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COVID-19 Business Continuity – 24th April

I’m here with the COVID-19 business continuity update on Friday 24th April.

In today’s update:
1. Alternative tests for businesses to qualify for JobKeeper:

  • Businesses with significant growth
  • Businesses with irregular turnover

2. Extension to enrol for JobKeeper – end of May

1. Alternative tests for businesses to qualify for JobKeeper

The ATO has provided significantly more detail on the alternative tests that businesses can use if they don’t easily qualify for JobKeeper using the basic test.
The basic JobKeeper turnover test requires businesses to have seen their revenue reduce by 30% compared to the same period last year. This doesn’t allow for fast growing businesses or those with lumpy turnover. Many Tenfold clients have grown their businesses over the last 12 months and this growth would have penalised them by causing them to miss out on JobKeeper.

There are seven alternative tests announced yesterday, 23rd April, but I feel two in particular are relevant to most businesses:

Alternative test for significant growth businesses

Many businesses are in the situation whereby their turnover in 2020 is substantially greater than a year ago. Using the basic test, this growth in their business effectively penalised them when it came to JobKeeper eligibility. This new alternative test makes the calculation fairer for these businesses. See the rules for “Business had substantial increase in turnover” here:

JobKeeper alternative test growth

Essentially the alternative test allows for a business that has grown by 50% per annum, measured over 12 months, 6 months (25% growth) or 3 months (12.5% growth) to use a more recent comparison turnover measure. This comparison can be used to assess whether revenue has declined by 30% to be eligible for JobKeeper.

In my understanding of how to apply the test, this would be an example:
• If your business has grown by more than 12.5% over the January 2020 to March 2020 period, then,
• Take the average of your turnover for January to March 2020 and compare it with your turnover for April 2020 to demonstrate your eligibility.

This is my understanding based on the information from the ATO so far – we could receive further clarification next week. This makes it significantly easier for a growing business to qualify for JobKeeper and possibly qualify sooner.

Alternative test for businesses with irregular turnover

Some of you, especially those in the project and construction industry, experience significant swings in your turnover on a quarterly basis as projects finish before others start. This alternative test supports you to qualify for JobKeeper.

See here for the rules for “Business has an irregular turnover”:

JobKeeper alternative test irregular

The alternative test applies if your quarterly turnover fluctuation is at least a 50% reduction from the highest quarter to the lower quarter for the previous 12 months. In my understanding of how to apply the test, this would be an example:

If your January to March 2020 turnover was 50% less than your July to September 2019 turnover, then,
• Take the monthly average of your turnover for the April 2019 to March 2020 period and compare it with your turnover for April 2020 to demonstrate your eligibility.

This comparison can be used to assess whether revenue has declined by 30% to be eligible for JobKeeper.

Again, this is my understanding of how to apply the test, but we could receive further clarification next week. This makes JobKeeper much more accessible to many of project and construction clients.

What this means for businesses is that if you didn’t think you’d qualify before, you may be able to now. Additionally, you may be able to qualify sooner.

What we’ve typically seen from the ATO is that they publish the information and then provide examples later that show how the rules are applied in practical situations. Therefore, we aren’t 100% sure of exactly how to interpret these new alternative tests in every situation, however we anticipate some examples being published early next week.

If this all makes you confused you are not alone. Please speak to your coach to discuss how this applies for your particular circumstances as I feel these alternative tests are going to provide a lot more peace of mind for our clients experiencing a decline in sales.

To summarise the process for determining your comparison turnover as it applies to most of Tenfold’s clients.

1. Compare your actual March 2020 with your March 2019 turnover
• If you’ve experienced a 30% decline, you’ve qualified
• Otherwise:

2. Compare your forecast April 2020 with your April 2019 turnover
• If you’ve experienced a 30% decline, you’ve qualified
• Otherwise:

3. Compare your forecast April to June 2020 with your April to June 2019 turnover
• If you’ve experienced a 30% decline, you’ve qualified
• Otherwise:

4. Use an alternative test, such as the ‘substantial increase in turnover’ test
• If you’ve experienced a 30% decline, you’ve qualified
• Otherwise:

5. Use another alternative test, such as the ‘irregular turnover’ test
• If you’ve experienced a 30% decline, you’ve qualified.

There is also more information on not having to retest each month to ensure ongoing eligibility for JobKeeper through until September 2020. See this excerpt from the ATO:

JobKeeper not a retest

I understand this to mean that once you have qualified for JobKeeper you will receive the benefits of JobKeeper until the end of September 2020 when it is legislated to conclude.

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2. Extension to enrol for JobKeeper

Another update that came through today is that the ATO has extended the time to enrol for the initial JobKeeper periods from 30 April 2020 until 31 May 2020.

If you enrol by 31 May, you will still be able to claim for the fortnights in April and May provided you meet all the eligibility requirements for each of those fortnights. This includes having paid your employees by the appropriate date for each fortnight.

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I know this is a lot to digest on a Friday evening. Rest assured, all of the coaches are here to assist you next week in ensuring you get all of the government support you’re entitled to. These alternative tests clearly show that the federal government wants to ensure that any business that experienced a significant drop in turnover will be supported through JobKeeper.

Have a good weekend.

Ash

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