JobKeeper Payment 2.0 – The Alternative Tests
In the last article, we looked at the updated ‘basic test’ to assess if you qualify for the extended JobKeeper Payment scheme. This article lists a number of alternative tests for the scheme if you have trouble qualifying under the basic test.
The basic test
Under the new basic test, the relevant entity must have experienced an actual drop in the aggregated GST turnover of 50% for businesses with an aggregated turnover of more than $1 billion and 30% for businesses with an aggregated turnover of $1 billion or less. A not-for-profit entity only needs to have experienced a 15% drop to qualify for the extended JobKeeper Payment scheme.
The eligibility requirements will be based on the entity’s actual GST turnover, not projected GST turnover (as was previously relevant).
For payments from 28 September 2020 to 3 January 2021, the relevant entity needs to demonstrate a drop in actual aggregated GST turnover for the quarter ended 30 September 2020 (‘test period’) compared with that for the quarter ended 30 September 2019 (‘comparison period’).
For payments from 4 January 2021 to 28 March 2021, the relevant entity needs to demonstrate a drop in actual aggregated GST turnover for the quarter ending 31 December 2020 compared with that for the quarter ended 31 December 2019.
If you account for GST on a quarterly basis, you may also use the quarter ended 30 June 2020 as your test period and there are special rules if you account for GST on a monthly basis.
While the new basic test is arguably easier to apply because it relies on your actual GST turnover as reported in your Business Activity Statements, rather than your projected GST turnover, the new test removes the potential subjectivity of guessing the business’ future turnover.
As a result, it’s expected that a number of businesses may no longer qualify for the scheme under the new basic test.
The alternative tests
To ensure that a business wouldn’t be unfairly disqualified from the scheme because its turnover was affected by exceptional circumstances, a series of alternative tests were released with the original scheme.
These alternative tests have now been updated and will continue to apply to the extended scheme if you fall into one or more of the following circumstances:
1. If you started a new business
This alternative test modifies the rules on how the turnover figures are calculated to take into account the fact that you may not have a fair comparison of your turnover between the ‘test period’ and the ‘comparison period’ because your business started after the relevant comparison period. The rules are not straightforward (there are alternative sub-tests within this alternative test!) but essentially average out your turnover since your business started to provide a fairer comparison with your turnover for the test period.
2. If you went through a business disposal, acquisition, or restructure
This test provides a fairer comparison if your business in the test period is not the same business as that in the comparison period because you have acquired, disposed of, or restructured a part of your business that has affected your turnover. The test also provides special rules if you went through multiple acquisitions or disposals. Again, the required calculations are not straightforward.
3. If your business had a substantial increase in turnover
This test looks at whether you have experienced a substantial increase in your GST turnover within 12 months, 6 months, or 3 months immediately before the relevant test period. There are essentially two qualifying sub-tests under this alternative test – you need to first determine if there has been a substantial increase in turnover and, if so, you need to then make the required comparison to see if you qualify.
4. If your business has been affected by drought or other natural disaster
You can use this test if your business has been affected by drought or natural disaster in a declared zone during the comparison period in the year ended 30 June 2019 and your turnover has been affected. This alternative test allows you to use your turnover before the period in which the drought or natural disaster occurred for comparison purposes.
5. If your business has an irregular turnover
This alternative test can only be used if you have experienced a large irregular variance in turnover for the quarters ending in the 12 months before the test period but not due to the fact that your turnover is cyclical as your business normally experiences seasonality as a matter of course. This test allows you to use your average turnover to smooth out the irregularity for comparison purposes.
6. If you operate your business as a sole trader or via small partnership that has experienced sickness, injury, or leave
This last test is rather restrictive. You can only use this test if you carry on business as a sole trader or via a partnership with 4 or fewer partners and the business does not have any employees. You can use the test if the sole trader or one of the partners hasn’t worked for all or part of the comparison period due to sickness, injury, or leave, which has affected your turnover. Similar to the other alternative tests, this test adjusts your turnover to remove the effect on your turnover specifically caused by these exceptional events.
In my view, it’s somewhat disappointing that there is so much complexity in all the turnover tests. The devil is in the detail and careful assessments and calculations are required to ensure that you are applying the tests correctly. Professional advice may be more important than ever, especially if you want to avoid having an argument with the tax office about your eligibility down the track.
Naturally, a key reason for the complexity is the perception that, without it, the tests may be exploited by businesses that shouldn’t qualify for the JobKeeper Payment scheme, but making them too complex and convoluted may defeat the purpose for which the scheme is formulated in the first instance.
Important disclaimer: No person should rely on the contents of this article without first obtaining advice from a qualified professional person. This article is provided on the terms and understanding that the author and BDO Services Pty Ltd are not responsible for the results of any actions taken on the basis of information in this article, nor for any error in or omission from this article. The article is provided for general information only and the author and BDO Services Pty Ltd are not engaged to render professional advice or services through this article. The author and BDO Services Pty Ltd expressly disclaim all and any liability and responsibility to any person in respect of anything, and of the consequences of anything, done or omitted to be done by any such person in reliance, whether wholly or partially, upon the whole or any part of the contents of this article.