JobKeeper payment – do you meet the decline in turnover test?

JobKeeper payment – do you meet the decline in turnover test?

20 April 2020 Authored by: Sarah Lancaster   |   Topics: Professional advisers, Tax and revenue, Tax disputes, Workplace relations and safety, COVID-19

The Coronavirus Economic Response Package (Payments and Benefits) Bill 2020 passed both houses of Parliament on 8 April 2020, containing some further detail on the JobKeeper payment scheme.

The JobKeeper payment is a payment to eligible businesses of $1,500 per fortnight for each eligible employee. The ATO will administer the payments, which will currently go for six months – from the fortnight starting 30 March 2020 to the fortnight ending on 27 September 2020.

The Treasurer has broad powers to make rules (by legislative instrument) that give effect to the legislation. These rules are the Coronavirus Economic Response Package (Payments and Benefits) Rules 2020 (Rules).

Are you eligible for the JobKeeper payment?

To be eligible for the JobKeeper payment, there must be an eligible employer, an eligible employee and the employer must have paid the employee $1,500 for a fortnight.

A business is an eligible employer if:

  • it carried on business in Australia on 1 March 2020 or, if the business is a not-for-profit, it pursued its objectives principally in Australia on 1 March 2020
  • it suffered a relevant decline in turnover.

The entity will have suffered the relevant decline in turnover if the entity:

  • is an ACNC-registered charity (but not a university or school) and its turnover decreases by 15% compared to the same month or quarter in 2019
  • has a projected turnover likely to be more than $1 billion or had an aggregated turnover in the 2019 income year of more than $1 billion and its turnover decreases by 50% compared to the same month or quarter in 2019
  • is not one of the above entities and its turnover decreases by 30% compared to the same month or quarter in 2019.

An entity can choose whether to assess its decline in turnover for a calendar month between March and September or for the June or September quarter – the relevant test period is not tied to how the entity accounts for GST.

How do I determine the decline in my turnover?

The decline in turnover test picks up on two concepts of a business’s GST turnover – the ‘projected turnover’ and the ‘current turnover’.

A business will need to determine its ‘projected turnover’ for the relevant month or quarter in the test period (30 March 2020 to 27 September 2020). To determine the projected turnover, you will need to look at the supplies that the entity has made, or is likely to make, in the relevant period – that is, a month between March and September or the June or September quarter.

To compare the projected turnover in the test period, you need to look at the ‘current turnover’ for the relevant month or quarter in 2019 – that is, the actual turnover in that period.

In both periods, we need to exclude the following from the calculations: input taxed supplies; supplies where there is no consideration; and supplies not connected with an enterprise.

How do I calculate my projected turnover?

Correctly calculating the relevant decline in turnover at the time of applying for the JobKeeper payment scheme is crucial.

When you assess your eligibility for the JobKeeper payment, you are looking at your eligibility for a particular fortnight. However, to calculate your projected turnover, you will need to calculate:

  1. your actual supplies to date in the relevant month or quarter
  2. the supplies you are likely to make for the rest of the month or quarter.

Predicting the supplies that a business is likely to make in the month or quarter may be a difficult exercise where things are changing on a daily basis. It is important that businesses keep records evidencing how they calculated their likely supplies for the month or quarter.

When a business satisfies the turnover test in the relevant test period (month or quarter), it will meet that condition for the rest of the JobKeeper payment scheme – that is, until September 2020. This is part of the reason why it will be imperative that businesses can substantiate and prove that they met the condition at the relevant time.

We expect that it will not be enough to have a suspicion that COVID-19 will affect the business. We recommend that businesses carefully monitor and keep evidence about the following:

  1. decreases in sales
  2. decreases in bookings
  3. decreases in quotes
  4. decreases in customer sales
  5. decreases in the numbers of customers
  6. other factors that are relevant to the business’s turnover.

Cash or accruals?

There is nothing in the Rules or the GST legislation that specifies when a taxpayer makes a supply. Generally, a supply of:

  • goods will be made title and possession of those goods has been transferred
  • services will be made when the services are performed.

In each case, the date of the invoice for the goods or services will generally be closer to the supply date, so the accruals method will probably be a more accurate way to determine when a supply was made.

However, the Commissioner has brought out guidance which allows taxpayers to calculate their current turnover and projected turnover on a cash basis if they prepare their BASs on a cash basis.

The same basis must be used for calculating the current turnover and projected turnover.

The ATO states:

You may use an accruals basis of accounting to calculate both the current GST turnover and projected GST turnover as both calculations require you to include sales that you have made or are likely to make without any reference to when you are paid.

However, if you prepare your activity statements on a cash basis, the ATO will allow you to calculate both the current and projected GST turnovers on a cash basis. The basis used must be the same for calculating your projected and current GST turnover.

Typically, current turnover will equal your GST exclusive sales less your input taxed supplies.

What happens if my decline in turnover is not as much as I thought it would be?

This is where it could get ugly. What happens if a business reasonably assesses its projected turnover for April 2020 as $100,000 and in April 2019 it was $150,000 – so its decline in turnover is around 33% and the business meets the decline in turnover condition at the test time. However, the business’s actual turnover for April 2020 turns out to be $120,000 so its decline in turnover was actually 20%.

The risk is that the ATO will later audit the business and deny it was eligible, in which case, the business will have to pay back the JobKeeper payments and interest, even though the payments have been paid to employees.

The Treasury has provided some commentary in its fact sheet for employers that ‘there will be some tolerance where employers, in good faith, estimate a 30 percent or more or 50 per cent or more fall in turnover but actually experience a slightly smaller fall.’

However, we don’t know what amounts to ‘a slightly smaller fall’ – is a 25% fall in turnover ‘slightly smaller’ than 30%? The difficulty for businesses is that projecting their turnover in these times is not going to be easy.

It is crucial for businesses to keep evidence about how they have calculated their projected turnover. An entity will not be entitled to the JobKeeper payment if it does not comply with the record keeping requirements, which generally require the entity to keep records to substantiate the information it provides to the Commissioner.

Under the legislation, the Commissioner has the power to issue a written determination, by legislative instrument, that specifies the types of records and how those records should be kept, in order for an entity to satisfy the record keeping requirements. No determination has been made as yet, but we expect this will be issued in the coming weeks.

Can I reduce my turnover to meet the test?

No. Similar to the cash flow boost payments, there are integrity provisions in the legislation that apply where an entity does something for the sole or dominant purpose of obtaining or increasing the JobKeeper payment (e.g. artificially pushing turnover down to meet the decline in turnover condition) so that the entity would not be entitled to the JobKeeper payment.

Need further information?

We are holding a webinar on 22 April 2020, where we will be discussing the JobKeeper payment scheme in more detail and will be running through various case studies.

For employment related issues, please see here or contact Belinda Winter or Annie Smeaton.

You can register for the webinar here.

Please contact a team member if you would like to discuss. 



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This publication is for information only and is not legal advice. You should obtain advice that is specific to your circumstances and not rely on this publication as legal advice. If there are any issues you would like us to advise you on arising from this publication, please let us know.