JobKeeper 2.0: Additional (8th Category) of Alternative decline in turnover test released

Lowe Lippmann Chartered Accountants

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:

	Extension Period 1	Extension Period 2
Relevant dates?	28 September 2020 to 3 January 2021	4 January 2021 to 28 March 2021
Current testing period?	1 July - 30 September 2020	1 October – 31 December 2020
Relevant comparison period?	1 July - 30 September 2019	1 October – 31 December 2019

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 (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.

Additional (8th Category) Alternative decline in turnover tests

We note that this additional 8th Category can be applied when testing the decline in turnover for both/either of Extensions Period 1 ( EP1 ) and/or Extensions Period 2 ( EP2 ).

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:

the entity's business had temporarily ceased trading due to an event or circumstance outside the ordinary course of its business ;

trading temporarily ceased for a week or more ;

some or all of the relevant comparison period occurred during the time in which the entity's business had temporarily ceased trading ; and

the entity's business resumed trading before 28 September 2020 .

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.

Category 8 - Alternative Test 1

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:

Current GST turnover for the same period in the year immediately before the business temporarily ceased trading

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.

Category 8 - Alternative Test 2

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:

The total of its current GST turnover in the 3 months immediately before the month in which it temporarily ceased trading

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.

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

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