This week, the ATO published information about the JobKeeper payment, the eligibility criteria, and the process for claiming this payment. This has provided clarity to some of the common questions many businesses have been asking. We detail below these questions and the answers to them.

How do you calculate a business’s reduction in turnover?

We already know that for an employer, with an annual aggregated turnover below $1 billion, to be eligible for the payment, turnover needs to reduce by more than 30%. The ATO have now clarified how to calculate this turnover reduction.

The Basic Test

In order to be eligible to claim the payment from 30 March 2020, there are 3 ways to calculate a reduction in turnover, referred to as “the basic test”:

1. Compare GST turnover for the month of March 2020 with GST turnover for the month of March 2019;
2. Compare projected GST turnover for the month of April 2020 with projected GST turnover for the month of April 2019;
3. Compare projected GST turnover for the quarter starting April 2020 with projected GST turnover for the quarter starting April 2019.

If a business does not pass the test based on one of the above, then the business can still qualify in a future month and receive the payment from the start of that future month. The future test periods are:

1. May 2020 compared to May 2019;
2. June 2020 compared to June 2019;
3. July 2020 compared to July 2019;
4. August 2020 compared to August 2019;
5. September 2020 compared to September 2019;
6. July to September 2020 quarter compared to July to September 2019 quarter.

Any business can use any of the above test periods regardless of whether they lodge monthly or quarterly BAS. If a business calculates a larger than 30% reduction based on one of the above periods, then the business is eligible for the JobKeeper payment from the start of that period up to 30 September 2020, even if future turnover increases.

The Alternate Test

The ATO has the discretion to determine an alternate test for fall in turnover for entities where there is not an appropriate relevant comparison period and, therefore, cannot use the basic test.

The ATO will determine this for situations where there is something out of the ordinary about the relevant comparison period in 2019 that means it is not appropriate for the purpose of an entity satisfying the basic test.

Some examples of where the alternate test would be appropriate are:

1. A farming business was subject to a severe drought from 2018 until September 2019 that reduced the amount of its’ crop that it could grow;
2. An entity recently commenced a new business;
3. An entity acquired a business after the relevant comparison period;
4. An entity was scaling up their business after the relevant comparison period;
5. An entity’s turnover is highly variable;
6. An entity has had major structural business changes after the relevant comparison period.

The ATO will be making a legislative instrument to deal with situations where it will be appropriate to apply this alternate test.

What is GST Turnover?

The above tests use “GST Turnover” as the basis for determining a fall in turnover. GST Turnover includes turnover from all business sales that are subject to GST and business sales that are GST free i.e. export sales and sales of GST free items e.g. medical services, GST free food items. GST Turnover excludes the following:

1. The GST amount included in the sales (if any);
2. Sales that are input taxed sales e.g. bank interest, sale of shares, residential rental income;
3. Sales not connected with an enterprise e.g. sale of a private car;
4. Sales that are not made for payment;
5. Receipts where there was no supply of goods or services i.e. the JobKeeper payment;
6. Gifts and donations received;
7. Sales not connected with Australia e.g. sales from a business carried on outside of Australia and sales of goods purchased and sold outside of Australia;
8. Sales that are made by transfer of capital assets i.e. selling a business’s fixed asset;
9. Sales that are made because of substantially and permanently reducing in size or scale the enterprise i.e. selling one of 10 shops owned by a business.

Must Cash or Accrual accounting be used?

A business should calculate GST turnover using accrual accounting – this is generally the turnover that is shown on the profit and loss statement of the business. However, a business that is registered for GST on a cash basis, may choose to use cash accounting for calculating GST turnover i.e. receipts from sales in a month compared to the receipts from sales in the same month in 2019.

Does a business have to wait to the end of a month to determine eligibility?

No, at any point in a month a business can determine its eligibility by projecting its GST turnover for the month compared to the GST turnover for the same month in 2019. If this results in a reduction of more than 30%, the business can apply for the JobKeeper payment to be paid for each fortnight from the start of that month.

How does a business estimate projected turnover?

A business needs to identify the sales made, or are likely to make, during the turnover test period.

When determining the sales that are likely to be made for the rest of the test period, a business needs to consider what it expects to happen for the remainder of that period. Relevant considerations include:

1. The period during which the business is not expected to trade because it has been closed due to the coronavirus, or its ability to trade has been restricted;
2. Recent patterns in trading that are expected to continue;
3. Revised business plans.

The reasons for a fall or expected fall in turnover are not prescribed and are not limited only to the direct impacts of the coronavirus.

Can a business claim the JobKeeper payment for a business owner who does not receive a salary?

Sole traders, partnerships, trusts, and companies are entitled to a JobKeeper payment, provided the eligibility criteria are met, for a non-employee individual who actively participates in the operation of the business. This can only be claimed for one non-employee individual of a business.

Some examples of a non-employee individual are:

1. The individual who operates a sole trader business;
2. An active partner in a partnership that operates a business;
3. An adult beneficiary of a trust that operates a business i.e. the beneficiary may normally receive a trust distribution as income rather than a salary;
4. A shareholder or director of a company that operates a business i.e. the director/shareholder may normally receive a dividend as income rather than a salary.

Does a business need to pay the JobKeeper payment to employees before receiving it from the ATO?

The JobKeeper payment is a payment made by the ATO to a business monthly in arrears. The first payment will be made in May for the two April 2020 fortnight periods.

Employers need to be paying employees their salaries during the month. If a salary is less than the $1,500 per fortnight JobKeeper payment amount, then the employer needs to top up the salary to $1,500 per fortnight. The ATO will not provide the JobKeeper payment for employees who were not paid at least $1,500 per fortnight in the previous month.

For the month of April, employees who had stood down or been paid less than $1,500 per fortnight, a catch-up payment can be made by the end of April.