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  • Basic test

    This test is satisfied when your actual GST turnover for the turnover test period quarter falls short of the relevant comparison period, by the specified shortfall percentage (generally 30%).

    To apply the actual decline in turnover test you need to:

    • Step 1: identify the turnover test period
    • Step 2: identify the relevant comparison period
    • Step 3: work out the current GST turnover for the periods
    • Step 4: determine which shortfall percentage applies
    • Step 5: determine if GST turnover has declined by the specified shortfall percentage

    Step 1: identify the turnover test period

    • For extension 1 this is the quarter ending 30 September 2020.
    • For extension 2 this is the quarter ending 31 December 2020.

    Step 2: identify the relevant comparison period

    • For extension 1 this is the quarter ending 30 September 2019.
    • For extension 2 this is the quarter ending 31 December 2019.
    • There may be situations where your turnover in the relevant comparison period in 2019 does not provide an appropriate relevant comparison. In these situations, you will need to consider an alternative test for the actual decline in turnover test.

    Step 3: work out the current GST turnover for the periods

    You need to work out the current GST turnover for both the turnover test period and the relevant comparison period in 2019.

    There are changes to how you allocate supplies to test periods compared to the original decline in turnover test calculation.

    Current GST Turnover

    Current GST turnover is the amount of your sales except for the following:

    • the GST you included in sales to your customers (if any)
    • sales that are input taxed sales (for example, bank interest, sale of shares, residential rental income)
    • sales not connected with an enterprise that you carry on (for example, sale of private car)
    • sales that are not made for payment (unless a taxable supply to an associate)
    • payments for no supply (for example, JobKeeper payments)
    • gifts and donations (except for deductible gift recipients and ACNC-registered charities as discussed above)
    • sales not connected with Australia, for example 
      • sales of services made through a business you carry on outside Australia
      • sales of goods purchased and sold from a place outside Australia
      • sale of real property situated outside Australia.
       

    Financial supplies (for example, issuing shares) are usually input taxed supplies. However, when a financial supply is made to a non-resident who is not in Australia the supply is GST-free instead of input taxed. This means capital raised from issuing shares to offshore entities will generally be included in your current GST turnover.

    The amounts included in calculating current GST turnover are the same regardless of whether you are registered for GST.

    When calculating current GST turnover for an entity that operates two or more businesses, the turnover from each business is combined.

    Entities that form part of a GST group or consolidated group must work out the current GST turnover and apply the actual decline in turnover test for each entity individually.

    Unlike projected GST turnover (relevant to the original decline in turnover test), current GST turnover includes supplies that:

    • you made by transferring capital assets
    • are made because of a substantial and permanent reduction in the size or scale of your enterprise.
    Modifications to current GST turnover

    There are 6 main modifications to the current GST turnover calculation under JobKeeper.

    1. Current GST turnover for the actual decline in turnover test is worked out for the quarter being tested rather than for 12 months.
    2. If an entity is part of a GST group, the entity calculates its GST turnover as if it wasn’t part of the group. This means that supplies made by one group member to another will be included in current GST turnover for the purposes of the decline in turnover test.
    3. The calculation includes the following amounts, unless they are received from an associate
      • receipt of certain gifts by a deductible gift recipient
      • gifts of money, property with a market value of more than $5,000, or listed Australian shares received by an ACNC-registered charity (that is not a deductible gift recipient).
       
    4. The calculation excludes conditional grants if
      • the grant is received by an ACNC-registered charity – other than a university or a school – from
        • an Australian government agency
        • a local governing body
        • the United Nations or its agency
         
      • the charity notified the Commissioner of its election to exclude these grants within 7 days of choosing to participate in JobKeeper (or within any further time we allow).
       
    5. The calculation includes amounts received by universities under the Higher Education Support Act 2003 or the Australian Research Council Act 2001.
    6. External Territories (for example, Norfolk Island) are treated as if they formed part of the indirect tax zone (that is, Australia).

    See also:

    • Law Companion Ruling LCR 2020/1 Paragraphs 20 to 33 JobKeeper payment – decline in turnover test, for more information on what supplies are relevant when calculating current GST turnover. Other parts of this ruling are only relevant to the original decline in turnover test.
    Government grants

    A government grant that is not for a supply, is not included in current GST turnover.

    A government grant that is for a supply, is included in current GST turnover unless you are an ACNC registered charity and have elected to exclude government grants.

    You can find information on whether a government grant is for a supply at GST and grants.

    See also:

    Accounting methods to determine when you make a supply

    Unlike the original decline in turnover test, there is now only one method you can use to determine when you make a supply. Supplies must be allocated to a period on a GST reporting basis, even if you are not registered for GST. We have limited the method you use to determine when you make a supply to make the calculation of current GST turnover simpler. This should reduce compliance costs for many entities.

    You allocate all your supplies in the same way as taxable supplies are allocated for GST.

    Entities registered for GST must report supplies made to a particular BAS according to either a cash basis or a non-cash basis of accounting. Depending on the GST accounting basis relevant to you, supplies should be allocated to a test period as follows:

    • Cash basis – supplies are considered made in the test period you received payment for them. If you receive part-payment for a supply in the test period, your supply is only taken to be made in the test period for the part of the payment you received.
    • Non-cash basis – supplies are considered made in the test period you received any payment, or when you issued an invoice if it was issued prior to receiving any payment. Special rules apply to sales that are made and paid for progressively or periodically. For example, if you lease equipment to someone for 12 months and they pay you monthly.

    See also:

    GST accounting basis that applies to you
    • If you are registered for GST for both test periods and have not changed your accounting basis for GST – you use the same accounting basis you used for preparing your business activity statements.
    • If you are not registered for GST during either test period – you can work out the time you made sales either on a cash basis or a non-cash basis but you must use the same accounting basis for both test periods.

    There are specific rules for all other entities to ensure the same GST accounting basis is applied to both test periods:

    • If you became registered for GST during the relevant comparison period, use your accounting basis that first applied to you.
    • If you changed your accounting basis during or after the start of the relevant comparison period, use your accounting basis from the first tax period of the relevant comparison period.
    • If you cancelled your GST registration during or after the relevant comparison period, use your accounting basis from the first tax period of the relevant comparison period.
    • If you registered for GST after the end of the relevant comparison period, use your accounting basis at the beginning of your turnover test period.

    Example 1 – Sales on a cash basis or non-cash basis

    Orchid Corner Florist is registered for GST with quarterly tax periods and accounts on a cash basis for GST. They also accounted for GST in 2019 throughout its relevant comparison period.

    Orchid Corner Florist makes a sale of flowers for $660 and is paid $330 (GST inclusive) in September and October. The $330 received in September is included in its business activity statement (BAS) for the July-September tax period. The $330 received in October is included in its BAS for the October-December tax period.

    To work out its current GST turnover for the September turnover test quarter, Orchid Corner Florist’s sale is treated as being made in the September quarter for payments received in September. Because it received half the payment in September, 50% of the sale is taken to be made in that period. The remaining GST exclusive amount, that is $300, is included in its December 2020 quarter.

    If Orchid Corner Florist accounted on a non-cash basis for GST purposes and issued the invoice in September, all the sales would be treated as being made in the September 2020 quarter turnover test period.

    End of example

    If you are registered for GST

    If you are registered for GST, you should consider whether you can work out your current GST turnover starting with the amounts you calculated for your BAS.

    When you complete your BAS, you specify an amount at label G1 for your total sales. This can be GST-inclusive or GST-exclusive. For current GST turnover purposes, you need to use a GST-exclusive amount.

    For many businesses that only make GST-free and taxable supplies, G1 may represent your current GST turnover.

    Circumstances when you cannot use your BAS label G1 amount include:

    • you haven’t lodged a BAS
    • you are a GST branched entity, GST group member or GST joint venture operator
    • you have annual tax periods for GST
    • your total sales (G1) do not represent your current GST turnover for another reason, for example
      • you make input taxed supplies
      • you make supplies under the margin scheme and only report your margin at G1
      • for some ACNC-registered charities – you receive donations and gifts, or government grants and elect not to count these grants for JobKeeper purposes
      • you have incorrectly filled out label G1 when lodging your BAS
      • you have corrected GST errors from an earlier period in the relevant BAS or have corrected errors in a later BAS for sales that were attributable to the relevant BAS.
       

    In these circumstances, using G1 (converted to a GST-exclusive amount) might not be possible for you, but you may be able to easily add amounts or subtract amounts for the required variations you need to make (for example, by subtracting input taxed supplies).

    If you have not followed the instructions correctly when preparing your BAS, you will need to adjust the amounts accordingly. If you received amounts for sales not connected with Australia (for example sales of goods purchased and sold from a place outside Australia) but included them at G1, you will need to subtract those amounts.

    If it is not easy for you to work from you G1 amount you will need to calculate your current GST turnover by identifying all sales that need to be included in the calculation.

    GST adjustments

    GST adjustments do not change the time when a supply is taken to be made when working out your current GST turnover. The value of the supplies you have made in your test period are determined at the end of the test period. Later events may arise that change the value of your supplies, for example giving discounts. When working out your current GST turnover, if a supply is treated as being made:

    • before the test period, then any change in value for that supply that arises during the test period is not included
    • during the test period, and the change in value occurs during the test period, then the change in value is included
    • during the test period, and the change in value occurs after the end of the test period, the change in value is not included.

    Bad debt adjustments (under Division 21 of the GST Act) do not change the value of your supplies. Also, they are not considered when calculating your current GST turnover.

    If you are not registered for GST

    If you are not registered for GST, you can use your business records that show when you received payments for your sales or when you issued invoices to work out your current GST turnover.

    If you choose to account on a cash basis:

    • You may be able to use bank or financial institution records, cash register reconciliations, or copies of receipts if you issue receipts when you receive payments. You will need to be able to explain why these business or accounting records you use reasonably reflect when you receive payments for making your relevant sales.

    If you choose to account on a non-cash basis:

    • You may be able to use bank or financial institution records, cash register reconciliations, or copies of invoices. You will need to be able to explain why these business or accounting records you use reasonably reflect when you received any payment, or when you have issued an invoice if the invoice was issued prior to receiving any payment.

    Step 4: work out which shortfall percentage applies

    You need to work out whether your shortfall percentage is 50%, 30% or 15%.

    Generally, the shortfall percentage will need to be 30% or more. However, for some ACNC-registered charities and large businesses the shortfall percentage is different.

    Find out about:

    ACNC registered charity

    An ACNC-registered charity only needs to show a shortfall of 15% or more. This shortfall percentage does not apply to universities and non-government schools that are registered charities. School is defined to mean an institution that provides pre-school courses, primary courses, secondary courses or special education courses.

    Government schools do not qualify for the JobKeeper scheme.

    Aggregated turnover tests for entities likely to exceed $1 billion

    Large businesses must show a shortfall percentage of 50% or more.

    You will need to calculate your aggregated turnover for the 2019–20 income year and your likely aggregated turnover for the 2020–21 income year again to apply the actual decline in turnover test for both the September and December 2020 quarters.

    This means it is possible that the shortfall percentage you use for the actual decline in turnover test could be different from the shortfall percentage that applied to the original decline in turnover test.

    For the purposes of determining if the 50% shortfall percentage applies, a large business is an entity that:

    • had an aggregated turnover of more than $1 billion in the previous income year to the income year in which the turnover test period occurs
    • is likely to have an aggregated turnover of more than $1 billion in the income year during which the turnover test period occurs.

    The aggregated turnover test is used to determine if a higher threshold applies to an entity that is not an ACNC-registered charity (other than a university or non-government school). The purpose of this is to ensure that smaller entities that form part of a larger group that have an aggregated turnover of more than $1 billion need to satisfy the 50% decline in turnover to qualify for the JobKeeper payment.

    Aggregated turnover is a defined term and has the meaning given by section 328-115 of the Income Tax Assessment Act 1997.

    Aggregated turnover includes:

    • the entity’s own annual turnover plus
    • the annual turnover of any entity that is connected with and/or is an affiliate of the test entity.

    The annual turnover for an income year is the total ordinary income that an entity derives, directly or indirectly from all sources, whether in or out of Australia, in the income year in the ordinary course of carrying on a business.

    You must apply the aggregation rules in Division 328 of the ITAA 1997 to work out whether you need to add any other business entities' annual turnover to your annual turnover to work out your aggregated turnover.

    The aggregated turnover of an entity is not necessarily the same as the turnover calculated for a consolidated or MEC group or the annual global income of a significant global entity.

    In working out aggregated turnover, if you are a foreign entity or a foreign entity is connected with you and/or is your affiliate, the annual turnover of that foreign entity needs to be included in your aggregated turnover.

    The calculation of aggregated turnover requires you to disregard any income from certain dealings with entities connected with or affiliated with you to avoid double counting. These entities may be part of the consolidated group, MEC group or a significant global entity. However, it may also include entities that are outside these groups.

    See also:

    Example 2 – Working out the specified percentage based on aggregated turnover

    FlowerCo operates a flower shop with annual turnover of $500 million in 2019–20 income year, being the total ordinary income of the business in that year.

    FlowerCo is connected with PotCo. The annual turnover of PotCo is $2 billion in the 2019–20 income year.

    When calculating the aggregated turnover of FlowerCo, the turnover of PotCo is included as it is a connected entity. As FlowerCo’s aggregated turnover is above $1 billion it will need to use the higher specified shortfall percentage (50%) when calculating the shortfall.

    End of example

    Fair Work Act decline in turnover test

    There is a 10% decline in turnover test under the Fair Work Act. The Fair Work Ombudsman can provide you with advice and assistance about this test. This test is not administered by us.

    Information on the actual decline in turnover test may help you work out if you meet the 10% decline in turnover test under the Fair Work Act. If you have any questions about this test, visit the Fair Work OmbudsmanExternal Link website.

    Step 5: work out if GST turnover has declined by the specified shortfall percentage

    Work out the percentage that your turnover has declined, based on the shortfall in your current GST turnover in the turnover test period in 2020 compared to the current GST turnover for the relevant comparison period in 2019.

    If the shortfall percentage is greater than or equal to the specified percentage, you satisfy the actual decline in turnover test for the quarter.

    Find out about:

      Last modified: 15 Oct 2020QC 63698