Alternative eligibility test for JobKeeper
The ATO registered the Coronavirus Economic Response Package (Payments and Benefits) Alternative Decline in Turnover Test Rules 2020 on 23 April 2020. These Rules set out the alternative tests that can be used to determine if the decline in turnover test is satisfied for the purposes of the JobKeeper Payment.
Businesses (including sole traders and charities) must have suffered a "substantial decline" in turnover to be entitled to the Jobkeeper Payment of $1,500 for each eligible employee. The basic test requires an entity to measure its projected GST turnover and compare this to the actual GST turnover in a relevant comparison period in 2019. Refer here.
There is scope for an employer to use an alternative test if their circumstances do not fit the basic test rules, which is what the Rules set out. Note that the Rules apply to a class of entity, not an entity or entities in particular.
The Rules set out 7 categories and the test(s) that can be used for each. If an entity satisfies the basic test, there is no need for it to then apply the alternative test – in other words, only entities that do not satisfy the basic test need worry about applying any of the alternative tests. Similarly, if more than one alternative decline in turnover test applies to an entity, then that is enough – it only has to satisfy one of the alternative decline in turnover tests.
It is important to note that the grounds for applying an alternative test is that the comparison period is not an appropriate reference point. Therefore, something needs to have happened in the prior 12 months that renders the comparison period unfair. That something also needs to be outside the usual business setting for that entity.
Category 1
Business commenced within the last 12 months
This applies to give 2 alternative tests to entities that commenced business after the relevant comparison period in 2019, but not on or after 1 March 2020. While an entity can exist before it commenced business, it is when it commenced business that is relevant for this test. Entities that already operated business during the relevant comparison period and commenced a new additional business after the relevant comparison period have a relevant comparison period, so this test does not apply to them (although one of the other alternative decline in turnover tests below may apply).
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).
The second alternative test compares the entity's projected GST turnover for the relevant 2020 period with the average turnover of the 3 months immediately before the applicable turnover test period. This test will use the most recent 3 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.
Category 2 & 3
Acquisition, disposal or restructure changed turnover within the last 12 months
These apply to entities that have undergone certain large changes in their business. For example, where an entity has undertaken a disposal or acquisition of part of their business, or restructure in the business, or multiples or combinations of those.
In such instances, the alternative tests will apply to compare the entity's projected GST turnover for the applicable turnover test period (i.e. for 2020) with the current GST turnover for the month after the month in which the disposal, acquisition or restructure occurred (in 2019). Where there are multiple acquisitions, disposals or restructures, the entity's projected GST turnover will be compared with the GST turnover for the whole month after the last acquisition, disposal or restructure has taken place.
If there is no whole month after the last acquisition, disposal or restructure, then the month immediately before the applicable turnover test period is used.
Category 4
Business had a substantial increase in turnover
The alternative test here applies to entities that have 50% or more growth in the 12 months before the turnover test period they use (the applicable turnover test period).
To cater for entities that started their growth during the 12 months before their turnover test period, the alternative decline turnover test also applies to entities with 25% or more growth in turnover in the 6 months before the applicable turnover test period and 12.5% or more growth in the 3 months before the applicable turnover test period. This alternative test will apply to compare the entity's projected GST turnover for the applicable turnover test period with the average turnover from the 3 months immediately before the test period.
Category 5
Business has irregular (but not cyclical) turnover
This will apply to entities that have large irregular variances in their turnover for the quarters ending in the 12 months before the applicable turnover test period. This alternative test will apply to compare the entity's projected GST turnover for the applicable turnover test period with the average turnover from the 12 months immediately before the applicable turnover test period.
However, an entity that has cyclical turnover will not be able to apply this alternative test. The explanatory statement says that, for example, entities with regular seasonal variance in their turnover have an appropriate relevant comparison period in 2019, being the relevant comparison period used for the basic test. That period is the same time in 2019 as 2020, and hence in the same season, so the relevant comparison period in 2019 is not outside the usual business setting for the entity.
Category 6
Business has been affected by drought or natural disaster
Where an entity was affected by such droughts or other natural disaster in the relevant comparison period in 2019, the 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 (i.e. rather than 2019).
Category 7
Business is a sole trader or small partnership with no employees and had sickness, injury or leave
An alternative test applies to a sole trader or small partnership if the turnover of the sole trader or partnership was affected by the sole trader or a partner not working for all or part of that period due to sickness, injury or leave.
This test is intended to address the situation where it is the individual, the sole trader or partner, who works in the business to generate turnover, and hence only applies to those sole traders and small partnerships which do not have employees. Similarly, the test only applies to "small partnerships" – as small partnerships would have more difficulty in compensating for the absence from work of one of the partners, while larger partnerships can expect absences as a usual business setting. This applies to partnerships of 4 or less individual partners (using the ITAA 1997 definition of partnerships).
If the relevant comparison period is one calendar month, the entity uses the current GST turnover for the month immediately after the month in which sole trader or partner returned to work instead of the current GST turnover of the relevant comparison period. If the relevant comparison period is a quarter, the entity multiplies the current GST turnover for the month immediately after the month in which the sole trader or partner returned to work by 3.
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