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ATO ruling to ease turnover projection ‘predicament’

Businesses reluctant to enrol in the JobKeeper scheme due to uncertainty over their projected turnover calculations have been afforded some comfort by the ATO’s latest ruling.

Tax&Compliance Jotham Lian 06 May 2020
— 3 minute read

Over 725,000 businesses, employing more than 4.7 million Australians, have now enrolled for JobKeeper, falling short of the 900,000 businesses that had initially expressed interest in the scheme.

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The Institute of Public Accountants general manager of technical policy Tony Greco believes some business owners may be hesitant because of the fear of incorrectly working out their projected turnover decline.

“Trying to put projections together for the month of May and June is hard in the best of times, let alone while we are operating with severe restrictions caused by COVID-19,” Mr Greco told Accountants Daily.

“The predicament is real for those who haven’t had their sales fall more than 30 per cent for April, but they know the rest of Q2 will be down.

“You make your best guess on where it would land, but it would keep me awake at night and it would keep the client up at night by knowing that the ATO might come back and say you are a bit soft on those projections.”

Mr Greco believes, however, that the ATO’s recently released Law Companion Ruling 2020/1 may bring some comfort to those who are fretting over their projected GST turnover.

In the ruling, the ATO notes that the commissioner’s compliance approach will allow for some tolerance around projection predictions.

“If it later eventuates that your actual turnover for your turnover test period is greater than your prediction of your projected turnover, you do not lose access to the JobKeeper scheme,” the ATO ruling said.

“The commissioner will accept your assessment of these turnovers, unless he has reason to believe that your calculation of your projected GST turnover was not reasonable.”

However, a significant difference between the actual turnover and the projected turnover may trigger an enquiry from the ATO.

“If there is a significant difference between your projected turnover, and what eventuates, we would likely make further enquiries to ascertain whether your assessment of what was likely to happen was reasonable,” the ATO said.

“Keeping good records… explaining how you undertook the calculation will be necessary to show how you took reasonable steps.”

The administratively binding ruling also sets out a number of relevant evidence that would support a prediction of supplies likely to be made, including being required to close or pause a business due to COVID-19 restrictions, using economic forecasts by a reputable organisation that is relevant to the business, and customers cancelling or modifying contracts.

Mr Greco believes contemporaneous documentation will be key for practitioners, as will advice to clients who are pushing them to figure out their eligibility.

“Make sure the caveat is explained and the caveat is that if the ATO finds that your methodology doesnt stand up to their standard, then the conversation will lean towards you paying it all back with interest,” Mr Greco said.

The monthly business declaration

Speaking on a webcast hosted by sister title My Business, ATO Deputy Commissioner Deborah Jenkins clarified that businesses only have to prove their eligibility once at the point of enrolment, with the monthly business declaration not a retest of eligibility.

“Once you are eligible, you remain eligible for the period until September,” Ms Jenkins said.

“People can’t predict the future. They don’t have a crystal ball. Wouldn’t it be wonderful if businesses are doing well in that period and didn’t have a drop of 30 per cent? They continue to be eligible even though, later on, they might find their business has kicked in, and people are shopping again, buying again, out in the restaurants and cafés.”

The monthly declaration, which can be made through Online service for agents, will instead be used to track how a business is progressing under the JobKeeper scheme.

“That’s the purpose of the monthly declaration each month — it’s to make sure your business still exists and to check who your employees are that are employed for that period of time,” Ms Jenkins said.

“That needs to happen. I can’t say often enough, we do need information for the current and projected turnover, but that is not to retest their eligibility.

“It is statistical information; we need to understand how this JobKeeper scheme is playing out and whether it is meeting what it was set out to do.”

ATO ruling to ease turnover projection ‘predicament’
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Jotham Lian

Jotham Lian

Jotham Lian is the editor of Accountants Daily, the leading source of breaking news, analysis and insight for Australian accounting professionals.

Before joining the team in 2017, Jotham wrote for a range of national mastheads including the Sydney Morning Herald, and Channel NewsAsia.

You can email Jotham at: This email address is being protected from spambots. You need JavaScript enabled to view it. 

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