JobKeeper 2.0 testing updates

JobKeeper 2.0 – Alternative tests

The extension known as JobKeeper 2.0 formally commenced on 28 September and there has been a number of updates to the rules. Here we will look at details in relation to the decline in turnover test that is required to be satisfied for eligibility to JobKeeper 2.0.

In relation to the first phase of JobKeeper 2.0 (28 September to 3 January) the testing requires that you compare the quarter of September 2020 (current test period) with the quarter of September 2019 (relevant comparison period). As we will point out below, there are alternative tests available.

Actual GST Turnover

One of the key differences between JobKeeper and JobKeeper 2.0 is that the decline in turnover test is based on actual turnover, not projected turnover. In the context of the GST Act, this is referred to as “current GST turnover”.

In simple terms, this means that you include the following revenue items in your decline in turnover test:

  • Normal business trading revenue, including any GST Free sales,
  • Sale of business assets, which would include the trade-in of motor vehicles or commercial vehicles/equipment,
  • Charities need to include donations and gifts received, even if they don’t need to be reported on BAS lodgements, but they can elect to exclude certain Government grants from the test. These are grants that require the charity to make supplies to receive it.

Timing of when to include supplies in the test

The ATO has clarified the issue of when to include revenue from supplies in the test; it is to be treated the same as when you would include them in your BAS lodgement.  For an accruals/non-cash GST lodgement, this means it is based on the invoice date. For cash basis GST lodgement, it is when you are paid for the supply.

The following rules were also released in relation to which accounting method is used.  Generally you can’t pick and choose and need to apply the method consistently across the comparison period and the current test period.

Rules 
Not registered for GST.Choose a method and apply consistently.
Always registered for GST, no changes.Use the method registered for.
Changed method after start of comparison period.Use method that was in place at start of comparison period.
Cancelled GST after start of comparison period.Use method that was in place at start of comparison period.
Registered for GST after comparison period.Use current method in place at start of current test period.

Alternative decline in turnover tests

If the basic test of comparing September 2020 with September 2019 is failed, then there are alternative tests that can be considered. It is important to note that when looking to use an alternative test, there must be something unusual in the comparison period that has caused the basic test to be failed. It must be something that is outside the usual business setting that affected turnover and it must fit in with the specified categories below. If necessary, each test can also allow for bushfire or disaster area declarations, in addition to a specific test noted below. Finally, for JobKeeper 2.0 the alternative tests require that a 3 month period is used as the basis for comparison.

ClassWhen & WhatTestNotes
Business commencedThe entity commenced business before 1 March 2020 and after the first day of the relevant comparison period (1 July 2019 for the Sept 2020 testing).1 – Multiply the average monthly current GST turnover by 3 and use that as comparison period.

2 – The entity uses the 3 months current GST turnover instead of the current GST turnover for the comparison period.
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 2020. Only available if the business commenced at least 3 months before 1 March 2020.
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.Multiply the current GST turnover from the month immediately after the month in which the event occurred by 3 and use that as the relevant comparison period.There is no requirement to use the month immediately following the most recent event, if there were multiple ones during the year. The entity may apply these tests to each separate event, which is intended to provide flexibility.

If there is no whole month after the event and before the test period, then 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.Multiply the current GST turnover from the month immediately after the month in which the restructure occurred by 3 and use that as the relevant comparison period.If there is no whole month after the restructure and before the test period, then use the month immediately before the test period.
Business had substantial increase in turnoverApplies if the entity had an increase in turnover before the test period (1 July 2020 for September 2020 testing) or before 1 March 2020 of;
– 50% or more in 12 months
– 25% or more in 6 months
– 12.5% or more in 3 months
The entity uses the 3 months’ current GST turnover for the relevant comparison period.

If the test period is being used, then it is the current GST turnover in the 3 months’ immediately before the test period (1 July 2020 for September 2020 testing).

If 1 March 2020 is being used, then it is the current GST turnover in the 3 months immediately before 1 March 2020.
A substantial increase is determined by comparing relevant months that are 12 months apart. To test an increase in current GST turnover in the 12 months before 1 March 2020, the entity compares their current GST turnover from the month of February 2019 with February 2020. To compare 6 months and 3 months before 1 March 2020, the entity compares their current GST turnover for February 2020 against August 2019 and November 2019 respectively.
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.
Business has irregular turnoverThe business has irregular turnover that is not cyclical in nature. For consecutive 3 months period ending 12 months immediately before the test period or 1 March 2020, the lowest 3 months turnover is less than 50% of the highest quarter turnover.The entity multiplies the average monthly current GST turnover by 3 and uses that figure as the relevant comparison period.The average monthly current GST turnover is the current GST turnover for each whole month in the 12 months immediately before either the applicable turnover test period (1 July 2020 for September 2020 testing) or 1 March 2020, added together and divided by 12.
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 work for all of the comparison period due to sickness, injury or leave
– turnover was affected by that absence
The entity multiplies the current GST turnover from the month immediately before the month in which the absence occurred by 3 and uses that figure as the relevant comparison period.

The legislative instrument and explanation is here.

Please contact your Accru Melbourne representative on (03) 9835 8200 if you have any queries about the points above or to find out more about JobKeeper.

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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