Beware of New Alternative Tests for JobKeeper 2.0
The introduction of JobKeeper 2.0 will be starting from 28 September 2020 onwards. The new levels of payments and how they will be assessed have been widely publicised – you can read more about that here.
The original JobKeeper legislation included various alternative tests that could be applied to various businesses to help determine whether they pass the decline in the turnover test. If an entity has already passed the original decline in the turnover test for a JobKeeper fortnight before 28 September 2020 then there is no need to apply the original test again.
The updated alternative tests released by the Commissioner of Taxation are broadly similar to the alternative tests that were released in connection with the original decline in the turnover test. However, there are some key differences.
‘Projected’ GST Turnover No Longer Applies
The new alternative tests use the concept of projected GST turnover. The comparison only uses current GST turnover. In other words, you will only be using actual GST turnover figures with previous periods – and not using any estimates or projections.
Capital Asset Sales Included in GST turnover
One of the key differences between the concept of current GST turnover compared with projected GST turnover is that proceeds from the sale of capital assets are included in current GST turnover calculations (unless the sale of the asset is input taxed), while proceeds from the sale of capital assets are ignored when calculating projected GST turnover. This is likely to make it more difficult for entities to access the JobKeeper extension if they have sold plant and equipment, vehicles, property etc during the test period.
GST Reporting Method Must Be Consistent with Accounting
The timing of supplies for the JobKeeper decline in turnover tests apply to these new alternative tests as well. This means that if an entity is registered for GST it needs to calculate current GST turnover using the same accounting method that is used for GST reporting purposes (ie, cash or accruals). Entities that are not registered for GST can choose which method, but must use a consistent approach.
Substantial Increase in Turnover Test Modified
The “substantial increase in turnover” test has been modified to provide an additional level of flexibility in accessing this test. Under the original version of the rules, you had to start by checking if there was an increase in turnover of at least 50%, 25%, or 12.5% in the 12, 6, or 3 months before the test period. While this is still possible under the updated version of this test, an entity can also access the test if there was an increase in turnover of at least 50%, 25%, or 12.5% in the 12, 6, or 3 months before 1 March 2020.
Irregular Turnover Test Modified
A similar modification has been made to the “irregular turnover” test and the wording used for this test has been updated. Under the original version of the rules you started by looking at whether the entity’s lowest turnover quarter was no more than 50% of the highest turnover quarter for the quarters ending in the 12 months immediately before the applicable turnover test period. However, under the updated version you look at whether the entity’s current GST turnover for any consecutive 3-month period before the applicable test period or 1 March 2020 is no more than 50% of the highest of the entity’s current GST turnover for any other of those 3-month periods.
Changes to Sole Trader or Small Partnership Test
When applying the test for sole traders or small partnerships where the sole trader or a partner could not work for at least part of the comparison period because of sickness, injury, or leave, the updated version of the test requires you to look at the current GST turnover for the month immediately before the month in which the sole trader or partner did not work. The original version of the test looked at the turnover for the month immediately after the month in which they returned to work.
Sole Trader Eligible Business Participants
To be able to claim the Tier 1 JobKeeper 2.0 payment as a sole trader (initially $1200/fortnight), eligible business participants need to have been actively engaged in the business for 80 hours or more in February and provide a declaration to that effect. All other eligible business participants will qualify for Tier 2 benefits (initially $750/fortnight)