Technical Update:

Legislative instrument on JobKeeper alternative turnover tests

24 September 2020

On 23 September 2020, the ATO registered this instrument that sets out seven alternative tests that can be used to determine if the decline in turnover test is satisfied for the purposes of JobKeeper after 28 September 2020, if there is no appropriate relevant comparison period in 2019. This instrument updates and replaces the former instrument that set out the decline in turnover tests for JobKeeper prior to 28 September 2020.  

Category 1: entity is new to business

This applies where an entity commenced business after the first day of the relevant comparison period in 2019 and before 1 March 2020, with the result that the business did not exist for the whole relevant comparison period, so instead an entity can one of these two options:

  • Compares the entity's current GST turnover for the turnover test period with the average monthly current GST turnover since the entity commenced business; or
  • Compares the entity's current GST turnover for the turnover test period with the current GST turnover of the 3 months immediately before 1 March 2020 (this option is only available if the business commenced at least 3 months before 1 March 2020).

This alternative test only applies where the entity was not previously operating any business.

Categories 2 and 3: disposals, acquisitions and restructures

These apply where an entity acquired or disposed of part of their business or restructured part or all of its business at, or after, the start of the relevant comparison period in 2019, which changed its current GST turnover. The alternative tests compare the entity's current GST turnover for the applicable turnover test period with the current GST turnover for the month after the month in which the disposal, acquisition or restructure occurred.

Where there are multiple acquisitions, disposals or restructures the entity may apply this test to each acquisition, disposal or restructure.  This is a change to the similar test in the former instrument, which required using the period after the last such transaction.

Category 4: entity had substantial increase in turnover

This applies where an entity has had an increase in current GST turnover by:

  • 50% or more in the 12 months immediately before either the applicable turnover test period or 1 March 2020;
  • 25% or more in the 6 months immediately before either the applicable turnover test period or 1 March 2020; or
  • 12.5% or more in the 3 months immediately before either the applicable turnover test period or 1 March 2020.

Entities may choose whether to use the period immediately before either the applicable turnover test period or before 1 March 2020 and then need to compare their current GST turnover for the applicable turnover test period with the average current GST turnover from the 3 months immediately before the test period or 1 March 2020.

Category 5: entity affected by drought or other natural disasters

Where an entity was affected by a natural disaster in the relevant comparison period in 2019, the alternative test will apply to compare the entity's current 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 natural disaster was declared.

Category 6: business has an irregular turnover

This will apply to an entity that has an "irregular" current GST turnover that is not cyclical, such as can occur in the building and construction sector. Before applying this test, the entity has to show GST turnover in a consecutive 3-month period ending in the 12 months immediately before the turnover test period or 1 March 2020 was no more than 50% of the highest GST turnover in any other consecutive 3-month period in those 12 months. The words ‘consecutive 3-month periods’ replace the words ‘the quarter’ from the former instrument.

This alternative test will apply to compare the entity's current GST turnover for the applicable turnover test period with the average current GST turnover from the 12 months immediately before the applicable turnover test period or 1 March 2020.

Category 7: sole trader or small partnership with 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. The test is only available to those sole traders and small partnerships which do not have employees.

BDO Comment

Businesses that are looking to apply for the JobKeeper extension using one of the alternative tests will have to indicate to the ATO that they are doing so on their next claim.