JobKeeper - Alternative Tests and Integrity Measures
With many businesses in the midst of registering for JobKeeper and making their first claim, the Government and the ATO have issued various documents over the last week or so on important elements of the JobKeeper program.  These are discussed briefly below.

Alternative decline in turnover tests  

On 23 April 2020, the Commissioner of Taxation released his anticipated Legislative Instrument on the circumstances in which entities can apply an alternative turnover reduction test for the purposes of receiving JobKeeper payments.

The basic test requires a GST turnover reduction of at least 30% (15% for charities or 50% for entities with aggregated turnover of $1bn or more) between the 2020 period being examined and the equivalent period in 2019.  For example, comparing the turnover in the month of March 2020 with the turnover in the month of March 2019, or comparing the projected turnover in the April – June 2020 quarter with the actual turnover in the April – June 2019 quarter.

The JobKeeper Rules recognise that for certain classes of entities, the equivalent period in 2019 does not provide an appropriate comparison, thereby allowing the Commissioner to issue alternative tests by Legislative Instrument.

In doing so, the Commissioner has identified 7 situations in which alternative turnover comparisons will be allowed:
Alternative turnover comparison  
An entity that commenced business after the relevant comparison period in 2019 – e.g., entities that were not operating any business at the time.
Average turnover in the months of operation following the commencement month up to February 2020 (or average of 3 months up to February 2020)
An entity that acquired or disposed of part/s of its business after the relevant comparison period in 2019 and the acquisition/s or disposal/s changed its turnover – e.g., the business was not the same business at the time.

Turnover in the month following the acquisition or disposal (or the latest acquisition or disposal if there were multiple ones)

An entity that restructured part or all of its business after the relevant comparison period in 2019 and the restructure/s changed the entity’s turnover – e.g., the business was not the same at the time.

Turnover in the month following the restructure (or the latest restructure if there were multiple ones)

An entity that experienced high growth outside of the usual business setting and therefore was not the same at the time.  This is defined as a turnover increase of:

  • 50% or more in the 12 months immediately before the applicable turnover test period; or
  • 25% or more in the 6 months immediately before the applicable turnover test period; or
  • 12.5% or more in the 3 months immediately before the applicable turnover test period.
Turnover in the 3 months immediately before the turnover test period
An entity that has been affected by a drought or other natural disaster in the relevant comparison period in 2019.
Turnover in the period in the year prior to the declaration of drought or natural disaster 
An entity that has an irregular turnover (e.g., building and construction sector) not due to a cyclical business nature (e.g., seasonal agricultural businesses).
Average turnover in the 12 months prior to the turnover test period 
 An entity this is a sole trader or a small partnership
and the sole trader or one of the partners did not work
for all or part of the relevant comparison period because
they were sick, injured or on leave during the relevant comparison period and those circumstances affects the turnover of the sole trader or partnership.
Turnover in the month following the sole trader or partner returning to work

It should be noted that if your business satisfies the basic test, there is no need to refer to the alternative tests.  In other words, if your business qualifies under the basic test, it cannot be denied JobKeeper payments if it fails any potentially applicable alternative test.

As these alternative methods are very complex, please contact your Prosperity adviser for assistance with those if applicable to your business.

Modified decline in turnover test for certain group structures   

On 1 May 2020, the Treasurer released a number of amendments to the JobKeeper Rules, including a modified test for certain group structures.

This modified test applies to entities that are part of a group (e.g., a tax consolidated or consolidatable group and/or a GST group) and whose principal activity is supplying employee labour services to other members of the group – i.e., service entities.

Where this is the case, the entity can assess its decline in turnover by reference to the turnover of the group entities to which it provides the employee labour services rather than its own turnover.

It should be noted that if any of the group entities to which services are provided are entitled to use an alternative decline in turnover test (as noted above), the alternative will also be used for the purpose of this calculation.

If your group includes such entities, please contact your Prosperity adviser for assistance. 

Integrity provisions

The JobKeeper legislation has an embedded anti-avoidance provision that allows the Commissioner of Taxation to recover any JobKeeper payments and impose heavy penalties and interest where entities have entered into or carried-out a scheme for the sole or dominant purpose of obtaining JobKeeper payments and/or increasing an entitlement amount.

On 1 May 2020, the ATO issued PCG 2020/4 on the issue of such “schemes” and where compliance resources will be allocated in investigating them.

The Commissioner’s key concerns will be in situations where an entity’s business was not significantly affected by external factors such as COVID-19.  On the other hand, where such factors did have a significant impact and the entity entered into a scheme to obtain JobKeeper payments to keep its employees employed, the Commissioner is unlikely to apply compliance resources. 

The PCG contains a number of helpful examples such as deferring or bringing-forward supplies in unimpacted industries in order to artificially obtain access to JobKeeper payments, as well as schemes undertaken by entities in impacted industries that are unlikely to warrant ATO attention (e.g., renegotiating service entity arrangements by impacted groups).

In addition, it has been reported that both Treasury and the ATO are working together with the Australian Federal Police’s anti-fraud taskforce to identify and combat rorting and fraudulent activity in relation to various Stimulus measures, primarily JobKeeper.  For example, the ATO has already set-up a tip-off hotline to which JobKeeper fraud and other behaviours of concern can be reported.  

This is aimed at the more criminal and fraudulent end of artificial claims rather than mistakes or schemes that will require a repayment of payments received.  Behaviour falling into this latter category may result in criminal charges and imprisonment.

Given the size of the JobKeeper program and the amounts of money involved, we believe this compliance activity by the ATO and the Australian Federal Police will last long into the future, even after the COVID-19 pandemic is over.

We caution against backdating or creating salary arrangements in order to generate or increase entitlements to the payment.

If the employment arrangement did not exist at the time, then you should not be purporting that it did.

For more information please contact Director of Taxation Services, Raffi Tenenbaum on 02 8262 8716 or email

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