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Craig Whatman, Partner

Understanding JobKeeper Part 2: Calculating GST turnover

April 2020

Pitcher Partners Advisors Proprietary LimitedABN 80 052 920 206


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Who is eligible?

How do you assess

your eligibility?

When do you assess

your eligibility?

How do you determine turnover?

What is projected GST turnover?

Turnover and BAS reporting

The risk of getting it wrong

Ongoing compliance


Overview

Stimulus estimated to cost $130b over a 6 month period

Key aspects of the scheme

Register interest in scheme from 30 March 2020 on ATO website

https://www.ato.gov.au/Job-keeper-payment/

Employers (or their tax agent) can enrol from 20 April 2020

Eligible Employers

Payable to eligible employers

and non-employer businesses (e.g. self-

employed) who have requisite decline in their

turnover during the relevant period

Eligible Employees

Payment of $1,500 (gross before tax)

to each employee who is employed by an

eligible employer


Who is eligible?

An entity will satisfy the decline in turnover test when compared to

the same month or quarter in 2019 if the entity is

Decline in turnover thresholds

An ACNC-registered charity

(excluding universities and

schools) and its turnover has

decreased by at least 15%

Any other entity and its

turnover has decreased

by at least 30%

An entity that has aggregated

turnover of more than $1b

and its turnover has

decreased by at least 50%


How do you test a decline in

turnover?

Two ways an entity may satisfy

a decline in turnover test

Basic test

Alternative test


How do you test a decline in turnover?

Requires a comparison between the test period and a comparison period

Basic Test

The turnover test period must be

• a calendar month that ends

after 30 March 2020 and before

1 October 2020

or

• a quarter that starts on 1 April or

1 July 2020

The relevant comparison period

must be the period in 2019 that

corresponds to the test period –

e.g. if testing April 2020, you must

compare with April 2019

The employer can choose an eligible month or quarter as a test period

irrespective of whether they lodge their BAS monthly or quarterly

The test only needs to be satisfied in one test period


How do you test a decline in turnover?

The Commissioner may determine an alternative test for a class of entities by way of

legislative instrument or take other factors into account for individual entities

Alternative test

Where a business was

not in operation

a year earlier

The turnover for the

prior year was not

representative of the

entity’s usual or

average turnover

e.g. because of drought,

or their turnover is typically

highly variable

The Commissioner has

discretion to consider

additional information

that the business can

provide to establish

that they have been

adversely affected

by COVID-19


How do you calculate your turnover?

Projected GST turnover is the sum of the value of all supplies

an entity has made or is likely to make, during the relevant period

Projected GST turnover

The relevant period for JobKeeper purposes = the test period (month or quarter)

What to include

Taxable supplies

GST-free supplies

What to exclude

Input taxed supplies

e.g. residential rents

and income from

financial supplies

Supplies for nil

consideration provided

they are not taxable

under the associate rules

Supplies not connected

with the enterprise

Supplies not connected

with the indirect tax zone

(Australia)



Special modifications for the JobKeeper Payment

• The relevant period is the month or quarter test period and comparison period

• Supplies between members of the same GST group are included

• Each external territory is treated as forming part of the indirect tax zone

Projected GST turnover

An entity that is a DGR –

each gift described in 30-15 ITAA

and received, or likely to be

received (e.g. a donation) is to be

treated as consideration for

a supply, the value of which is

equal to the amount of the gift

ACNC-registered charities

who are not DGRs must include

gifts received or likely to be

received by way of monetary

donation, gifts of property with

a value greater than $5,000 and

listed Australian shares



• A defined term for GST purposes

• Equals the GST exclusive consideration

received in relation to a supply

What is the ‘value’ of supplies

Don't rely on what has been reported on the BAS!

The value of all supplies that an entity has made will not

necessarily be the amount that is reported at G1 on the BAS

VALUE


Checklist of issues

to consider when calculating

your turnover

Margin scheme supplies

GST groups

Associates

Out of scope income

Insurance settlements

Input taxed supplies


Checklist of issues

to consider when calculating

your turnover

GST-free supplies

Barter transactions

Supplies of private assets

Supplies made as agent

Incorrectly registered entities


Incorrectly registered entities

A partnership return is not lodged and

each joint venture party includes 50% of

the value of each rent payment as a

taxable supply in their own BAS

EXAMPLE 1

Impact

Likely to constitute a partnership

for GST purposes

The JV entities may not meet the

threshold test of carrying on an

enterprise in their own right or

may not meet the decline in

turnover test

BusCo1 BusCo2

Commercial

rental property

Joint bank

account

Managing

agent

50% 50%


GST turnover

How should cash basis accounting entities calculate their turnover?

Cash vs Accruals

Cash basis accounting

Timing of when amounts reported on

BAS driven by when payment is received,

not when invoices are issued

Attribution of GST on BAS may differ

to value of supplies made in a period

Accruals accounting

Timing of when amounts reported on BAS

driven by when invoices are issued, unless

payment is received first


Cash vs Accruals

TradeCo is under the $10m threshold and

accounts for GST on cash basisImpact

Should TradeCo compare their

invoiced amounts or cash

collections when testing their

decline in turnover?

GST turnover rules refer to

supplies made in a period

But no time of supply rule in GST

Act, only attribution rules

Clarification needed from ATO

EXAMPLE 2

April 2019

$500,000 of sales

invoiced

$300,000 collected

in cash for prior

months' sales

April 2020

$300,000 of sales

expected to be

invoiced

$290,000 expected

to be collected in

cash for prior

months' sales


GST turnover

Adjustment events may cancel a supply or change

the consideration for a supply

Adjustments

How does an adjustment impact the value of a supply?

Timing

Adjustment

events occurring in

a later tax period

GST-free supplies Credits and

discounts

Bad debts


Comparable periods

Sales in April 2019 = $400,000

Expected sales in April 2020 = $350,000

This represents a decline of only 12.5%

Is this the correct result?

What if ServiceCo delays its 30 April 2020

invoice to 1 May 2020?

Impact

Do you apportion the weeks in

this case?

To what extent can an entity

change its invoice dates to

achieve a better result?

EXAMPLE 3

ServiceCo invoices its clients on a weekly basis

each Thursday

April 2019

4 Thursdays

with $100,000

invoiced

each Thursday

April 2020

5 Thursdays

with $70,000

invoiced

each Thursday


How do estimate your turnover for the test period?

On the balance of probabilities, it can be predicted

a supply is more likely than not to be made

What is ‘likely to be made’?

Commissioner has power to determine which methods an entity

may use to determine if a supply is likely to be made

Based on an ‘objective assessment’ of the entity’s prospects, one that a reasonable

person would make having regard to the facts and circumstances (GSTR 2001/7)

Bona fide business

plans and budgets

Growth patterns Existing and

prospective contracts



Impact

Did the entity satisfy the basic

decline in turnover test?

Is the entity eligible for the

Jobkeeper payment from April?

What if the actual GST turnover

for April was $900,000?

Overpayment debt risk

Penalties

Interest

EXAMPLE 4

ProjectedGST turnover

ActualGST turnover

$1mApril 2019

$600,000 April 2020

$720,000April 2020



Evidence establishing how projected GST turnover was calculated will be

crucial to supporting an entity’s eligibility for the payment

Supporting documents

Examples

Business plans Budgets Current and

future contracts


Administrative requirements

Ongoing compliance

Must report current GST turnover for

reporting month and projected GST

turnover for following month to the

Commissioner within 7 days of the end

of each calendar month

Administrative requirement only,

there is no requirement to assess eligibility

on an ongoing basis

Ensure what is reported is accurate

as reported figures could be used in post

scheme reviews of businesses


Process for reviewing GST turnover

01

02

03

04

05

Obtain BAS for the relevant period

Split the BAS into months and obtain total amounts for each month

Obtain a detailed report of items included in the BAS (transaction report)

Reconcile the transaction report to the BAS and ensure it reconciles

Review the transaction report and ensure treatment of individual transactions correct

Review P&L and check items of income and negative expenses and classification

Reconcile the P&L with items in the BAS

Review and analyse the treatment of difficult items that are relevant to your business

Scrutinise the logic behind the projected GST turnover

Ensure that projections are in accordance with the rules in GSTR 2001/7

Check actual calculations after month end

If actual results are materially different, consider whether this creates ‘overpayment debt’ risk


Questions

Please submit your questions through the Question function in this webinar and our team will answer them as part of a FAQ document, which will be

sent to you with the recording and slides post webinar

Pitcher Partners is an association of independent firms. 26

Contact us Craig

Whatman

Partner

+61 3 8610 5617

craig.whatman@

pitcher.com.au

Peter

Quattrocchi

Client Director

+61 3 8612 9255

peter.quattrocchi@

pitcher.com.au

Elisha

Herbert

Senior Manager

+61 3 8612 9220

elisha.herbert@

pitcher.com.au


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