JobKeeper 2.0: Additional (8th Category) of Alternative decline in turnover test released
JobKeeper 2.0: Additional (8th Category) of Alternative decline in turnover test released
Last week the Australian Taxation Office released further JobKeeper guidance to include an additional class of entity (now, the 8th Category) that may be able to apply an Alternative decline in turnover test. The additional class is targeted at entities that temporarily ceased trading during the relevant comparison period.
It is important to clarify upfront that the term " relevant comparison period " is very important to identify, and it will change for each the two extension periods as follows:
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| 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:
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 (now) 8 categories.
On 29 September 2020, we released a Tax Alert explaining the original 7 Categories of taxpayers which can consider the Alternative decline in turnover tests under JobKeeper 2.0 after 28 September 2020 – click here to revisit.
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| Category 8 - Business that started after the comparison period started but before 1 March 2020 |
| Use this test if your entity temporarily ceased trading during part, or all, of the relevant comparison period in 2019 (ie. EP1: 1 July – 30 Sept 2019, or EP2: 1 Oct – 31 Dec 2019).
An entity can apply either of these two new Alternative tests (below) if all of the following conditions are met:
Temporarily ceasing to trade includes where a business ceases to make supplies, or cannot otherwise offer its goods and services to customers. The entity is not required to completely stop carrying on business, but requires a suspension of the ordinary activities of the business while it is still carrying on business due to some event or circumstance outside the ordinary course of business.
We note that "ceasing trade" at the end of a business day, on weekends, public holidays or during the offseason of a seasonal business would not satisfy the requirement that ceasing trading is because of an event or circumstance outside the ordinary course of the entity's business , as these examples all form part of the ordinary course of the entity's business.
This Category 8 Alternative test will not generally apply where a business ceases trade because its sole trader or partner (in a small partnership) goes on planned leave for all or part of the relevant comparison period – as the Category 7 Alternative test should cover these circumstances.
You can use either Alternative Test 1 or Alternative Test 1 (below) if both are applicable to you.
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| Category 8 - Alternative Test 1 |
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Under Alternative Test 1, rather than comparing its current GST turnover for the turnover test period (ie. EP1: September 2020 quarter, or EP2: December 2020 quarter) with its current GST turnover for the relevant comparison period (ie. EP1: September 2019 quarter, or EP2: December 2019 quarter), it compares it with its:
Therefore, if the turnover test period for EP1 is the September 2020 quarter, an entity's current GST turnover for this quarter is compared with its current GST turnover for the September 2018 quarter.
Where an entity was not registered for JobKeeper 1.0 before 28 September 2020, and it chooses to apply for JobKeeper 2.0 using a monthly comparison period (ie. October 2020), the entity will compare its projected GST turnover for that month with its current GST turnover for the month of October 2018.
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| Category 8 - Alternative Test 2 |
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Under Alternative Test 2, rather than comparing its current GST turnover for the turnover test period (ie. EP1: September 2020 quarter, or EP2: December 2020 quarter) with its current GST turnover for the relevant comparison period (ie. EP1: September 2019 quarter, or EP2: December 2019 quarter), it compares it with its:
Therefore, if the turnover test period for EP1 is the September 2020 quarter, and the entity temporarily ceased trading in August 2019, its current GST turnover for the September 2020 quarter is compared with the total of its current GST turnover for the months of May 2019, June 2019 and July 2019 (ie. the 3 months before the month it temporarily ceased trading).
Where an entity was not registered for JobKeeper 1.0 before 28 September 2020, and it chooses to apply for JobKeeper 2.0 using a monthly comparison period (ie. October 2020), the entity will compare its projected GST turnover for that month with its current GST turnover for the month of September 2019.
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| Please do not hesitate to contact your Lowe Lippmann Relationship Partner if you wish to discuss any of these matters further. |
