The eagerly anticipated alternative tests have finally been released!

There are 7 alternative tests in the legislative instrument, Coronavirus Economic Response Package (Payments and Benefits) Alternative Decline in Turnover Test Rules 2020, that was registered Thursday 23 April 2020.

The alternative tests will apply if an entity cannot satisfy the basic decline in turnover test and will only apply to seven circumstances:

1. No comparison period

These include where an entity commenced business after the relevant comparison period in 2019 or the business did not exist in the relevant comparison period and as a result there was no relevant comparison period in 2019.

2. Business Acquisition or Disposal

It will also cover a circumstance where an entity acquired or disposed of part of their business after the relevant comparison period in 2019,

3. Business Restructure

and where an entity has restructured part or all of their business after the relevant comparison period in 2019.

4. Abnormal trading

Entities who had an increase in turnover by 50 per cent or more in the 12 months immediately before the applicable turnover test period, or 25 per cent or more in the six months immediately before the applicable turnover test period, or 12.5 per cent or more in the three months immediately before the applicable turnover test period, will also be covered.

5. Natural disasters

The alternative test will also cover entities affected by a drought or other natural disaster in the relevant comparison period in 2019,

6. Business subject to irregular turnover

and entities who have an irregular turnover that is not cyclical, such as what can occur in the building and construction sector.

7. Illness or Injury

A sole trader or a small partnership where the sole trader or one of the partners did not work for all or part of the relevant comparison period because they were sick, injured or on leave during the relevant comparison period, and those circumstances affects the turnover of the sole trader or partnership, will also be covered.

Each of the seven circumstances has its own alternative test that is detailed in the legislative instrument.

The ATO has said in the explanatory statement, “The commissioner cannot determine an alternative decline in turnover test in all circumstances…it is only in those circumstances where there is an event or circumstance, be it internal or external to an entity, that is outside the usual business setting for entities of that class which results in the relevant comparison period in 2019 not being appropriate for the purpose of an entity in the class of entities satisfying the decline in turnover test.”

We are currently working on the detail for each of these alternative tests so stand by!

5ivestar Business Services are tax agents located in Carina Heights on Brisbane’s Southside. We service all areas of Brisbane, Ipswich and the Sunshine Coast. We also practice as virtual CFOs, take on interim CFO engagements as well and  financial management, reengineering and restructures including business turnarounds and transformations and expert financial modelling.

Take a load off your mind and call us for your obligation free consultation today.

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