The JobKeeper Payment Scheme is part of the Australian Federal Government’s response to the economic effects from the Coronavirus pandemic. This scheme is designed at maintaining strong relationships between employers and employees throughout the uncertain times that have arisen. With applications opening from today, Monday 20th April 2020 many businesses are taking advantage of the JobKeeper scheme.  As part of the JobKeeper Payment Scheme Application, a business is required to calculate their Turnover to determine if the meet the eligibility criteria.

There are two ways to calculate whether or not your business has the required decline in turnover. They are:

1. The Basic Test; and
2. The Alternative Test.

The Australian Taxation Office (ATO) has created a full coverage document which will take you through the steps needed to calculate your turnover which are outlined below.

1. Identify the test turnover period;
2. Identify the relevant comparison period;
3. Work out the relevant GST turnover;
4. Determine which shortfall percentage applies; and
5. Determine if GST turnover has fallen by the specified shortfall percentage.

Below are five areas provided by the Walker Hill team about calculating your business’ turnover and were it can be unclear what is required.

Area 1: The Testing Period

You can pick either monthly or quarterly options for the testing period, and these will not be dependent on your Business Activity Statement lodgement frequency.

To have access to the first month of payments which is April 2020 (due for lodgement by 26 April 2020), you must use the month of March 2020, or April 2020.

If you want to apply for later periods, you can use May 2020 onward.

In Summary: You will only be eligible for JobKeeper payments for fortnights that end in or after the turnover test period starts.

Area 2: Cash vs Accruals

The ATO has provided guidance of application on cash vs accruals, which we’ve noted below.

1. You can use accruals for calculating your projected GST turnover and historical performance without any reference to payment;
2. You can prepare your projections on a cash basis if you lodge your Business Activity Statements on a cash basis; and
3. The basis of calculations must be the same for projected and historical.  You cannot pick and choose (For example, you cannot do cash projections but provide historical performance on an accruals basis).

Area 3: Key Exclusions to your GST Turnover Calculations

When calculating your GST turnover, remember to remove:

1. GST you included in sales to your customers (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 that you carry on (e.g. sale of private car);
4. Sales that are not made for payment (unless a taxable supply to an associate);
5. Payments for no supply (e.g. JobKeeper payments);
6. Gifts and donations (except for deductible gift recipients and ACNC-registered charities); and
7. Sales not connected with Australia, for example, sales of:
   • Services made through a business you carry on outside Australia;
   • Goods purchased and sold from a place outside Australia; or
   • Real property situated outside Australia.

Area 4: Eligible Business Participants

We have received further guidance on how to treat these payments to the eligible business participants.

Basically, the business will receive the $1,500 per fortnight on behalf of the Eligible Business Participant as income and this does not need to be declared (except for sole traders who are both the business and the eligible business participant).

Find out more information about Eligible Business Participants.

Area 5: Other Pieces of Information

There is also more information on the below areas that, if relevant to you, are worth looking into before you apply for the JobKeeper Payments.

1. Aggregated Turnover;
2. Affiliated/Connected Entities;
3. Control of Entities.

Be sure you thoroughly understand these rules or talk to your accountant before finalising your application.

A Note on the Alternative Test Method

If you expect to calculate your turnover under the Alternative Test method, please be patient. The ATO have advised that they are creating legislative instruments to deal with certain circumstances such as new companies or companies affected by drought. We will continue to update you as further information comes to light.

If you have any questions about the JobKeeper payment scheme and are seeking further clarity around these new developments, or if there is anything that the team at Walker Hill can assist with, please feel free to contact us out by emailing support@walkerhill.com.au or calling our team on 07 3367 3155.