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Common mistakes that made businesses think they failed the JobKeeper 2.0 test (Part 1)

JobKeeper (JK) 1.0 was a big challenge for us as it involved a new set of complex laws that required tedious documentation and reconciliation to ensure everything was executed smoothly! JobKeeper 2.0 is even more challenging because many businesses have to complete both JK 1.0 and 2.0 tests.

Since the release of JK 2.0 rules by the Australian Tax Office (ATO) and the alternative tests, our team has been working tirelessly to make sure our clients are entirely confident of whether or not they are going to receive JK payments for the next three months. The good news is that over 80% of our clients who were eligible for JK 1.0 also qualified for JK 2.0, however over 50% of the JK 1.0 participants that were qualified via alternative tests.

The reason for sharing this article is that we continue to hear business owners say they won’t qualify for JK 2.0 after doing the test themselves. As mentioned above, the tests involve complex sets of rules that require substantial accounting knowledge and experience to understand. In my opinion, it takes between one and four hours to determine if a business is qualified or not. There are fewer hours required for businesses who passed the basic test, while far more hours are required for those that have to go through all 26 sets of tests. So if you doubt your DIY test result, you should speak to one of our accounting staff, we often do the test for no cost!

Here are common misunderstandings that cause false test results:

  • I can use the test kit provided by XERO to work out if I am qualified or not. 

This is very wrong! XERO provides a quick test kit, but I would not recommend anyone use it unless you are simply after a quick result and plan on going through the rest of the test later. The XERO test kit does not take into account various factors that could give you the wrong result. For example, if you posted a journal to an income account and ticked the box that includes this journal into a cash report, it is reported as GST turnover in a XERO report. This result could give you the wrong figure for JK GST turnover testing purposes. Further, there is no alternative test provided.

  • As long as my books are completed up to 30th September, I am ready to do the test.

This is only partly right, there are a series of checks to make sure your books are ready for JK tests. Here are some tips:

  • First, you need to determine if your BAS is on a cash or accrual basis. If you are on cash (as are most small businesses) then you have to make sure your bank reconciliations are done with no outstanding or unreconciled transactions for the periods that you are testing and for the reference period (e.g. July - September 2019). 
  • Re-do your BAS for the reference periods to make sure that your current data matches with the BAS that was lodged with the ATO (access via the ATO portal). Periods that you need to check: July - September 2019, April - June 2010 and December - February 2020. For some other tests, you also have to check from March 2019 until June 2020.
  • When going through the GST audit reports for all the BASs above, ensure you check all transactions coded with the following GST code: GST Free Income & BAS excluded. Keep in mind that some of these transactions could be fine for BAS purposes but will need to be checked for JK turnover purposes.
  • Go through the GST turnover definition and remove any income that shouldn’t be accounted for as GST turnover. Keep in mind that some of these income streams could be reportable in G1 as your BAS turnover, but should be excluded for JK 2.0 GST turnover. For example, an ACNC registered organisation who receives Government funding that is considered G1 should be manually taken out for the purpose of this test. Another example could be client reimbursements, some of these transactions could be coded as GST free income and hence reported in G1, however, they should be excluded from the JK turnover test. 
  • Donations are another ledger that needs to be checked carefully. Finally, if your business is exporting, you have to include all export sales to your JK turnover test. Whereas they could be reported differently in your BAS turnover.
  • Check all manual journal transactions when going through GST audit reports for all BASs above. Some of these transactions could be excluded from JK turnover testing purposes.
  • If you are doing the books but not doing Accounts Receivable, you need to double-check with the Accounts Receivable team to make sure they have finished all invoices/credit notes for testing for the reference periods mentioned above.