Businesses will fulfil the relevant decline in turnover criteria if the business:

• Is an ACNC-registered charity (but not a university or school) and its turnover decreases by 15 per cent compared to the same month or quarter in 2019.
• Has a projected turnover likely to be more than $1 billion or had an aggregated turnover in the 2019 income year of more than $1 billion and its turnover decreases by 50 per cent compared to the same month or quarter in 2019.
• Is not one of the above entities and its turnover decreases by 30 per cent compared to the same month or quarter in 2019.

Correctly calculating decline in turnover ‘crucial’

But according to CGW Lawyers special counsel Sarah Lancaster, the situation “could get ugly” for businesses that underestimate their decline in business turnover.

For example, she said a business can reasonably assess its projected turnover for April 2020 as $100,000 when in April 2019 it was $150,000, meaning its decline in turnover is around 33 per cent and the business meets the decline in turnover condition at the test time.

However, the business’s actual turnover for April 2020 could turn out to be $120,000, meaning its decline in turnover was actually 20 per cent.

Ms Lancaster said the risk is that the ATO will later audit the business and deny it was eligible, in which case, the business will have to pay back the JobKeeper payments and interest, even though the payments have been paid to employees.

“The Treasury has provided some commentary in its fact sheet for employers that ‘there will be some tolerance where employers, in good faith, estimate a 30 per cent or more or 50 per cent or more fall in turnover but actually experience a slightly smaller fall’,” Ms Lancaster said.

“However, we don’t know what amounts to ‘a slightly smaller fall’ — is a 25 per cent fall in turnover ‘slightly smaller’ than 30 per cent? The difficulty for businesses is that projecting their turnover in these times is not going to be easy.

“It is crucial for businesses to keep evidence about how they have calculated their projected turnover.”

Ms Lancaster said a business will not be entitled to the JobKeeper payment if it does not comply with the record-keeping requirements, which generally require the business to keep records to substantiate the information it provides to the Commissioner of Taxation.

“Under the legislation, the commissioner has the power to issue a written determination, by legislative instrument, that specifies the types of records and how those records should be kept, in order for an entity to satisfy the record-keeping requirements,” she said.

“No determination has been made as yet, but we expect this will be issued in the coming weeks.”