Let us keep you informed

Learn more about tax areas and issues that may impact you.

JobKeeper 2.0:  New alternative decline in turnover tests explained

Under the JobKeeper 2.0 rules, from 28 September 2020, businesses will need to test the new "actual decline in turnover test" in respect of each quarter for the respective extension periods, as follows:

 

 

Extension Period 1

Extension Period 2

Relevant dates?

 

28 September 2020 to 3 January 2021

4 January 2021 to 28 March 2021

JobKeeper Fortnights?

 

Fortnights #14 to #20

Fortnights #21 to #26

JobKeeper 2.0 – New Actual Decline in Turnover Tests

New "actual decline in turnover test"?

The Business will need to confirm it has experienced a decline in "actual GST turnover" (and not projected turnover) for the September 2020 quarter (compared to the September 2019 quarter) …

The Business will need to confirm it has experienced a decline in "actual GST turnover" (and not projected turnover) for the December 2020 quarter (compared to the December 2019 quarter) …

Business with group aggregated turnover more than $1 bn …

.. of at least 50%

.. of at least 50%

Business with group aggregated turnover less than $1 bn …

.. of at least 30%

.. of at least 30%

Charities and ACNC entities …

 

.. of at least 15%

.. of at least 15%

 

Where the comparison period (ie. September 2019 or December 2019 quarter) is not appropriate to give an accurate reflection of the businesses' decline in turnover, an alternative decline in turnover test may be used where an entity fits into one of 7 categories.

 

There are 7 categories where the business can use an alternative test, and each category has been considered below in detail to:

  • clarify the circumstances when each category can be applied, and
  • explain the alternative test (or tests) for each category is then explained to show how the relevant comparable actual GST turnover is calculated.

UPDATED 22 October 2020:  We note that the ATO released an Additional (8th Category) Alternative decline in turnover test - Lowe Lippmann released an explanation - click here


The 7 categories which can use the new alternative decline in turnover test

 

Before we consider the detail of each of the 7 categories, we must note the following information: 

  1. An entity can only access one of the new alternative decline in turnover tests where the entity does not satisfy the basic decline in turnover test where there is an event or circumstances (internal or external) that are outside the usual business setting.
  2. Entities must use a relevant comparison period that is a full quarter, otherwise where the comparable period is a month it will be multiped by three.
  3. Entities must use "actual GST turnover" made in the relevant quarter, not "projected GST turnover".
  4. We note that JobKeeper payments, Cash Flow Boost payments and State Government Grants should be excluded when calculating "actual GST turnover" for the September 2020 and December 2020 quarters.
  5. An entity must allocate sales to the relevant quarter in the same way you would report those sales to a particular BAS if you were registered for GST.
  6. Under the JobKeeper 2.0 rules, you must now include any sale proceeds from the sale of capital assets sold to produce cash flow (even if caused by the economic impact of the COVID-19 pandemic) - this is explained in further detail below
  7. If more than one alternative decline in turnover test can apply to an entity, it only has to satisfy one of the alternative tests.

Finally, we note that each of the 7 categories can be applied when testing the decline in turnover for both/either of Extensions Period 1 (EP1) and/or Extensions Period 2 (EP2).

 

Category 1 - Business that started after the comparison period started but before 1 March 2020

Use this test if your entity started business after the first day of the relevant comparison period (ie. EP1: 1 July 2019, or EP2: 1 October 2019) but not on or after 1 March 2020.

An example is if your entity started business in October 2019 and therefore you cannot compare your current GST turnover in the September quarter 2020 with your actual GST turnover in the September quarter 2019.

You can apply Alternative Test 1 (below) in this category if your entity started business before 1 March 2020 but after the first day of the relevant comparison period (ie. EP1: 1 July 2019, or EP2: 1 October 2019).

You can use either Alternative Test 1 or Alternative Test 2 (below) if both are applicable to you.

 

Category 1 - Alternative Test 1

If your entity started business before 1 February 2020:

  • to determine if your GST turnover has fallen by at least 15%, 30% or 50%, take your average monthly actual GST turnover since your entity started business (before 1 March 2020) and multiply by 3. Then, compare this figure with your applicable current GST turnover for the September or December 2020 quarters.
  • your average monthly GST turnover will be the total of the actual GST turnovers for each whole month since your entity started business and before 1 March 2020 divided by the number of those whole months.

 If your business started in February 2020:

  • to determine if your GST turnover has fallen by at least 15%, 30% or 50%, compare your average monthly actual GST turnover for February 2020 with your applicable current GST turnover for the September or December 2020 quarter
  • your average monthly GST turnover for February 2020 is your total actual GST turnover for the days your business was in operation in February 2020 divided by the number of days you were in business in February 2020 and then multiplied by 29 (the number of days in February 2020).

 

Category 1 - Alternative Test 2

You can only use this test if your business started after the first day of the relevant comparison period (ie. EP1: 1 July 2019, or EP2: 1 October 2019) but before 1 December 2019.

To determine if your GST turnover has fallen by at least 15%, 30% or 50%, compare your applicable current GST turnover for the September or December 2020 quarter with your actual GST turnovers for the months of December 2019, January 2020 and February 2020.

 

Category 2 - Business acquisition or disposal that changes the entity's turnover

Use this test if:

  • your entity acquired or disposed of part of its business from the start of the relevant comparison period (ie. EP1: 1 July 2019, or EP2: 1 October 2019), including multiple acquisitions or disposals, but before the applicable turnover test period, and
  • the acquisition or disposal changed your entity's current GST turnover.

For example, for the September 2020 quarter turnover test period, you can use this test if you acquired or disposed of part of your business from, 1 July 2019 but before 1 July 2020. The acquisition or disposal must also have changed your entity's current GST turnover during that time.

If the acquisition or disposal made by your entity did not impact the business in a way that changed its current GST turnover, then you cannot use this test.

 

Category 2 - Alternative Test

Use your actual GST turnover from the month immediately after the month the acquisition or disposal occurred, multiplied by three.

To determine if your GST turnover has fallen by at least 15%, 30% or 50%, compare that figure with your applicable current GST turnover for the September or December 2020 quarter.

 

 

Category 3 - Business restructure that changed the entity's turnover

Use this test:

  • if you restructured the whole or part of the entity's business from the start of the relevant comparison period (ie. EP1: 1 July 2019, or EP2: 1 October 2019) but before the applicable current turnover test period (ie. EP1: 1 July 2020, or EP2: 1 October 2020), including multiple restructures, and
  • the restructure changed your entity's current GST turnover.

For example, in calculating the actual decline in turnover for the September 2020 quarter turnover test period, you use this test if you restructured your business, or part of it, from 1 July 2019 and before 1 July 2020.

The restructure must also have changed your entity's current GST turnover. If the restructure did not impact the business in a way that changed its current GST turnover, then you cannot use this test.

 

Category 3 - Alternative Test

Use your actual GST turnover from the month immediately after the month the restructure undertaken was completed, multiplied by three.

 ine if your GST turnover has fallen by at least 15%, 30% or 50%, compare that figure with your applicable current GST turnover for the September or December 2020 quarter.

 

Category 4 - Business that has had a substantial increase in turnover

Use this test if your entity had a substantial increase in its current GST turnover of:

  • 50% or more in the 12 months immediately before the applicable turnover test period (ie. EP1: 1 July 2020, or EP2: 1 October 2020) or before 1 March 2020, or
  • 25% or more in the 6 months immediately before the applicable turnover test period (ie. EP1: 1 July 2020, or EP2: 1 October 2020) or before 1 March 2020, or
  • 12.5% or more in the 3 months immediately before the applicable turnover test period (ie. EP1: 1 July 2020, or EP2: 1 October 2020) or before 1 March 2020.

To test if your entity's current GST turnover increased, by at least the applicable percentage above (ie. 50%, 25% or 12.5%), in the 12 (or 6 or 3) months immediately before the applicable turnover test period (ie. EP1: 1 July 2020, or EP2: 1 October 2020) or before 1 March 2020, you will need to:

  • compare your current GST turnover for the month immediately before the applicable turnover test period (ie. EP1: 1 July 2020, or EP2: 1 October 2020) or 1 March 2020
  • with your current GST turnover for the month immediately before the start of the 12 (or 6 or 3) months.

 

Category 4 - Alternative Test

To determine if your turnover has declined by 15%, 30% or 50%, in applying this alternative test:

  • if you are using the period immediately before the applicable turnover test period (ie. EP1: 1 July 2020, or EP2: 1 October 2020) to test whether you had a substantial increase in turnover:
  1. compare the total of your entity's current GST turnover for the 3 months immediately before the applicable turnover test period (ie. EP1: 1 July 2019, or EP2: 1 October 2019)
  2. with the applicable current GST turnover in the turnover test period (the September or December 2020 quarter).
  • if you are using the period immediately before 1 March 2020 to test whether you had a substantial increase in turnover:
  1. compare the total of your entity's current GST turnover for the three months immediately before 1 March 2020,
  2. with the applicable current GST turnover in the turnover test period (the September or December 2020 quarter).
 

 

Category 5 - Business affected by drought or natural disaster

Use this test if:

  • your entity conducted business or some of your business in a declared drought or natural disaster zone during the relevant comparison period in 2019, and
  • the drought or natural disaster changed your entity's turnover.

For the purposes of this test, a declared drought zone includes an area subject to a formal declaration of drought by a commonwealth, state, territory or local government agency. It also includes an area for which there has been a public identification or acknowledgment that the area is drought affected by such an agency.

 

Category 5 - Alternative Test

Calculate your entity's actual GST turnover for the September or December quarter in the year immediately before the year when the drought or natural disaster was declared, instead of those quarters in 2019.

To determine if your GST turnover has fallen by at least 15%, 30% or 50%, compare that figure against your current GST turnover for the September 2020 quarter (for EP1) or December 2020 quarter (for EP2).

 

 

Category 6 - Business that has an irregular turnover

Use this test if:

  • for the consecutive 3-month periods ending in the 12 months immediately before the applicable turnover test period (ie. EP1: 1 July 2019, or EP2: 1 October 2019) or 1 March 2020, the lowest of your entity's actual turnover for any of those 3-month periods is no more than 50% of the highest of the entity's actual GST turnover for any of those 3-month periods, and
  • the entity's current GST turnover is not cyclical.

Your entity cannot use this alternative test if your entity's turnover is cyclical. For example, a fruit growing business that is seasonal and usually has less turnover during certain months of the year cannot use this test. Or, for example, a business that usually has increased turnover in December from Christmas trade cannot use this test.

 

Category 6 - Alternative Test

In applying this alternative test, you must use your entity's average monthly actual GST turnover.

You can work out your entity's average monthly actual GST turnover as follows:

  • add the total of your current GST turnovers for each whole month in the 12 months immediately before the applicable turnover test period (ie. EP1: 1 July 2019, or EP2: 1 October 2019) or 1 March 2020, and
  • divide the total by 12 – this will give the entity's average monthly actual GST turnover, then
  • multiply your entity's average monthly current GST turnover by three and compare that to the current GST turnover for the applicable turnover test period (ie. September 2020 or December 2020 quarter).

 

Category 7 - Sole trader or small partnership with sickness, injury or leave

Use this test if:

  • you are a sole trader or a partnership (with four or fewer partners), and your entity has no employees,
  • the sole trader or one of the partners has not worked for all or part of the relevant comparison period due to sickness, injury or leave, and
  • your turnover was affected as a result of the sole trader or partner not working for all or part of the period.

 

Category 7 - Alternative Test

Use your actual GST turnover from the month immediately before the month in which the sole trader or partner did not work due to sickness, injury or leave and multiply that by three and then compare that with your current GST turnover for the applicable turnover test period (ie. September 2020 or December 2020 quarter).

 

 UPDATED 22 October 2020:  We note that the ATO released an Additional (8th Category) Alternative decline in turnover test - Lowe Lippmann released an explanation - click here.

Revenue from assets sold to produce cash flow included in "actual GST turnover"

When businesses first started accessing JobKeeper 1.0 and used their projected GST turnover to assess eligibility, they did not have to include revenue from selling capital assets in this turnover prediction.

 

However, under the JobKeeper 2.0 extended rules, a business must only test actual GST turnover.  This includes revenue from the sale of capital assets, including where the business has sold them to stay afloat.

 

This may cause some unfortunate outcomes in certain circumstances, where the proceeds from the sale of a capital asset may cause an entity to fail the decline in turnover test, and thus not be eligible for the JobKeeper subsidy after 28 September 2020.


Please do not hesitate to contact your Lowe Lippmann Relationship Partner if you wish to discuss any of these matters further.