GST turnover explained: How to pass the JobKeeper eligibility test

coronavirus tax relief

Applications for the federal government’s $130 billion JobKeeper wage subsidy program are now open and businesses across the country are applying.

But how do you know whether your business is eligible for the program?

You may have heard already, but to access JobKeeper payments, SMEs must pass a ‘turnover’ test, which shows their revenue has declined by at least 30% on a comparable period a year ago.

But what are these comparable periods, how long should they be, and how should you calculate turnover?

The turnover test, also being called the “basic test”, is a five-step process:

  1. Identify the turnover test period (monthly or quarterly);
  2. Identify a relevant comparison period (the turnover test period, but in 2019);
  3. Determine relevant JobKeeper GST turnover (actual or projected);
  4. Determine which turnover reduction applies to you (30% for SMEs that are not charities); and
  5. Work out if your turnover (step 1,2,3) has fallen by the required amount (step 4).

 

What does all of that mean? Let’s run through it

Which turnover period should I nominate?

The messaging on how the turnover test works has changed several times since JobKeeper was first announced in March, so let’s clear the air.

The Australian Tax Office (ATO), which is administering the entire program, says businesses can either nominate a monthly or quarterly turnover period in their application.

Businesses may select any month they want during the six-month life of the program, so that’s either March, April, June, July, August or September.

But businesses will only be eligible for JobKeeper payments for fortnightly cycles that start on or after their nominated month.

This means if your business nominates a projected fall in GST revenue in May (against May 2019), you’ll only be eligible for JobKeeper payments starting in the first JobKeeper pay cycle in or after May — even though payments technically start from April.

Even if your business was paying workers the minimum JobKeeper payment ($1,500 a fortnight) during April on the expectation of being reimbursed, you won’t be able to recover wages for those fortnights if May is nominated as your turnover period.

Flipping that scenario, if your business nominates March GST turnover (against March 2019) you will be eligible for JobKeeper payments starting from the inception of the scheme, including payments back dated to March 31.

Want to nominate a quarter? Your choices are April 1 to June 30, or July 1 to September 30 (compared, in both cases, to those corresponding periods in 2019).

Businesses that qualify under the June quarter will be eligible for payments from the inception of the scheme, including back-dated subsidies for April, but firms accepted under the September quarter will only qualify for JobKeeper fortnights that end in July or September.

The bottom line: Nominate the period you qualify for (obviously) but if there are multiple months you can demonstrate a 30% turnover decline in, picking an earlier period will get the payments flowing sooner.

What the Fiscal stimulus is GST turnover?

Here’s where things get a touch tricky. While GST turnover is an established accounting metric, the ATO has made several modifications to ensure the JobKeeper scheme is fit for purpose.

For example, for the purposes of JobKeeper, GST turnover or projected GST turnover (more on this below) is not calculated on a rolling annual basis, but on a monthly or quarterly basis depending on an applicant’s nominated period (explained above).

What is GST turnover? It’s all the sales (accountants sometimes use the word supplies) made within your business in a given period, which for the purposes of JobKeeper is a month or quarter, minus any excluded sales.

Excluded sales (for the purposes of JobKeeper) include:

  • GST included in those sales (I know, how confusing!);
  • Input taxed sales;
  • Sales not connected with Australia, including businesses operating wholly outside of the country; and
  • Gifts and donations, including the receipt of tax deductible donations by a deductible gift recipient unless they’re from an associate (defined here).

How a business calculates GST turnover will depend on the Business Activity Statements (BAS) usually filed to the ATO, namely whether they’re prepared on a cash or accrual basis.

Put simply, GST turnover calculated on an accrual basis relates to sales a business has invoiced (but has not necessarily been paid for) over their nominated period (as explained above), while GST turnover calculated on a cash basis relates to sales that have been paid for over a nominated period.

Which calculation a business opts for depends on whether they typically file BAS statements with GST turnover calculated on an accrual or cash basis.

If a business typically files on an accrual basis, it will not be allowed to calculate GST turnover on a cash basis for the purposes of JobKeeper.

Businesses must use the same type of GST turnover calculation (cash or accrual) for both their nominated and comparison period.

Accountant and principal of Perigee Advisers Lisa Greig says businesses should consult their historic Business Activity Statements for guidance on how they should build their JobKeeper applications.

“Don’t over think it, look at what you put in your BAS without GST,” Greig tells SmartCompany.

“The only thing is, if you report on a quarterly basis you’ve then got to dissect the months out.

“You have to match your first JobKeeper fortnight with your nominated month.”

What about projected GST turnover? This will be relevant to businesses applying for periods that have not yet happened, including April (the remainder), and both available quarterly periods.

Greig advises businesses to go in with a solid case to make.

“As with anything you have to have it supported, so make sure you have some logic behind it,” Grieg says.

The ATO has published some useful guidelines about preparing projected figures as well, saying firms should consider:

  • Whether the business is expected to trade during its nominated period due to coronavirus;
  • Whether the business is subject to coronavirus trading restrictions;
  • Recent patterns in trading that are expected to continue; and
  • Revised business plans.

Projections can point to conditions that are not directly coronavirus related.

What’s my comparison period?

All turnover tests must be run against a comparable period in 2019.

That means those trying to qualify under March 2020 turnover must measure against March 2019 turnover, and firms nominating June quarter turnover must measure against June quarter 2019.

If your business has been in operation less than 12 months, hang tight because there’s a legislative instrument coming with your name on it “soon”.

Your business doesn’t meet the 30% hurdle when compared against 2019? Well, the alternative test might be for you. We’ve explained what that means in our recent article here.

The bottom line: Whatever your nominated turnover period was 12 months ago.

What eligibility category is my business in?

Broadly there are three main eligibility categories for JobKeeper applicants.

Businesses with less than $1 billion in annual turnover are required to demonstrate a 30% decline in turnover year-on-year, based on the turnover periods explained above.

Businesses with more than $1 billion in annual turnover are required to demonstrate a 50% decline in turnover year-on-year, based on the turnover periods explained above.

Charities and registered not for profits are required to demonstrate a 15% decline in turnover year-on-year, based on the turnover periods explained above.

The bottom line: SMEs are required to show a 30% decline in turnover year-on-year for their nominated period.

NOW READ: JobKeeper applications now open: Here’s how to apply

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