The Alternative Test Method

Information on the Alternative testing method for the JobKeeper Payment scheme has been long awaited for by many Australian business owners who do not fit into the guidelines of the Basic testing method. In an official document released by the Australian Taxation Office (ATO) late last week, there were seven Alternative tests put forward based on varying business situations. This article breaks down the seven Alternative tests, how to apply them and highlights any concessions that you would need to consider.

Business Type 1: The New Business

The Alternative test is perfect for businesses who don’t have a full 12 months of data to calculate their turnover from. Providing that your new business began before 1 March 2020, you may be eligible for the JobKeeper scheme using this method.

How to Apply the Alternative Test

If your business is under a year old, you can choose between two options.

The first option is to test the entity’s projected GST turnover for the relevant 2020 period against the average turnover since the entity commenced business.  If you are using one month, then you should look at the average turnover for, as the name suggests, just one single month.  If you are using a quarter, then you look at the average turnover for three months, which equal one quarter.

The second option is to test the entity’s projected GST turnover for the relevant period with the average turnover of the three months immediately before the applicable test period. For example, if you are looking at testing April 2020, you will calculate the average turnover from January to March 2020.

Keep in mind that for either option, you must still meet the 30% decline in turnover from the test period compared to the average turnover.

Concessions to Consider?

Yes – scroll down to the end of this article to read more.

Business Type 2: The Business with Significant Turnover Change Thanks to an Acquisition or Disposal.

If a year-on-year comparison no longer makes sense in your business because there was an acquisition or disposal, then the Alternative test is what you need to determine JobKeeper Payment scheme eligibility.

How to Apply the Alternative Test

If this is your business, use the month directly following the acquisition or disposal event as your one-month comparison period.  If you are using a quarterly comparison, multiply this figure by 3 to get a comparable quarterly figure rather than the three months actual figures following the event.

If your business has had more than one event, use the month following the most recent acquisition or disposal to work your comparison figure off.  However, if this event was less than a month before the start of the testing period of 1 March 2020 or the three months leading up to it, use the month immediately before the testing period begins to determine the comparison figure.

Concessions to Consider?

Yes – scroll down to the end of this article to read more.

Business Type 3: The Business with Significant Turnover Change Thanks to a Business Restructure

If your business, or part of it, has undergone a significant restructure over the last 12 months, then the Basic test may not work to determine a suitable comparison for your JobKeeper eligibility. Thankfully, there is an alternative test to help with this.

How to Apply the Alternative Test

Similar to businesses who experienced a significant change in turnover due to acquisition or disposal events, if you experienced a business restructure and are making a monthly comparison, you should use the GST turnover for the month immediately following the month when the restructure event occurred. Or, if you are reporting quarterly, multiply this month comparison by 3 to get the quarterly figure.

In the event of more than one restructure, use the month following the second restructure as the comparison period. If you are doing a month comparison figure, use this number directly or multiplied by 3 to get a quarterly comparison figure. If the restructure event occurred less than a month before the turnover test period, use the GST turnover amount for the month immediately before the test period to get your comparison figure.

Concessions to Consider?

Yes – scroll down to the end of this article to read more.

Business Type 4: The High Growth Business

If your business experienced substantial GST turnover growth in the last 12 months but is now experiencing a downturn because of the COVID-19 pandemic, then the Alternative test could be a good way to determine your eligibility for the JobKeeper payments. To be able to use the Alternative test as a high growth business, you would need to see the below increases:

  • More than 50% growth in GST turnover in the 12 months leading up to the test period;
  • At least 25% growth in GST turnover in the 6 months leading up to the test period; or
  • At least 12.5% growth in GST turnover in the 3 months leading up to the test period.

How to Apply the Alternative Test

If your business reports quarterly, use the GST turnover figures 3 months before the test period as your comparison period. However, if your business reports monthly, take the three-monthly figure and divide it by 3 to get your comparison figure.

Concessions to Consider?

Yes – scroll down to the end of this article to read more.

Business Type 5: The Business Effected by Natural Disaster

If your business has been affected by the droughts or other natural disasters and is in a declared natural disaster zone during the relevant comparison period, then the Alternative test will determine your eligibility for the JobKeeper Payment scheme.

How to Apply the Alternative Test

Simply put, a business in this situation can use a comparison period from 2018 instead of 2019 to get a more accurate idea of how the COVID-19 virus effected their business.

Concessions to Consider?

No – this has already been taken into consideration with how the Alternative test is applied.

 

Business Type 6: The Business with Irregular Turnover

If your business turnover is a little sporadic, then the Alternative test could help you to determine if your business is eligible for the JobKeeper payment scheme. To be eligible to use this test, you will need to prove that you have significant differences in quarterly turnover. Over the 12 months leading up to the test period, the quarter with the highest GST turnover will need to have seen more than twice the revenue of the lowest to be eligible for this test.

 How to Apply the Alternative Test

If this is your business, calculate your monthly GST turnover averaging the GST amounts for the 12 months leading up to the test period. If your business reports quarterly, multiply the monthly figure by 3 to get the quarterly comparison figure.

Concessions to Consider?

Yes – scroll down to the end of this article to read more.

Business Type 7: Sole Traders or Partnerships where Leave have been Taken

This Alternative test allows for sole traders and partnerships where an individual did not work for all or part of the comparison period outlined in the Basic test. This leave could have been due to illness, injury or other leave taken and applies if the leave caused a negative impact on the revenue during the leave period.

How to Apply the Alternative Test

If this applies to you and your business, use the month immediately following the individual’s return to work and use this month as the comparison period. If you report quarterly, use this figure and multiply it by 3, rather than using the action three-month period.

Concessions to Consider?

Yes – scroll down to the end of this article to read more.

Concessions to Consider

Throughout the ATO official document, there is an additional note for any businesses that qualified for either:

  1. The 2019-2020 Bushfire Lodgement and Payment Deferrals; or
  2. Any drought assistance concessions.

If your business qualified for either of these benefits, ideally you will need to exclude the months from your Alternative test calculations. However, if these months are the only months that you have been in business, then they will need to be included.

If you would like any further assistance with the Alternative test or applying for the JobKeeper payment scheme, then reach out to our office by emailing support@walkerhill.com.au or calling our team on 07 3367 3155.