COVID-19 – JobKeeper Alternative Test Summary

Alternative test for determining eligibility for JobKeeper wage subsidy

On Thursday 23 April, the Australian Taxation Office released their legislative instrument outlining the details of the “alternative test” for determining eligibility for the JobKeeper wage subsidy program.

The basic test is simply comparing turnover from a current period to the same period 12 months ago. Where there is not an appropriate relevant comparison period then the alternative test can be used.

To be eligible for the alternative test, an entity needs to fall within one of seven classes that the Commissioner of Taxation has determined. These are:

  • Business commenced within the last 12 months
  • Acquisition or disposal changed turnover within the last 12 months
  • Business restructure changed turnover within the last 12 months
  • Business had a substantial increase in turnover
  • Business has irregular (but not cyclical) turnover
  • Business has been affected by drought or natural disaster
  • Business is a sole trader or small partnership with no employees and had sickness, injury or leave

In each class there is an alternative basis to use as the comparison turnover when comparing to current period turnover. Furthermore, in all classes and for each application, something needs to have happened to the business that is outside the usual business setting that makes the prior comparison period an inappropriate reference point.

If a business fails the basic test and either fails the alternative test, or doesn’t fit within one of these classes, then there is no further scope to apply for the program.

ClassWhen & WhatTestNotes
Business commencedThe entity commenced business before 1 March 2020 and after the relevant comparison period.1 – If comparison period is 1 month, use average monthly current GST turnover, or if comparing a quarter, use the average months times 3.

2 – If comparison period is 1 month, divide the 3 months current GST turnover by 3, or if comparing a quarter, use the 3 months current GST turnover.
1 – If commenced business before 1 February 2020, average monthly turnover is the total of each whole month after commencement and before 1 March 2020 divided by number of months. If started after 1 February 2020, then it is divided by days and multiplied by 29.
2 – 3 months current GST turnover is the 3 months before 1 March 20.
Acquisition or disposal that changed turnoverThere was an acquisition or disposal of part of the business after the relevant comparison period and before the test period and that changed the entity’s turnover.If comparison period is a month, entity uses current GST turnover from the month immediately after the month in which the event occurred.

If comparison period is a quarter, entity multiplies current GST turnover from the month immediately after the event by 3.
If there is more than one event occurring after the comparison period and before the test period, then use the whole month immediately after the last event.

If there is no whole month after the last event and before the test period, use the month immediately before the test period.
Business restructure that changed turnoverThere was a restructure of part of the business after the relevant comparison period and before the test period and that changed the entity’s turnover.If comparison period is a month, entity uses current GST turnover from the month immediately after the month in which the restructure occurred.

If comparison period is a quarter, entity multiplies current GST turnover from the month immediately after the restructure by 3.
If there is more than one event occurring after the comparison period and before the test period, then use the whole month immediately after the last restructure.

If there is no whole month after the last restructure and before the test period, use the month immediately before the test period.
Business had substantial increase in turnoverApplies if the entity had an increase in turnover of;
– 50% or more in 12 months before the test period
– 25% or more in the 6 months before the test period
– 12.5% or more in the 3 months before the test period.
If comparison period is a month, entity divides the 3 months current GST turnover by 3.

If comparison period is a quarter, entity uses the 3 months current GST turnover.
The 3 months current GST turnover is the total current GST turnover in the 3 months immediately before the test period.
Business has irregular turnoverThe business has irregular turnover that is not cyclical in nature. For the quarters ending 12 months immediately before the test period, the lowest quarter turnover is less than 50% of the highest quarter turnover.If comparison period is a month, the entity uses the average monthly current GST turnover.

If comparison is a quarter, the entity multiplies the average monthly current GST turnover by 3.
The average monthly current GST turnover is the current GST turnover for each whole month in the 12 months immediately before the applicable turnover test period added together and divided by 12.
Business affected by drought or natural disasterThe entity conducted some of its business in a declared drought or natural disaster zone and that changed turnover.The entity uses the entity’s current GST turnover for the same period in the year immediately before the declaration was made.
Sole trader or small partnership with sickness, injury or leaveApplies if the entity is a sole trader or small partnership and;
– no employees
– sole trader or one of the partners didn’t for all of the comparison period due to sickness, injury or leave
– turnover was affected by that absence.
If comparison period is a month, entity uses current GST turnover from the month immediately after the person in question returned to work.

If comparison period is a quarter, entity multiplies current GST turnover from the month immediately after the return to work by 3.

Other key notes:

  • These alternative tests are only applicable if the basic test is failed.
  • The grounds for applying an alternative test is that the comparison period is not an appropriate reference point. Therefore, something needs to have happened in the prior 12 months that renders the comparison period unfair. That something also needs to be outside the usual business setting for that entity.
  • If more than one alternative test applies, only need to satisfy one of them.
  • The Commissioner has determined that these are the classes of business that the alternative test applies to. Therefore, for an alternative test to apply a business needs to come under one of these classes. There is no further scope for testing under the program.
  • The tests are self-assessment based much like the basic test. The application form does not require any test data or proof of satisfying the test to be submitted. The application doesn’t even ask to declare whether the applicant has applied the basic or alternative test.
  • Proof of satisfying the test is no doubt part of the ongoing record keeping requirements and general anti-avoidance/integrity rules still apply to these tests.
  • The actual legislative instrument and explanatory statement is available here.
  • The ATO has a summary page here.

Please contact your Accru Melbourne representative on (03) 9835 8200 to assist with your application for the JobKeeper Payment.

About the Author
Daniel Arnephy
Daniel is our technical expert for all your taxation needs. His diverse network and client base allows him to continuously build his knowledge and analyse every situation he is faced with an experienced outlook.
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