How we prove you had a downturn

One thing we need to understand is that this is hasty legislation, for the largest amount of money any government has ever spent in Australia and it is full of bugs. There will be new updates no doubt, and even Your Business Angels has found a group that has been left out in the cold and we will go into bat for them over the weekend.

Late on Friday April 10, explanatory materials were released in relation to the JobKeeper payment that has now been passed into law. The explanatory material clarifies one key aspect of the new legislation:

Establishing a downturn

This is the key to helping businesses get the job keep a money, and because most businesses in Australia operate on a cash system to just work off accounting records wouldn’t be a true assessment of the position. Many businesses have been banking their income from February during March and there has been no reflection therefore of a downturn in their accounts, however they may have a lot less business and some consideration has been given by the government for this so that as an accounting firm we have ways of calculating or various ways of calculating if you had a downturn.

Just to recap

To qualify for the JobKeeper wage subsidy, one of the eligibility criteria is that: 

• for businesses that have an annual aggregated turnover of less than $1 billion, they estimate their GST turnover has fallen or will likely fall by 30% or more or

• for businesses that have an annual aggregated turnover of $1 billion or more (or is part of a consolidated group for income tax purposes with turnover of $1 billion or more), they estimate their GST turnover has fallen or will likely fall by 50% or more.

This is a crucial bit – Treasury has revealed that the comparison period is for either (a) any monthly period from April 2020 to the end of September 2020 or (b) any quarterly period from April to June or July to September…compared to the same monthly or quarterly period in 2019.

Importantly, once this test is met for either (a) a monthly period or (b) any quarterly period, there is no requirement to re-test in later months or quarters.

For example, if a business assesses that its turnover will fall by 30% in April 2020 compared to April 2019…then it retains its eligibility until the JobKeeper payments stop for all businesses at the end of September 2020. This is irrespective of its turnover in the months subsequent to April 2020. It is not required to estimate or determine turnover for subsequent periods.

Appreciate every business in Australia is scrambling for Jobkeeper payments a lot of payments will be made with the Australian Taxation Office auditing afterwards so it’s best to get things right in the first place.

There are many businesses that feel that their turnover will drop but not in the initial months therefore where an entity does not qualify in the month of April 2020, for example, or the April to June quarter, it can re-test in later months or quarters, but will only be eligible for the JobKeeper payments from the period of qualification onwards (the payment won’t be backdated to the commencement of scheme).

That’s why we have emphasised to our counting clients that keeping our fingers on the pulse and measuring the business very regularly is incredibly important.

Alternative tests

The explanatory material that we have received acknowledges that comparing monthly or quarterly periods from April 2020 and onwards, to April 2019 and onwards, may not always be possible or made lead to unfair outcomes.

To this end, where the ATO is satisfied that there is no such comparison period in 2019, or there is not an appropriate relevant comparison period, the ATO Commissioner may, by legislative instrument, determine an alternative decline in turnover test.

So this is not the end to the adjustments or change to this legislation we may see. Many micro businesses that support people on small incomes could fall below the radar, there is an incredibly unfair disadvantage to people who are bankrupt betrayed under an ABN that we will take to the government and so if we find any case that’s unusual Your Business Angels won’t just pointed the legislation we will pick up the case and fight like hell.

The two alternative test examples cited in the explanatory materials we have been working through relate to: 

• Businesses that were not in existence for the whole of the comparison period in 2019. In the explanatory materials, the business is permitted to average its actual turnover from October 2019 when it came into existence to March 2020, and compare that average it to its estimated turnover in April 2020.

• Businesses that were impacted by a natural disaster during the 2019 comparison period. In the explanatory materials, the business is permitted to go back to 2017 (the most recent year when its turnover was not impacted by drought) and compare its turnover to the same eligible period in 2020.

The Commissioner retains flexibility to apply other alternative tests and take into account other unique circumstances (aside from natural disaster and start-up businesses) confronted by a business, should the 2019 comparison period not be reflective of typical turnover.

Treasury, in a separate fact sheet Supporting Business to Retain Jobs, has stated that these alternative tests may include, for example, eligibility being established as soon as a business ceases or where a business significantly curtails its operations.

As we understand The Australian Taxation Office is open to hear conversations from us regarding unusual circumstances or we believe the legislation is not just to support someone who really should receive Jobkeeper funding.

Stay tuned, work with your client coordinator it will change and there may be more help in many other ways coming from federal and state governments as we move through time.

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