23 April 2020
by David Prichard and Andrew Law
- Related topics
- Corporate Tax & Regulatory
The Federal Government has released a Legislative Instrument today, outlining the “Alternative Tests” available for particular classes of entities to assess their eligibility for JobKeeper purposes.
It should be noted that if an entity already satisfies the decline in GST turnover tests under the Basic Test, no further testing is required. This Legislative Instrument aims to bring additional entities into the JobKeeper regime – not exclude those entities which are already eligible. Unfortunately, this Alternative Test has not included service entities as a class of entity, however, we hope to receive further guidance regarding this in coming days.
The classes of entities which are captured under this Legislative Instrument include:
- Businesses commencing before 1 March 2020, but after the period which they can assess their decline in GST turnover (i.e. November 2019);
- Entities which are a party to a business acquisition, disposal or restructure which had the effect of altering their GST turnover for comparative testing purposes;
- Entities affected by drought or natural disasters (i.e. bushfires);
- Sole traders or small partnerships impacted by sickness, injury or leave during the Basic Test comparison period; or
- Entities which had a substantial increase in GST turnover, or possessed irregular GST turnover (excluding those with proven cyclical turnover).
Importantly, while multiple Alternative Tests may be applicable to a particular entity – only one of these Alternative Tests need to be satisfied for JobKeeper eligibility purposes.
Where you fall within one of the above categories and do not pass the Basic Test, we recommend that you consider the Alternative Tests as a priority (noting the impending due date for JobKeeper enrolment – see below).
Alternative Tests – Adjustments to GST Turnover Comparisons
If an entity is eligible to assess their GST turnover comparisons using the Alternative Tests, it is still required to project its GST turnover for a certain period (eg. the month of April 2020 or the quarter ended 30 June 2020). The comparative period which it then tests against however is adjusted for eligibility testing purposes.
The adjustments required, depending on the Alternative Test utilised, may be one of the following:
- Averaging of the GST turnover of certain prior periods; or
- Bringing forward the comparison period (eg. following an acquisition or restructure)
Co A acquires another business in October 2019. Co A’s estimated projected GST turnover for April 2020 is $90,000. As Co A acquired a business in October 2019 its comparison period is not appropriate.
Co A can therefore use the alternative test being the first whole month after the acquisition (November 2019) as its comparison period (actual turnover $130,000). Co A compares the projected GST turnover of $90,000 to the current GST turnover of $130,000. The fall of $40,000 is more than 30%, therefore the alternative turnover test is satisfied.
Timeline and STP Implications
The current legislative due date for enrolment of the first two JobKeeper fortnights is 26 April. The ATO website however advises that this enrolment can occur, along with the wage payment requirement (being $3k per employee for the first two fortnights), by 30 April.
Given the challenges experienced by taxpayers, advisers and clearly the ATO themselves, the ATO have indicated on their website that employers can enrol and pay their employees by 30 April (ie an extension of 4 days).
At this point employers only need to provide the expected number of eligible employees for enrolment purposes, however, from 4 May onwards employers will be able to specifically identify their employees. Where employers have STP enabled payroll software updated with JobKeeper functionality, they can identify the employees using the STP software. As such, this will require employers to facilitate this through their own internal payroll or finance teams or external payroll providers.
For employers that do not have STP enabled payroll software updated with JobKeeper functionality, they will be required to log into the Business Portal and select eligible employees from a list of employees prefilled from your STP pay reports.
We are here to help our clients through this challenging COVID-19 era. The JobKeeper stimulus package is complex and our team are across every facet of it.
If you have questions regarding; the Alternative Tests, the JobKeeper initiative in general, Federal or State stimulus packages, or need help to apply please contact your ESV Engagement Partner on 02 9283 1666.