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You may be eligible for JobKeeper after all - Using projections of turnover for JobKeeper eligibility

The ATO has issued a ruling regarding the application of the decline in turnover test (ATO Ruling) and various ways in which turnover can be determined and predicted.

Relying on a 30 percent decline in projected turnover will satisfy the JobKeeper eligibility requirements and the ATO accepts that there may be practical compliance difficulties in linking amounts you have received or invoiced based strictly on the time a supply is made or likely to be made.

When determining your projected turnover consider the following:

1. Projections must be reasonable

When making decisions regarding a decline in projected turnover the ATO will accept calculations based on:

  • a bona fide business plan,
  • an accounting budget, or
  • some other reasonable estimate based on evidence about the projected facts and circumstances for the turnover test period i.e. the month or quarter in 2020 compared to the same month or quarter in 2019.

The evidence must have been in existence at the time you calculate the projected turnover.

The ATO will accept your assessment of turnover unless there is a reason to believe that your calculations were not reasonable.

2. Collect evidence

You must have evidence to support a prediction of a decline in projected turnover.

In the residential building industry there are a range of methods you could use that would satisfy a projected decline in turnover including:

a) A decline in conditional sales or preliminary agreements

You could rely on historical conditional sales (or preliminary agreements) and the taking of an initial fee and actual turnover from your business’s history and apply that experience to the current decline in conditional sales (or preliminary agreements) and the amount of initial fees taken to predict a 30 percent decline in turnover.

Example: If a customer wishes to engage Builder A to carry out construction work, Builder A will enter into a preliminary agreement with the customer in order to confirm that they intend to proceed with the construction of a new home. This preliminary agreement, or conditional sale, is accompanied by the payment of an initial fee.

In March 2020 Builder A experienced a 60 percent reduction in the turnover that would result from the number of preliminary agreements signed/ conditional sales made and initial fees taken.

Based on this reduction during March 2020 compared to the preliminary agreements signed/ conditional sales made and initial fees taken in March 2019 Builder A can predict there will be a reduction in their turnover of at least 30 percent.

If Builder A had paid staff by 8 May and applied for the JobKeeper Scheme by 31 May, Builder A was eligible for the JobKeeper Payment from 30 March.

If Builder A experienced this decline after May, Builder A must enroll their business and identify their eligible employees by the end of the month that they wish to claim the JobKeeper payment for. Builder A must also ensure that they pay their employees on or before the end of the fortnight that they wish to claim for. See here for the payment details that correspond to each JobKeeper fortnight.

Example: Builder B also enters into preliminary agreements or conditional sales with its customer in order to confirm that they intend to proceed with the construction of a new home. Builder B also takes the payment of an initial fee with this preliminary agreement, or conditional sale.

During the April 2020 quarter, Builder B predicts that they will experience a 70 percent reduction in the turnover that would result from the number of preliminary agreements signed/ conditional sales made and initial fees taken. That is Builder B has already experienced a drop in activity during April and the first part of May and considers it likely that this trend will continue during the rest of May and into June.

Based on this reduction during April 2020 quarter compared to the preliminary agreements signed/ conditional sales made and initial fees taken in the April 2019 quarter Builder B can project that there will be a reduction in their turnover of at least 30 percent.

If Builder B had paid staff by 8 May and applied for the JobKeeper Scheme by 31 May, Builder B was eligible for the JobKeeper Payment from 30 March.

If Builder B experienced this decline in the July quarter, Builder B must enroll their business and identify their eligible employees by the end of the month that they wish to claim the JobKeeper payment for i.e. before the end of July. Builder B must also ensure that they pay their employees on or before the end of the fortnight that they wish to claim for. See here for the payment details that correspond to each JobKeeper fortnight.

b) A decline in foot traffic through display homes

If you have a regular and systematic approach to measuring foot traffic through your display homes you could consider the number of customers you had through a home last year during, for example March and April, and the consequential actual turnover as a result of those visits during that period, and apply that experience to the current decline in foot traffic through your display home to predict a decline in turnover below 30 percent.

Example: Builder C operates a display home and keeps a detailed log of the number of people that visit the home and undertakes monthly analysis of how many preliminary agreements/conditional sales result from this foot traffic. During March and April Builder C experienced a 90 percent reduction in foot traffic through it due to the impact of COVID-19 and Government restrictions that required that people view the home on an appointment only basis.

Based on this reduction in foot traffic through the display home during March and April 2020 compared to the foot traffic through the display home during March and April 2019, and the regular monthly analysis undertaken, Builder C can predict there will be a reduction in their turnover of at least 30 percent.

If Builder C had paid staff by 8 May and applied for the JobKeeper Scheme by 31 May Builder C was eligible for the JobKeeper Payment from 30 March.

If Builder C experiences this decline after May, Builder C must enroll their business and identify their eligible employees by the end of the month that they wish to claim the JobKeeper payment for. Builder C must also ensure that they pay their employees on or before the end of the fortnight that they wish to claim for. See here for the payment details that correspond to each JobKeeper fortnight.

c) A decline in building contracts signed

You could examine the number and value of contracts you signed during the April 2019 and the consequential actual turnover you received from those contracts and apply that experience to the current decline in the number of contracts you signed in April 2020 to predict a decline in turnover below 30 percent.

Example: During April 2020 Builder D received 3 customer enquiries for, with only one committing to signing a contract with Builder D. This reduction in new sales activity represents a 50 percent decline in sales activity compared to April in 2019. Based on this reduction in sales activity Builder D can predict there will be a reduction in their turnover of at least 30 percent.

If Builder D had paid staff by 8 May and applied for the JobKeeper Scheme by 31 May Builder D was eligible for the JobKeeper Payment from 30 March.

If Builder D experiences this decline after May, Builder D must enroll their business and identify their eligible employees by the end of the month that they wish to claim for. Builder D must also ensure that they pay their employees on or before the end of the fortnight that they wish to claim for. See here for the payment details that correspond to each JobKeeper fortnight.

d) Other evidence of a projected decline in turnover

Other evidence may include:

  • A decline in supplies during the month or a quarter since 1 March 2020 as a result of government COVID-19 restrictions.
  • Customers cancelling or modifying existing contracts for supplies on or from 1 March 2020.
  • Being required to close or pausing the business due to government COVID-19 restrictions.
  • Delays in being able to get access to trading stock sourced from overseas on or from 1 March 2020.
  • Any consequential impact on the prices of what you supply, for example, the impact on the market value of new property being sold by a developer.
  • Information known to the business, whether or not publically available.
  • Economic forecasts undertaken by a reputable organisation that are relevant to your type of business.
  • The likely timing of government COVID-19 restrictions being lifted for your type of business based in government announcements.

3. Apply a consistent approach

Ensure that the way you determine and attribute turnover to a relevant period in 2020 is consistent with how you determine and attribute turnover in 2019.

4. Keep records

While Jobkeeper applications do not require details of how your turnover projections were made you must keep records and documentation in relation to how you came to the decision regarding a projected decline of 30 percent compared to the same period (either a month or a quarter) in 2019 for 5 years.

5. Satisfy the test once

Once you are eligible, you are covered by the scheme and are not required to retest your turnover.

6. What if actual turnover is more than predicted?

As long as your decision to claim JobKeeper payments was reasonable you will not be penalised if your actual turnover is greater than what you predicted when making an application for JobKeeper. Find further information regarding the ATO’s compliance approach here.

Contact a HIA Workplace Adviser on 1300 650 620 for further information and advice