One of the major issues that was immediately highlighted with the JobKeeper package was that the initial test for being an eligible business wouldn’t necessarily fit all business scenarios. Upon announcement, the 30% decline in turnover against the same period in the prior year test, immediately raised concerns. What if another business was purchased since then, what if we’ve seen a sharp uptick in turnover since then (for whatever reason) or like many business here in Townsville, what if the floods was right in the middle of that comparison period? All legitimate questions, all valid business reasons, and all reasons why that particular business shouldn’t necessarily miss out on the JobKeeper package just because the comparison period that was outlined wasn’t entirely appropriate.
Our issue wasn’t necessarily with this, as it was identified fairly early on that in the instance where the comparison period isn’t appropriate, that the ATO would have discretion on determining a more appropriate comparison period for that business. As you would be able to read from our earlier posts, our worry was that if this were going to be on a case by case basis with the ATO, that their “usual” turnaround time for a query would simply mean that particular business wouldn’t be informed enough to make a decision about the future of their business in timely manner. Obviously the ATO also felt that this wouldn’t be a good way to deal with it and consequently they’ve announced 7 alternative tests.
These tests will only apply should a business not be able to satisfy the original test.
1. If the business is less than 12 months old
This alternative test applies if a business was established less than a year ago, and so cannot show a decline in turnover year-on-year.
It is available to businesses that commenced before March 1, 2020, but after the one- or three-month relevant comparison period.
The alternative test
If that business is using a one-month period, it should calculate its average monthly GST turnover, based on each whole month it has been in business.
If the business is reporting quarterly, it should take that monthly average GST turnover, and multiple it by three, to get the comparable quarterly figure.
If the business launched after February 1, 2020, and so had not been in business for a full month as of March 1, the average monthly turnover should be calculated by dividing total February turnover by the number of days the entity was in business, and multiplying that number by 29.
A second alternative test
If the business has been around for three months or more, as of March 1, 2020, the business owner can choose to use the GST turnover for the three months leading up to that date as the comparison period.
If they are comparing month-on-month, they can divide that turnover figure by three, and use that as the comparison.
2. If an acquisition or disposal has changed turnover significantly
This applies if a business went through an acquisition or disposal process that changed its turnover, meaning a year-on-year comparison no longer makes sense.
The alternative test
Business owners in this situation should use the month directly following the acquisition or disposal event as the comparison period.
If the business is using a quarterly comparison, then the turnover of that month should be multiplied by three. The comparison period should not be the three months following the event.
If a business has been through more than one acquisition or disposal, they should use the month following the most recent event.
And, if the most recent event was less than a month before the start of the testing period (whether that’s the month of March or a three-month period), the business should use the month immediately before the testing period begins.
3. If a business restructure has changed turnover significantly
This alternative test applies if your business, or part of it, has undergone a restructure in the past 12 months, meaning year-on-year turnover is not a suitable comparison.
The alternative test
If the business is making a monthly comparison, it should use the GST turnover for the month immediately following that in which the restructure occurred.
If the business reports quarterly, it should take the GST turnover for the month following the restructure, and times it by three.
If there is more than one restructure, the business should use the month following the second event as the comparison period. Again, if the business is making a three-month comparison, that figure should be multiplied by three.
And if the most recent restructure happened less than a month before the turnover test period, the business should use the GST turnover for the month immediately preceding that test period
4. If the business has seen substantial growth in turnover
This provision makes allowances for high-growth businesses, including startups, that may have seen a significant increase in GST turnover in the past 12 months, but still suffered a decrease caused by the COVID-19 outbreak.
A business can use this test if it has seen more than 50% growth in GST turnover in the 12 months leading up to the test period.
The alternative test also applies if the business has seen 25% growth in turnover in six months, or 12.5% growth over three months, leading up to the test period.
The alternative test
If the business reports quarterly, it can use the three months directly preceding the test period as its comparison period.
If the business reports monthly, it should take the GST turnover from those three months, and divide it by three, to get a more accurate monthly figure.
5. If the business has been affected by drought or natural disaster
This test applies to entities that conducted some or all of their business in a declared drought or natural disaster zone during the relevant comparison period, and who believe that had a negative effect on their turnover.
The alternative test
Businesses in this situation can simply use a comparison period from 2018, instead of 2019.
So, instead of comparing March 2020’s revenue, for example, to March 2019, they can compare March 2020 to March 2018, to get a more accurate idea of the effect the virus has had.
6. If a business has irregular turnover
A business can apply this test if their turnover is not considered cyclical.
Businesses will also have to prove a significant difference in quarterly turnover.
A business will be eligible if, over the 12 months leading up to the test period, the quarter with the highest GST turnover saw more than twice the revenue of the lowest-performing quarter.
The alternative test
In this case, a business can calculate an average monthly GST turnover for the 12 months leading up to the test period. That monthly figure will act as the comparison turnover figure.
If the business reports quarterly, that monthly figures should be multiplied by three.
7. If a sole trader or partner has taken leave
This allowance is for sole traders or partnerships with no employees, where an individual did not work for all or part of the comparison period in 2019, because of illness, injury or other leave. The alternative test applies if that leave caused a negative impact on revenue at the time.
The alternative test
In this case, business owners should take the month immediately following the individual’s return to work, and use this as the comparison period.
If the business is using a three-month test period, they should multiply the turnover for that month by three, rather than using an actual three-month period.
Please keep in mind that there are concessions for each of these tests around the ATO bushfire’s lodgement and payment deferrals or if a business has received any drought relief concessions.
We understand that some of these alternative tests may be difficult to follow. Please contact our office if you have any questions at all.
