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The JobKeeper alternative test might help you if you fail the primary turnover test.
JobKeeper Alternative Test
If you fail the primary test, you might need an alternative test to show a 30% drop in turnover.
In this episode Andrew Henshaw of Velocity Legal in Sydney will walk you through this JobKeeper alternative test. Here is what we learned but please listen in as Andrew explains all this much better than we ever could.
To listen while you drive, walk or work, just access the episode through a free podcast app on your mobile phone.
Drop in Turnover
To qualify for the jobkeeper payment you need to show a 30% drop in turnover – or 50% if your turnover is over $1b or 15% if you are a charity.
Primary Test
For the primary test you just compare your turnover in March or April 2020 or a later month before October 2020 to your turnover in March or April or the equivalent month in 2019 or you compare your June quarter of 2020 to your June quarter in 2019. That is your primary test. And if you can show a 30% drop this way, then you are done. You don’t need an alternative.
Alternative Test
If you don’t pass the primary turnover test, then there might be an alternative test you can apply
Until now it was unclear what this alternative test would look like. But the Commissioner has now issued a legislative instrument – published on 23 April 2020.
Scenarios
There are alternative tests for 7 different scenarios. So there is not just one alternative test, but several and which one you apply depends on your circumstances. It depends on which one of the 7 scenarios applies to you.
Relevant Comparison Period
Each of the following 7 scenarios refers to a relevant comparison period. Your relevant comparison period might be April 2019 if you want to test your turnover in April 2020. Or it might be May 2019 or a month after that, if you want to test for a later month since April wasn’t that bad yet.
Or your relevant comparison period could be Q4 2019, if you want to test your quarterly turnover for Q4 2020.
1 – New Business
The entity commenced business after the relevant comparison period.
So let’s say your comparison period under the primary test would be April 2019, but the business didn’t exist yet in April 2019. It only started on 1 July 2019. And you want to claim the JobKeeper payment from April 2020 onwards.
In that case you have two alternative tests.
You either take the average of the 9 months from 1 July 2019 to 31 March 2020, divide it by 9 and compare that average to your turnover in April 2020.
Or you take your turnover in the last 3 months, so January to March 2020, divide it by three and compare that to your turnover in April 2020.
-the entity acquired or disposed of part of the business after the relevant comparison period (the business is not the same business in that period as it is now)
2 – Acquisition or Disposal
The entity undertook a restructure after the relevant comparison period. So the business is not the same business in that period as it is now.
In that case you use the turnover in the month just after the acquisition or disposal as your comparison period.
3 – Restructure
The entity undertook a restructure after the relevant comparison period. So back then the business wasn’t what it is now.
In that case – just as before for an acquisition or disposal – you use the turnover in the month just after the restructure as your comparison period.
4 – Substantial Increase in Turnover
The entity’s turnover substantially increased by 50% or more in the 12 months or 25% or more in the 6 months or 12.5% or more in the 3 months immediately before the applicable turnover test period.
If this applies to you, you can look at the last 3 months of turnover and then compare the average or total of these to the relevant month or quarter.
So if you want to test April 2019, you take the average of your turnover from January to March 2020 and look for a 30% drop in turnover.
5 – Affected by Drought or Other Declared Natural Disasters
The entity was affected by drought or other declared natural disaster during the relevant comparison period.
In this scenario, look at the same period in the year immediately before there was a declaration in place. That might mean that you have to go back several years if the declaration had been in place for that long.
6 – Large Irregular Variance
The entity has a large irregular variance in their turnover for the quarters ending in the 12 months before the applicable turnover test period, excluding entities that have cyclical or regular seasonal variance in their turnover. And your lowest quarter is 50% or less of your highest quarter in terms of turnover.
If this applies to you, then you take the last 12 months turnover, divide it by 12 and that is your comparison monthly turnover.
7 – Sickness, Injury or Being Away
The entity is a sole trader or small partnership where sickness, injury or leave have impacted an individual’s ability to work which has affected turnover.
So this one only applies to sole traders and small partners. It doesn’t apply to sole directors or a trust.
In this scenario you take the turnover of the first month after the sole trader or partner’s return and compare it to your April 2020 turnover (or whichever month you want to test).
Just One
So these are the 7 scenarios that allow you to apply a JobKeeper alternative test.
If several scenarios apply to you, you can choose which alternative test you want to apply. You only need to satisfy one of the tests. Just one. It doesn’t matter if you fail all of the other tests, as long as you pass one that applies to you.
If none of these 7 scenarios apply to you, then you can’t apply an alternative test. And hence don’t qualify for the JobKeeper payment.
Commissioner Discretion
The Commissioner can only exercise discretion and determine a test for a class of entities. So they can’t make discretionary decisions for individual entities.
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Disclaimer: Tax Talks does not provide financial or tax advice. All information on Tax Talks is of a general nature only and might no longer be up to date or correct. You should seek professional accredited tax and financial advice when considering whether the information is suitable to your or your client’s circumstances.
Last Updated on 16 March 2021
Tax Talks spoke to Andrew Henshaw - Director at Velocity Legal - for more details.
