Since the government announced the JobKeeper Payment in late March, there has been some uncertainty about whether startups and high growth companies will be eligible for JobKeeper.

This is because, under the original test, eligibility is based on a decline in projected turnover compared against turnover in the same period last year. However, a year-on-year comparison isn’t appropriate for newly launched startups, or companies that have gone through significant growth in the last 12 months.

As the government has previously foreshadowed, they have now released the legislation and an explanatory statement to establish a number of alternative tests for businesses whose turnover a year ago is not representative of their average turnover.

This is good news for:

  • new businesses
  • high growth businesses
  • businesses that went through M&A or restructures
  • businesses affected by drought or natural disasters
  • irregular turnover businesses
  • sole traders or small partnerships affected by sickness or injury

What Is JobKeeper?

The JobKeeper Payment is a payment for some businesses and not for profits who have suffered a financial loss due to COVID-19. 

It is administered by the ATO and will last from 30 March 2020 to 27 September 2020.

First your business has to register for it, then if you are eligible, the ATO will give your business a JobKeeper payment for you to pay to each eligible employee.

For more information on how JobKeeper works and answers to eligibility questions you can find more information on the ATO website.

How Do The JobKeeper Alternative Tests Work?

The government has now outlined a number of alternative tests where a comparison against last year’s turnover is not appropriate.

Under the original basic test, businesses can assess their eligibility by comparing projected turnover in a ‘test period’ (ie the period affected by COVID-19) against turnover in a ‘comparison period’, being the same period last year. Applicants are able to choose whether to compare periods over a month or over a quarter, whichever makes sense for them.

The alternative tests set out other comparison turnovers (again, can be either monthly or quarterly periods). 

Here’s a summary of how each of the tests work.


New Business

Eligibility – This test applies to entities that commenced business after the 2019 comparison period but before 1 March 2020.

Comparison Period Turnover

MonthlyQuarterly
Average monthly turnover since commencement of business
OR
3 month turnover before 1 March 2020 (ie Dec-Feb), divided by 3
Average monthly turnover since commencement of business, times 3
OR
3 month turnover before 1 March 2020 (ie Dec-Feb)

High Growth Business

Eligibility – This test applies to entities that have increased turnover by any of the following:

  • 50%+ in the last 12 months,
  • 25%+ in the last 6 months, or
  • 12.5%+ in the last 3 months.

Comparison Period Turnover

MonthlyQuarterly
Turnover in the 3 months immediately before the test period, divided by 3Turnover in the 3 months immediately before the test period

Recent M&A or Restructuring

Eligibility – This test applies to businesses whose turnover has been affected by an acquisition, disposal or restructure.

Comparison Period Turnover

MonthlyQuarterly
Turnover in the month immediately after the month in which the event occurredTurnover in the month immediately after the month in which the event occurred, times 3

What If My Business Has Gone Through Multiple Acquisitions, Disposals Or Restructures?

Where there are multiple acquisitions, disposals or restructures, the rules ensure that the comparison is done against the turnover of the entity’s new setting once all of these changes have occurred.

Generally, the relevant comparison period will be the whole month after the last acquisition, disposal or restructure has taken place. Or, if there is no whole month after the last event, then the comparison period will be the month immediately before the comparison period.


Drought or Natural Disasters

Eligibility – This test applies to entities whose turnover has been affected by drought or natural disasters in a declared zone.

Comparison Period Turnover

MonthlyQuarterly
Turnover in the same month in the year before declarationTurnover in the same quarter in the year before declaration

Irregular Turnover

Eligibility – This test applies to entities where, in the last 12 months, the lowest turnover quarter is 50% or less than the highest turnover quarter. Not available for ‘cyclical’ businesses

Comparison Period Turnover

MonthlyQuarterly
Average monthly turnover of the last 12 monthsAverage monthly turnover of the last 12 months, times 3

What Does ‘Cyclical’ Mean For The Irregular Turnover Test?

As set out above, ‘cyclical’ businesses are not eligible to claim the irregular business test. The explanatory statement makes it clear that this includes businesses with regular seasonal variance in their turnover (such as in agriculture). For these businesses, even though the lowest turnover quarter might be less than 50% of the highest quarter, since this is the case every year, the irregularity is not outside the usual business setting and therefore they are not eligible for an alternate test.


Sole Trader / Small Partnership

Eligibility – This test applies to sole traders and small partnerships with no employees, whose turnover in the relevant period last year has been affected by the sole trader or one of the partners not working due to sickness, injury or leave

Comparison Period Turnover

MonthlyQuarterly
Turnover in the month immediately after the sole trader or partner returned to workTurnover in the month immediately after the sole trader or partner returned to work, times 3

What If My Business Satisfies More Than One Test?

The key requirement is that you satisfy one of the alternative tests. The rules and the explanatory statement makes clear that it doesn’t matter that there are other tests that apply that your entity doesn’t satisfy. Similarly, if your entity satisfies more than one test, it will satisfy the decline in turnover test.

Can Pre-Revenue Startups Get The JobKeeper Payment?

Unfortunately not at this stage, as there isn’t much in the new announcement for pre-revenue startups. This is because all of the tests require a comparison against some turnover, which obviously won’t be possible for pre-revenue startups.

Treasury had previously flagged there may be a test along the lines of ‘significantly curtailed operations’. However, it seems that this didn’t make the cut in this version. This, though not surprising, really is unfortunate as many pre-revenue businesses are legitimate employers and creators of jobs.

It is still technically possible for the ATO to formulate additional alternative tests, but that seems unlikely at this stage.

Key Takeaways

If you thought that you were not eligible for the JobKeeper Payment under the original basic test, it would be worth looking into whether any of the alternative tests apply to your business.

It seems that the overarching principle of these tests is to ensure that businesses do not miss out if they have been impacted by other events that are outside their usual business settings. This is good news for businesses that are new, experienced high growth, or some kind of disruption, so that they are able to keep their staff employed through the coronavirus pandemic. 

For further information or if you need help navigating the JobKeeper regime, feel free to contact us at Sprintlaw as we’re always happy to help. You can reach us at 1800 730 617 or email us at team@sprintlaw.com.au.

Also, head over to our Coronavirus resource hub for more articles about managing your business through Coronavirus, as well as to see the discounted support packages we’re offering to affected businesses. 

About Sprintlaw

Sprintlaw is a new type of law firm that operates completely online and on a fixed-fee basis. We’re on a mission to make quality legal services faster, simpler and more affordable for small business owners and entrepreneurs.

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