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  • Turnover test for universities

    The turnover test for universities is met if your projected GST turnover for the test period falls short of your current GST turnover for the relevant comparison period by a specified percentage (either 30% or 50%).

    This test only applies to Table A providers within the meaning of the Higher Education Support Act 2003. For all other universities, see Applying the turnover test.

    Basic test

    To apply the test, you need to:

    The turnover calculation is based on GST turnover, but there are some modifications to the definitions of current and projected GST turnover, including disregarding GST grouping.

    Step 1: identify the turnover test period

    Your turnover test period is 1 January 2020 to 30 June 2020.

    Step 2: identify the relevant comparison period

    Your relevant comparison period is 1 January 2019 to 30 June 2019.

    Step 3: work out the relevant GST turnover

    You need to determine:

    • what your projected GST turnover will be for the period from 1 January 2020 to 30 June 2020
    • what your current GST turnover was for the period from 1 January 2019 to 30 June 2019.

    Modifications to projected and current GST turnover

    Projected GST turnover and current GST turnover are defined in the GST Act but have been modified for JobKeeper purposes as explained below. The amounts included in calculating projected GST turnover and current GST turnover are the same regardless of whether you are currently GST registered.

    When calculating GST turnover for an entity that operates two or more businesses, the turnover from each business is combined. Entities forming part of a GST group or consolidated group must work out the projected GST turnover and current GST turnover and apply the fall in turnover test for each entity individually. Special rules may apply where you use another entity to employ your staff.

    See also:

    There are six main modifications to the GST turnover calculation for universities:

    • Projected GST turnover and current GST turnover are calculated for the relevant 6 months being tested (rather than 12 months).
    • If you are part of a GST group, you calculate your GST turnover as if you weren't part of the group. This means supplies made by one group member to another will be included in GST turnover for the purposes of the fall in turnover test.
    • If you are a deductible gift recipient, the calculation includes the receipt of gifts except for those from an associate.
    • If you are an ACNC-registered charity and not a deductible gift recipient, the calculation includes gifts of money, property (with a market value of more than $5,000) and listed Australian shares received. However, none of these receipts are included if they are from an associate.
    • The calculation includes the amount received under the Higher Education Support Act 2003 or the Australian Research Council Act 2001.
    • External Territories (for example – Norfolk Island) are treated as if they formed part of the indirect tax zone (Australia).

    Projected GST turnover and current GST turnover excludes:

    • GST you included in sales to 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 a 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.

    Cash or accruals basis

    The turnover calculation requires you to include sales that you have made, or are likely to make, in the relevant six months. The calculations are based on the time you make the sales.

    There are different ways of calculating turnover that may be reasonable in your circumstances.

    As a practical matter, we expect that you will use the GST accounting method that you normally use. In other words, you may use a cash or accruals (non-cash) approach to determining the value of your sales in the relevant six months. If you do this, typically, turnover for the relevant period will equal your GST exclusive sales less your input taxed supplies.

    If you use GST calculations to determine turnover, don’t forget to include GST-free sales.

    If you normally account for GST on an accruals basis but seek to calculate on a cash basis (or vice versa), we may seek to understand your circumstances to ensure the calculation achieves an appropriate reflection of your turnover.

    If you aren’t registered for GST, we would expect you to use the same accounting method you use for income tax purposes.

    Importantly, whichever basis you use it must be used consistently in comparing the two relevant periods 1 January 2020 to 30 June 2020 and 1 January 2019 to 30 June 2019.

    See also:

    Estimating your projected GST turnover

    You need to identify the sales you made, or are likely to make, during the turnover test period.

    Given that you can test eligibility part way through the turnover period, you need to consider what you expect to happen for the remainder of that period. Relevant considerations include:

    • the period during which the business is not expected to trade because it has been closed due to the coronavirus, or its ability to trade has been restricted
    • recent patterns in trading that are expected to continue
    • revised business plans.

    The reasons for a fall or expected fall in turnover are not prescribed and are not limited only to the direct impacts of the coronavirus.

    A business may intend on making substantial changes to their structure and operations, as part of responding to the coronavirus. However, projected GST turnover excludes:

    • supplies that are made by transfer of capital assets
    • supplies that are made as a consequence of substantially and permanently reducing in size or scale the enterprise.

    A 10% reduction is generally accepted as a substantial reduction in size and scale (a smaller reduction may be substantial depending on the particular circumstances of the enterprise). The reduction will be permanent if it is enduring but not if it is reasonable to expect the reduction will end, for example in one or two years. This means that, for example, where an entity decides to close 1 out of its 10 tores in its business, the income from selling the store or the assets used in the store would be excluded when calculating projected GST turnover. 

    This means that the turnover from structural changes may need to be excluded when calculating projected GST turnover.

    See also:

    Step 4: determine which shortfall percentage applies

    The shortfall percentage will need to be 30% or more if your aggregated turnover is likely to be $1 billion or less.

    The shortfall percentage will need to be 50% or more if you:

    • 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, or
    • are 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. This is to ensure 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 under section 328-115 of the Income Tax Assessment Act 1997 (ITAA 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 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 group.

    In working out aggregated turnover, if you are a foreign entity or a foreign entity is connected with you, 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 that you 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. However, it may also include entities that are outside these groups.

    See also:

    Step 5: determine if GST turnover has fallen by the specified shortfall percentage

    Work out the percentage that your projected turnover has fallen, based on the shortfall in your projected GST turnover as compared to the current GST turnover for 1 January 2019 to 30 June 2019.

    If the shortfall percentage is greater than, or equal to, the specified percentage, you satisfy the basic fall in turnover test.

    Example: Fall in turnover test satisfied

    A university assesses its eligibility for JobKeeper payments based on a projected GST turnover for the turnover period from 1 January to 30 June 2020 of $10 million. The relevant comparison is 1 January to 30 June 2019 for which it had a current GST turnover of $20 million.

    The 2020 turnover falls short of the 2019 turnover by $10 million, which is 50% of the 2019 turnover.

    The university calculated its aggregate turnover to be less than $1 billion. Therefore, its fall in GST turnover exceeds the specified percentage of 30% that applies to it. The fall in turnover test is satisfied.

    End of example
      Last modified: 03 Jun 2020QC 62207