Many business owners will currently be assessing whether they will qualify for JobKeeper 2.0 for the October - December 2020 period and after this period again from January 2021 to March 2021.
Unfortunately, what we are seeing is that quite a few are relying on the Basic test only for qualification and where they fail are assuming they are not eligible for the subsidies which can be crucial to a business's survival as it tries to get back on its feet from COVID.
Treasury has announced 8 main alternative tests. These tests generally are complicated and confusing and are either not known by the business owners or their advisors or they are being applied incorrectly.
Consequences Of Being Unaware Or Getting It Wrong
Being unaware of these tests or getting them wrong if the basic test is failed can lead to the following:
- Businesses are not getting JobKeeper 2.0 when they should be; or
- Businesses are getting JobKeeper 2.0 using these tests and if not applied correctly will have to pay the payments back.
These tests allow certain businesses to compare their current GST turnover for the test period in 2020 with a comparison period not being the corresponding period in the 2019 year.
So what then are the main Alternative Tests?
Test #1 - Business Temporarily Ceased
If a business temporarily ceased trading due to an event or circumstance outside the ordinary course of business, this will skew the true affect of COVID on a businesses comparable turnover period. This could be for example drought, bushfire, storms or some other event and even COVID. In some circumstances you won't be comparing the September or December 2020 quarters with a relevant comparison period.
Test #2 - New Businesses
If a business commenced a new business after the comparison period in 2019 it won't be possible to satisfy the Basic test.
This test caters for businesses that may be affected by COVID who are this position.
Test #3 - Business With A Substantial Increase In Turnover
Where a business was gradually increasing its turnover, it may have found that its revenue has dropped in recent months but not enough when compared to 2019. This test takes these factors into account.
Test #4 - Business With An Irregular Turnover
A business with an irregular turnover might be disadvantaged when applying the Basic test and comparing either September 2020 or December 2020 quarters with 2019. Fortunately this test allows for such instances.
Test #5 - Business Affected By Drought Or Natural Disaster
Clearly comparing a current GST turnover period with 2019 when the business in 2019 was in a natural disaster area, this will make it more difficult to satisfy the Basic test. This alternative test allows a more reasonable comparison period when assessing the affect of the pandemic on a business's turnover.
Test #6 - Business Acquisition Or Disposal Changing Turnover
If a business has bought or sold a business during, or after, the relevant 2019 comparison period, it may find the Basic test does not give an accurate reflection of the affect of COVID on the business.
Test #7 - Business Restructure Changing Entity's Turnover
If a business has been restructured during, or after, the relevant 2019 comparison period, it may find the Basic test does not give an accurate reflection of the affect of COVID on the business.
Test#8 - Sole Traders Or Small Partnerships With Sickness, Injury or Leave
Where a sole trader or partners of a small partnership were sick, injured or on leave during the relevant 2019 comparison period, this may not give a true indication of the affect of COVID on the business.
If you have determined that your business does not qualify for JobKeeper 2.0 by merely comparing the September or December 2020 turnover with the relevant comparison period in 2019, consider whether any of the above alternative tests may apply and then work through the numbers to see if you could qualify.
These tests are complex so it's important to get the numbers right.
If you feel you require experts to assist you in this area, please do not hesitate to contact us as we are here to help!
Scolari Comerford remains committed to proactively advising and keeping businesses up to date.