8 May  2020

The latest figures from Treasury show that  approximately 730,000 businesses have now enrolled for the JobKeeper scheme extending to approximately  4.7 million employees.

Professional, scientific and technical services are currently the largest industry group to register for JobKeeper, accounting for 14.7 per cent of total enrolments.  The construction industry group was next up, making up 14 per cent of all enrolments.

Only 51,000 employers enrolled come from the accommodation and food sectors, arguably one of the most impacted industries from the Coronavirus. We suspect this is an outcome of many of these business operators unable to find surplus funds to make the initial $1,500 fortnightly payments to employees before they are reimbursed by the JobKeeper payments.

This newsletter acts as a timely reminder to those employers who are claiming for the first two JobKeeper fortnights to ensure you not only have paid your employees the first two minimum $1,500 payment per fortnight since 30 March 2020 by today, 8 May 2020 but also have provided an employee nomination notice to each employee if you enrolled prior to 2 May 2020, in line with the latest legislative amendments which clarify the “one in, all in” feature. Failure to provide the notice to employees within 7 days of enrolling leaves employers liable for a penalty of $4,200 per instance.

Furthermore, where eligibility has been a key concern for many businesses, we cover in this newsletter the recent amended rules and ATO rulings that may help businesses better understand their eligibility position. 



Within certain business structures, it can be common to have a special purpose entity that provides the services of its employees to other members of the group.  One of the key requirements of the JobKeeper scheme is that the employer entity must be able to demonstrate a significant decline in its turnover.  In structures such as these however the employer entity does not typically have significant dealings outside the group and as such their turnover is unlikely to reflect the overall performance of the group.  As a result, even where there has been a significant decline in the turnover of the entities in the group, the JobKeeper payment may not be available to the employer entity in this scenario.

To address this issue, the Government has now released its latest legislative instrument providing a modified turnover test for these types of special purpose service entities.

Who will the modified test apply to?

The modified test will apply in the following circumstances:

  • The employer entity must be a member of a consolidated group, consolidatable group (corporate groups that are eligible to consolidate but have not done so) or a GST group. 
  • The operating entities of the group carry on the business of deriving revenue from unrelated third parties.
  • The employer entity cannot be an operating entity of the group.
  • The employer entity must only provide the services of its employees to other members of the group. Incidental services to third parties or members outside the group are allowable.
  • The provision of employee labour services (i.e. the performance of work by individuals the employer entity employs) must be the employer entity’s principal activity.
  • The Commissioner has not determined that the modified decline in turnover test does not apply to the employer entity.

Common ownership paramount

In order to apply the modified test, the employer entity must be part of either a wholly owned group (i.e. 100%) or there must be 90% or more common ownership amongst the group members.

Can you form a GST group now?  Caution advised!

The modified test does not contain provisions regarding the timing of when an election to form a GST group is made, however it is expected that the legislation is intended to apply to those GST groups currently in existence. 

Groups that are considering making an election to form a GST group now with the intent of accessing the JobKeeper, are strongly advised to consider the application of anti-avoidance provision (Section 19) of the Coronavirus Economic Response Package (Payments and Benefits) Act 2020.  Where an election is made now, entities should ensure that their reasoning for choosing this option is sound and not for the purposes of accessing the JobKeeper payment only.  Evidence supporting this reasoning should be maintained.

Where does this leave service trusts?

Limiting the measure to grouped entities for the purposes of consolidation and GST, means that many common service trust arrangements, which are typically not structured through wholly owned corporate structures, but rather as unit trusts, often with multiple unitholders, will not have access to these measures.

Given this, we anticipate that many professionals using service trusts arrangements will not be able to use the modified basic test and where they cannot meet the basic test or any of the alternative tests these entities may still not qualify for the JobKeeper payments.

Reduction to management fees by service entities

When considering whether the basic test or the alternative tests apply (i.e. where the modified test will not apply), service entities should be mindful about the reduction of service fees charged to other related parties and the impact this has on their turnover.  This matter has been specifically identified by the ATO as a risk area (see below for further discussion on the ATO’s PCG regarding schemes to access the JobKeeper payments).  

It is noted that the ATO will generally regard a situation where a service entity satisfies the decline in turnover test itself, as a result of reducing its service or management fees as low risk, where the reduction in fees is in response to a relative decline in turnover of the related parties to whom it provides services. This is regardless of whether the service fee reduction is a consequence of a reduction in employee working hours or not. However the key point is that any such reduction in management fees must be solely a result of a reduction in turnover or operations due to external factors that is beyond the group’s control.  If this is the case, there is a low risk of compliance resources being applied.

Modification of the basic test

The basic test is modified by using the combined GST turnovers for each group member using the services of the employer entity.

This ensures that the decline in turnover test is applied to those group members that predominantly carry on business with third parties rather than measuring the decline in intragroup transactions.

The modification to the basic test also allows for circumstances in which the alternative decline in turnover tests may be applied to other members of the group because there is not an appropriate 2019 comparison period.

Commissioner can prevent access to the test

To maintain the integrity of the system and prevent misuse of the modified test, the Commissioner will have the power to prevent access to this test where the Commissioner has material compliance or integrity concerns with an entity’s use of the test.

Principal vs incidental activities

Whilst the supply of employee labour services to the group must be the employer entity’s main or predominant activity, the employer entity may provide other services to the group or to third parties as long as these activities are considered to be incidental.

These terms are not specifically defined in the legislation and it is expected further guidance from the ATO will be required.

It is expected that those service entities that carry out a variety of activities will have greater risk exposure that the Commissioner may disallow access to the modified test.

Employer entities that carry out additional activities (i.e. leasing) should consider this issue carefully when determining if the modified test applies, as well as ensuring that contemporaneous documentation supporting their principal purpose (i.e. service agreements) is gathered and maintained.


In addition to the release of legislative amendment to the JobKeeper rules, the ATO have also published two major pieces of guidance regarding the administration of the JobKeeper Scheme, being LCR 2020/1 and PCG 2020/4.  The publications are intended to supplement guidance already provided by the ATO on its JobKeeper website.

The guidance has no doubt been released in response to the practical difficulties that have arisen in applying the JobKeeper rules.  The following is a summary of the key points from these ATO publications.

JobKeeper GST Turnover Test

Law Companion Ruling (LCR 2020/1): ‘JobKeeper payment-decline in turnover test’ provides the Commissioner’s view of how the JobKeeper decline in turnover test is applied, as well as providing some practical guidance and alternative options on how to measure GST turnover for the decline in turnover test.

The ruling seeks to provide clarity on three key areas of the decline in turnover basic test, being:

  1. what supplies are relevant when calculating projected GST turnover and current GST turnover;
  2. how supplies are allocated to relevant periods; and
  3. how to determine the value of each supply that has been allocated to a relevant period.

Whilst the LCR does not provide specific guidance on the alternative tests, it is expected that entities can apply the principles considered in the ruling to these tests.

Compliance approach available

In recognition of the difficulty that some entities may have in linking amounts received or invoiced based strictly on the time a supply is made or likely to be made, the ruling sets out the alternative methods that can be used as a proxy for determining the value of supplies were made or likely to be made in a relevant period, particularly as assessing turnover based on the timing of when a supply is made, is not a usual consideration for working out say GST liabilities which are based on either invoicing or cash receipts, or reporting for accounting and tax purposes.  It is also further complicated when a supply may be made over a period of time, such as when services are performed, or in itself could consist of more than one supply. This may therefore impose a significant compliance burden on businesses.

As such, the Commissioner will also accept turnover as assessed under the following alternative methodologies:

  • accrual method of accounting;
  • GST attribution basis; or
  • Income tax accounting (if not registered for GST).

Predicting turnover

Where projected GST turnover is based on the supplies that an entity is likely to make in a turnover test period, the Commissioner requires that reasonable determinations are made and are based on contemporaneous and bona fide business plans, budget or forecasts and / or projected facts and circumstances. This evidence must be in existence at the time you calculate your projected turnover.

Tolerance but ensure contemporaneous evidence is kept

Whilst significant variations in projected turnover and what actually eventuates will most likely be investigated by the ATO, getting predicted turnover wrong won’t necessarily mean that access to the JobKeeper scheme will be lost as long as an entity can evidence that its projected turnover was reasonable at that point in time.  Maintaining records to support your projections will be critical in this regard, including explaining how you undertook the projection calculations.

Evidence to support projections that supplies have or will decline due to COVID-19 could include:

  • Application of government COVID-19 restrictions such as being required to close or pause business.
  • Delays in receiving trading stock.
  • Consequential impacts on the value of products you supply.
  • Cancellation or significant variation to existing contracts for supplies.
  • Heavy reliance on industry significantly impacted by the COVID restrictions and closures.

Margin schemes -disparity between GST reporting and turnover testing

As anticipated, it has been clarified that suppliers of property using the margin scheme approach will need to include the full value of the property not just the margin when calculating turnover for the purposes of the JobKeeper tests.

Work in Progress

Where a supply is made but not yet billed, an assessment of the value can be made based on an objective assessment of normal business practice and experience, for example, assessing the usual recoverability of WIP. However, once the value has been determined, any other events which may happen after the relevant period and change value cannot be considered.

Timing of adjustments – Discounts, refunds, and bad debts

The ATO has acknowledged that the original value of a supply can fluctuate due to later events.  For example, where refunds are given, discounts are provided, debts are settled, or deposits are forfeited.  Given the practical difficulties in valuing these fluctuations, the ATO has provided the following guidance:

  • Adjustment events that change the value of supplies and occur in the relevant period are included in turnover only if they relate to the value of supplies you have already allocated to that period.
  • Those adjustment events that relate to supplies made in another period are not relevant and should be excluded from your turnover calculation.
  • Writing off debt as bad will not affect its value for testing purposes.

Cash or accruals?  Consistency is a must

The JobKeeper rules allow flexibility in the way in which entities can calculate their turnover, however the ATO have made it clear that it is their expectation that an entity will use the GST accounting method that is normally used by them.

An entity may choose to apply an alternative method of calculating its turnover from the manner in which it reports in its BAS, and this will be acceptable where it is consistently applied for across the relevant testing period.  These entities should ensure that their rationale for adopting a different approach is evidenced and well supported, in light of the integrity provisions that will apply.

The LCR clearly states that large taxpayers seeking to utilise a cash approach are forewarned that the ATO will take particular interest in their reasoning for such a choice.  Similarly, taxpayers that choose to apply the attribution method as an alternative approach whilst delaying the issue of invoices or allowing delays in payment will come under particular scrutiny from the ATO.

Whatever method is used for calculating turnover must continue to be applied for all subsequent JobKeeper reporting to the ATO.


Under the original legislation giving effect to the JobKeeper Scheme, the Commissioner was given powers to determine that an entity was never entitled to a payment and to recover the amount if the Commissioner is satisfied that the entity had carried out a contrived scheme for the sole and dominant purpose of obtaining the payment.

With regard to this specific integrity provision, the ATO has now released its Practical Compliance Guideline (PGC 2020/4), which sets out the ATO’s compliance focus regarding schemes devised to access or increase JobKeeper payments.

Of particular concern to the Commissioner will be those entities that access the JobKeeper scheme but have NOT been significantly affected by external environmental factors beyond its control.  Whilst the PCG does not specifically state that COVID-19 needs to be the cause of a business’s decline in turnover, and this consistent with statements made on the ATO website, entities should be aware that the intent of the JobKeeper scheme, as stated in the original legislation is to provide financial support to those entities directly or indirectly affected by the Coronavirus and as such, caution should be exercised by those entities wishing to access the scheme legitimately but where reductions in turnover are not as a result of COVID-19.

The PCG sets out a number of examples of scenarios that will attract the ATO’s attention, including those arrangements that technically satisfy the eligibility requirements, but have been implemented for the sole or dominant purpose of accessing a JobKeeper payment.  The examples include where a company chooses to defer the making of supplies or where a parent entity within a group manipulates the timing or reduces management fees. The examples typically also refer to reductions in turnover that has been affected by COVID-19, albeit that this is not a legislative requirement as such.

Whilst the ATO’s examples are categorised as high and low risk scenarios, entities should not rely on these examples as a safe harbour and should be satisfied that their processes and reasoning for accessing the JobKeeper payments are sound and justifiable.  Entities should also ensure that they have considered their position and how the rules apply to their circumstances as well as considering any potential risk that the ATO may take the alternate position that their eligibility to the scheme does not exist.


The JobKeeper scheme and COVID-19 in general has thrown up a number of employment related issues and many employers are experiencing difficulties in understanding their rights and the rights of their employees.  We encourage those entities that are experiencing uncertainty  about workplace entitlements and obligations in relation to the JobKeeper Payment scheme seek employment law advice.

Alternatively, it is noted that the Fair Work Commission has released guidance on how it can assist affected parties dealing with disputes regarding the application of the JobKeeper Scheme.


  • We can assist in determining which alternative test best applies to your circumstance.
  • We can assist with assessing eligibility for the JobKeeper Payment, including cashflow forecasting and preparation of the entire program application.
  • We can conduct independent reviews on the first round of reporting and claims to ensure accurate and within the Rules of eligibility.

This newsletter is current as of 8 May 2020, however, please note that announcements and changes are being made by the Government and the ATO regularly, and we expect that the tax and business-related responses will continue to evolve. 

Please contact us to discuss. Cooper Partners is committed to providing general advice to our clients at no charge as part of our commitment to assist you through this period.