Current as at 16 April 2020
After reviewing the new legislation in relation to the JobKeeper incentive we have become aware of some uncertainty in relation to the turnover test and how businesses are able to access the incentive.
The turnover test applicable to the Jobkeeper stimulus for businesses/employers is as follows:
1. Annual aggregated turnover less than $1b and you can demonstrate a reduction in revenue of 30% or more since 1 March 2020; or
2. Annual aggregated turnover of $1b or more and can demonstrate a reduction in revenue of 50% or more since 1 March 2020.
For the purpose of determining the $1b threshold the “aggregated turnover” definition requires you to include the annual turnover of all entities connected or affiliated with you – all worldwide related entities/businesses. This is different to the revenue rules for assessing the 30% or 50% revenue reduction.
To assess whether a business/employer has a reduction in revenue – it must work out its current or projected revenue using the conditions below:
1. Revenue includes all taxable sales and GST-free sales. GST-free sales would effectively cover all export and overseas sales made by the Australian business. Therefore only the Australian-based revenue will be included and not revenue made by overseas-related entities. Generally, this will be the total sales reported at G1 in the Business Activity Statement of the business;
2. Revenue will exclude input-taxed sales such as interest income, passive income (i.e. dividend), residential rent receipts, and certain fundraising receipts (i.e. charity auctions);
3. The revenue reduction assessment will be done on a per employer/entity basis so rules like the GST grouping rule is disregarded so only the revenue of the relevant employing entity is counted.
4. Consolidated group rule is not relevant when calculating the reduction in revenue due to the individual entity basis assessment so intra-company transactions between related entities are likely to be included in the revenue count if it is reported in G1 in the BAS or is considered to be a taxable supply or GST-free supply.
New businesses or start-ups where there is no revenue or trading history in prior years will have alternative revenue tests that can be applied once made available by the Commissioner. At the time of writing this article no further information has been released by the ATO.
If you have questions or would like to know more about the turnover test for the Jobkeeper stimulus please do not hesitate to contact your client manager.
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