JobKeeper – Part 3 – Working out the Decline in GST Turnover
In order to apply for JobKeeper, all non-charity small businesses will need to work out that their GST Turnover has declined by 30% or more (See Part 1 – JobKeeper). For some businesses this is quite simple as their business has minimal to no revenue. However, for other businesses this decline is more difficult to prove.
There are two tests:
- The Basic Test; and
- The Alternative Test.
The Basic Test
Under this test you need to compare your GST Turnover in either the relevant month or the relevant quarter with GST Turnover in the same period in 2019. There is further detail below on how to calculate GST Turnover. You have to use your Projected GST Turnover for a period you choose for the test, which has not yet ended.
The months you can use are: March 2020, April 2020, May 2020, June 2020, July, 2020, August 2020 and September 2020.
The quarters you can use are: 1 April 2020 to 30 June 2020, or 1 July 2020 to 30 September 2020.
It does not matter whether you lodge your BAS on a monthly or quarterly basis, you can choose any of these periods to work out your decline.
The JobKeeper program works on fortnights (Part 1 – JobKeeper). You can start applying the JobKeeper program from the fortnight that you determine the monthly or quarterly GST Turnover satisfies the 30% decline in turnover. Once in, you will remain in the program as long as you meet the other criteria, – even if your GST Turnover improves in subsequent periods.
Special rules apply for April only, allowing you to claim the program from 1 April 2020 even if you determine the decline after 1 April.
If on 20 April 2020 you determine your GST Turnover for April will decline by 30% you can apply for Jobkeeper from 1 April onwards provided you meet the other criteria.
If on 18 May 2020 you determine your GST Turnover for May will decline by 30% you can apply for JobKeeper from the fortnight that commences from 18 May 2020.
The Alternative Test
If you don’t meet the Basic test, you can consider The Alternative test. This test can be applied where there is not an appropriate relevant comparison period in the 2019 year. For example, if you started a new business in 2020 or there are some other facts that makes 2019 not comparative.
You cannot self-assess the Alternative Test. You will need to apply to the Commissioner to meet this test. For clients that do not meet the Basic test, we will work directly with you to attempt to apply for the Alternative test if we believe there is a case to do so. At this stage, there is no further guidance from the Commissioner on this test, although this is expected soon. We have a number of entities that undertook either restructures or rollovers in the prior year, so these entities may need to consider the Alternative test.
How to Calculate GST Turnover
GST Turnover is a defined term and includes the value of all supplies you have made except:
- Input taxed supplies – such as interest or residential rent
- Sales that are not connected with the business (e.g. sale of private car)
- Sales that are not made for payment – unless they are made to an associate
- JobKeeper payments or other payments for no supply.
GST Free export sale are included. However, sales that are not connected with Australia are not included, such as:
- sales of services made through a business you carry on outside Australia
- sales of goods purchased and sold from a place outside Australia
- sale of real property situated outside Australia.
You must look at GST Turnover for an entity – you cannot separately look at GST Turnover for each business. For example if you have a physical retail store and an online store in the one entity and the physical store has declined, but the online store has increased, you must consider both together to determine if there is an overall 30% decline. However, if you have different businesses in different entities, you are not required to group them together. You do not eliminate intercompany supplies when working out GST Turnover.
Due to these modifications, it will not be as simple as looking at the BAS or your financial statements to work out this decline. In our view, it is best to look at all the tax invoices that you issued for each entity in the relevant period to work out your GST Turnover. Your accounting system should be able to give you a report. As GST Turnover does not include the actual GST, it is the GST excluded amount of the tax invoice that is relevant, therefore please review the GST Exclusive report.
If you ordinarily prepare your BAS on a cash basis, the Commissioner has allowed you to use the cash basis to work out GST Turnover, however, in our view this is not mandatory. You will need to be consistent between the current and comparative period with the method that you choose.
In working out Projected GST Turnover, you will need to consider the value of all supplies made or “likely to be made”. Based on guidance received from the Treasurer, “a supply is likely to be made where, on the balance of probabilities, it can be predicted that the supply is more likely that than not to be made”. We read this as a 50% test, so if the chance of the supply being made is 50% or greater, it should be included in projected GST Turnover having regard to “reasonable expectation” and “facts and circumstances”.
Please note if you are selling assets during this period, particularly if these sales are a part of your downsizing, these supplies may be excluded from Projected GST turnover, so please contact us to discuss this matter.
We want to point out that there are very strict anti-avoidance measures including potential criminal penalties for businesses that deliberately enter into contrived arrangements to reduce their turnover.
The ATO has provided additional guidance on these tests on their website https://www.ato.gov.au/General/JobKeeper-Payment/In-detail/Applying-the-turnover-test/
The Macro Team have been fully briefed and trained on these rules and while they are new with many complexities, we thrive on a challenge are we are ready to take your questions and answer them as best as we can. Please call or email us at any time.
Date published: 20 April 2020