Check out our easy to use Alternate Test Calculator at https://www.mcaaccountants.com.au/download-files/9025/

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With 4 days until JobKeeper 2.0 begins, the Government has released the alternate tests available to businesses when working out if they have suffered a 30% decline in turnover. Talk about cutting it fine! The strangest part of the delay is that the tests are very similar to the original alternate tests – so we’re not sure why they took so long to finalise, but anyway, here we are.

To try and make things easier to understand, we’ve used the following abbreviations:

• JK 2.0 = JobKeeper for the period 28 September 2020 to 3 January 2021
• JK 2.1 = JobKeeper for the period 4 January to 28 March 2021
• Comparison Period = The prior year’s turnover test period
  • For JK 2.0 this is 1 July to 30 September 2019
  • For JK 2.1 this is 1 October to 31 December 2019
• Test Period = The current year’s turnover test period
  • For JK 2.0 this is 1 July to 30 September 2020
  • For JK 2.1 this is 1 October to 31 December 2020
• Current Turnover = The businesses turnover during the relevant test period

When You Can Use The Alternate Tests

Something that’s not reported to much is that you can’t just use the alternate tests because the original test doesn’t give you the outcome you want. The only time you are allowed to use one of the alternate tests is when last year isn’t an appropriate relevant comparison period.

Don’t be surprised if the ATO focus on this when reviewing and auditing eligibility in the future. The last thing your business needs to is be forced to repay JobKeeper monies (that you have paid to your staff) because you used the alternate tests when you shouldn’t have.

Bushfire and Drought Affected Businesses

We’re going to put this at the start – if your business qualified for ATO assistance under the Bushfire or Drought help programs, then you are able to use modified alternate tests and we suggest you give us a call to work through those.

The Alternate Tests

If multiple alternate tests are applicable, you must use the one that is the most appropriate. Again, don’t cherry pick the one that gives you the answer you want.

1) Business Commenced During or After the Comparison Period

For JK 2.0, if your business commenced on or after 2 July 2019, and for JK 2.1, on or after 2 October 2019, then this test is for you. There are 2 tests available to use here, and you can pick the one that suits you best.

Test # 1

If your business commenced before 1 February 2020, you are working out average turnover from inception (excl the first month) to 29 February 2020 and testing current turnover against this average. The process is:

• Add up the turnover of your business since inception;
• Remove from this tally the first month (i.e. the month the business started);
• Divide this new total by the number of months (excluding the first month);
• Multiply this figure by 3 (to gross up to a quarterly figure);
• If current turnover is 30% down on this figure, you qualify.

If your business commenced in February 2020, then you need to pro-rata this up to a quarterly figure and test:

• Add up the turnover of your business for the month of February 2020;
• Divide by the number of days (to get an average per day);
• Multiply by 29 (number of days in February);
• Multiply by 3 (to gross up to a quarterly figure);
• If current turnover is 30% down on this figure, you qualify.

Test # 2

If your business commenced before 1 December 2019, then you may choose this test instead. Essentially you measure your turnover for the period 1 December 2019 to 29 February 2020 (which is 3 months) against your current turnover.

2) Purchase or Sale of Part of the Business

If you purchased or sold part of your business after the start of the comparison period AND the purchase or sale altered your turnover, then you can use this test. Essentially you use the month immediately prior to the purchase or sale (gross it up to a quarter) and test it against current turnover. The process is:

• Find the date of your purchase or sale
• Add up your turnover for the previous calendar month;
• Multiply this figure by 3 (to gross up to a quarterly figure);
• If current turnover is 30% down on this figure, you qualify.

If the purchase or sale only occurred in the month immediately prior to the test period (i.e. the purchase or sale occurred during June 2020 for JK 2.0, or September 2020 for JK 2.1), then you must use the month in which the purchase or sale occurred. The process is:

• Add up the turnover of your business in the month immediately prior to the test period
• Multiply this figure by 3 (to gross up to a quarterly figure);
• If current turnover is 30% down on this figure, you qualify.

To avoid doubt on this one, for JK 2.0 you are essentially taking June 2020, multiplying by 3, and comparing to the July to September quarter.

3) Business Restructure

If you did a business restructure AND the restructure altered your turnover, then you can use this test. The details of the test are exactly the same of the above purchase or sale tests, so please refer to the above for details.

The Government’s material states that “substantial change in the usual business setting” is required. The purpose of the test is to give people an alternative where the original / normal test is unfair in that the comparison period isn’t representative of the current business – things like employee movement or changing employee roles would not qualify as these are in the “usual business setting”.

4) Rapidly Growing Business

If your business has substantial growth prior to the test period, then this test is available to you. Substantial growth means:

• A 50% increase in 12 months;
• A 25% increase in 6 months; or
• A 12.5% increase in 3 months.

In either:

• The 12 / 6 / 3 months immediately prior to the turnover test period, or
• The 12 / 6 / 3 months immediately prior to 1 March 2020

If this applies to you, then you essentially test your current turnover against the previous 3 months (i.e. 1 July to 30 September 2020 vs 1 April to 30 June 2020 for JK 2.0).

5) Business With Irregular Turnover

If your turnover fluctuates highly across a year (other than cyclical or seasonal), then you should look at this test.

The threshold for “irregular turnover” is turnover in any quarter in a 12 month period being 50% or less than the highest quarter. For this test there are two 12 months periods you can use:

• The 12 months prior to the test period; or
• The 12 months prior to 1 March 2020

So essentially for JK 2.0, you would get your turnover for the 4 quarters between 1 July 2019 and 30 June 2020 and see if any was 50% below the highest. If that doesn’t work, then you would look at 4 quarters between 1 March 2019 and 28 February 2020.

If this test applies to you, then you are essentially testing current turnover against the average turnover of the 12 months that you have tested above. The process for this is:

• Work out if you are testing the 12 months prior to:
  • the test period; or
  • 1 March 2020;
• Tally up your turnover for that 12 months;
• Divide by 4 (to get an average quarterly figure);
• If current turnover is 30% down on this figure, you qualify.

6) Sole Trader or Small Partnership affected by Sickness, Injury, or Leave

Only sole traders and partnerships with no employees are eligible to use this test. Essentially the turnover of the comparison period must have been affected by the sole trader (or partner in the partnership) being unable to work for all or part of the comparison period due to sickness, injury, or leave.

We note that there needs to be a substantial sickness / injury / leave period, having one day off  (and therefore barely effecting turnover) will not qualify you to use this test.

This test involves using the month prior to the individual being sick / injured / on leave as the comparative period. The process for this is:

• Work out the period that the individual was not able to work;
• Calculate the businesses turnover for the previous calendar month (e.g. if sick from 4 July to 22 July, then you need the turnover for June);
• Multiply this figure by 3 (to gross up to a quarterly figure);
• If current turnover is 30% down on this figure, you qualify.