The Alternative Tests
Under the JobKeeper rules, special discretionary powers were given to the Commissioner of Taxation to determine alternative tests for classes of taxpayers where the basic test couldn’t be used because there was no appropriate relevant comparison period.
These alternative tests have now been determined. The alternative tests are only relevant if the basic test cannot be met.
Alternative tests have been provided where:
- The entity commenced business before 1 March 2020 but after the relevant comparison period
- There was a business acquisition or disposal that changed the entity’s turnover
- There was a business restructure that changed the entity’s turnover
- The business had a substantial increase in turnover (referred to as a “rapid growth” business)
- The business was affected by drought or natural disaster
- The business has irregular or “lumpy” turnover
- The business is a sole trader or small partnership with sickness, injury or leave over the last 12 months which has impacted turnover
For each of these scenarios, an alternative test has been provided.
There is still limited information on the application of the above tests however we expect more details imminently.
If your business is unable to apply an alternative test, and the basic test is not appropriate, there is no ability to apply to the Commissioner requesting him to consider your situation (i.e. a private ruling request).
Please contact you Holman Hodge adviser if you have any questions in relation to the above.
Treasurer Press Release
On 24 April, the Treasurer issued a media release to clarify the operation of the JobKeeper payment rules and to ensure their integrity and efficient operation.
Amongst other matters, the media release provides that changes will made to the rules where employees are employed through a “special purpose entity” rather than the business operating entity (what we commonly refer to as a service entity).
Where employees are employed through a service entity, the service entity charges the business entity a service fee based on an agreement in force between the entities. In understanding the analysis for the decline in turnover test, this often resulted in the business suffered a drop in turnover of the requisite percentage (generally 30%) however the service entity did not. As the business entity was not an employing entity, it wasn’t eligible for the JobKeeper payment and as the service entity (which does employ people) did not have the requisite drop in turnover, it also was not eligible for the JobKeeper payment.
The Treasurer has clarified that changes will be made to the rules to include another alternate test where an entity provides the services of its employees to one or more related entities (where those related entities carry on a business deriving revenue from unrelated third parties). The alternate test will combine the GST turnovers of the related entities using the services of the service entity.
The provision of the alternate test will allow clients who have a service entity structure in place, an opportunity to apply the alternate test to determine if the JobKeeper payment is available for the employees of the service entity.
This is a sensible outcome and we welcome the clarification provided by the Treasurer.
There were other matters covered in the press release including:
- Treatment of government grants in the turnover calculation for Charities
- Allowing religious practitioners to be eligible for JobKeeper
- Confirming the “one in, all in,” principle of JobKeeper i.e. that once an employer is eligible for JobKeeper, all eligible employees must be included
- An exclusion to the payment of JobKeeper has been made for full time students aged 16 & 17 and who are not financially independent (this clarification will apply prospectively)
- Clarification for international aid organisations and whether they were pursuing their objectives principally in Australia
- Clarification that universities must include Commonwealth Government financial assistance in the JobKeeper turnover tests
Banks have also agreed to set up helplines and prioritise businesses who need finance to bridge the payment of the amount to enable a business to qualify for JobKeeper until they start receiving the JobKeeper payment.
If you have any questions in relation to the above, please contact your Holman Hodge adviser.