On the 9 October, the Commissioner introduced a new class of alternative decline in turnover test for the JobKeeper extension. This new class is available where the entity has temporarily ceased trading and the cessation occurred during some or all of the relevant comparison period.
The cessation must have been for a week or more and the reason for the cessation must have been outside the ordinary course of the entity’s business. Additionally, the entity must have resumed trading before 28 September 2020.
Importantly, the entity does not have to have ceased business, only trading, and this alternative test is only available to gain access to the JobKeeper 2.0 fortnights beginning on or after 28 September 2020.
But what is “outside of the ordinary course of business”?
The Explanatory Statement to this new class gives the sole example of a business that needs to cease trading for more than a week due to a relocation of its operations.
But the Explanatory Statement is more comprehensive in what is not “outside of the ordinary course of business”, stating:
Entities can expect to cease trading temporarily for short periods, such as several days to move premises, or such as due to events or circumstances outside their control, like blackouts. Even where particular events and their timing may not be known in advance, such short events can be expected and are therefore not outside the ordinary business setting.
You could take from this that the application of this test is expected to be limited.
So, how does it work? There are two alternative tests available in this class.
The first alternate test uses the same period in the year immediately before the business temporarily ceased trading, whereas the second alternative test uses the whole month or months immediately before the business temporarily ceased trading.
Although this test will only give access to JobKeeper 2.0 fortnights, an entity must have satisfied the decline in turnover test under JobKeeper 1.0 to qualify for JobKeeper 2.0. Therefore, this test must be fit for that purpose.
Details are available with the ATO’s guidance. However a discussion and examples of this eighth test and of the other seven alternative decline in turnover tests is available on the Tax & Super Australia website and is free to members. Non-members may also purchase the videos, which can be a very useful tool to explain the alternative tests to clients.