEC was incorporated and commenced business on 6 November 2019.The second alternative test compares the entity’s projected GST turnover for the relevant 2020 period with the average turnover of the three months immediately before the applicable turnover test period. The following monthly current GST turnovers have been recorded by CEC during the three-month period:

Month GST Turnover recorded by CEC 

January 2020 $3 million 

February 2020 $3 million 

March 2020 $3 million 

1. Businesses have been impacted by drought or a natural disaster

The updated turnover laws apply to give an alternative test to entities that were affected by a drought or another natural disaster in the relevant comparison period in 2019. Where an entity was affected by such droughts or other natural disasters, those circumstances are outside the ordinary business setting. Therefore, the relevant comparison period in 2019 is not appropriate.

This alternative test will apply to compare the entity’s projected GST turnover for the applicable turnover test period with the current GST turnover for the same period in the year immediately preceding the year when the drought or natural disaster was declared rather than 2019. The earlier period will be a more appropriate period to use than the relevant comparison period in 2019 due to the drought or natural disaster being an event or circumstance being outside the usual business setting.