30 August | Decline in turnover test for service entities
Service NSW has updated its information for the 2021 COVID-19 Business Grant. The most significant change is the inclusion of an alternative decline in turnover test for eligible group employing entities (i.e. service entities) similar to the rules used for JobKeeper.
NOTE – applications for these grants close at 11:59pm on 13 September 2021
12 August | More detail and changed guidance released for 2021 COVID-19 Business Grant on the Service NSW website
Updates have been made to the Service NSW website for the 2021 COVID-19 Business Grant. Some of these changes include:
- Additional comparison periods provided
- Defining aggregated annual turnover to include worldwide income of the business, its connected entities and affiliates and not just national income
- Clarification on additional documentation requirements
- Allowing accountants to apply on behalf of their clients.
Full details on the Grant incorporating all the updates are provided below.
Further information on the eligibility requirements and application process can be found here.
The NSW Government has provided further detail on the 2021 COVID-19 Business Grant including greater clarity around the eligibility requirements and the documentation required for application.
The program provides grants of between $7,500 and $15,000 to eligible businesses with annual Australian wages up to $10 million.
Businesses (including sole traders) and not-for-profits will be eligible for the 2021 COVID-19 Business Grant if they meet the criteria below.
- have an ABN registered in NSW or can demonstrate that they are physically located and primarily operating in NSW as at 1 June 2021 (only one grant is available for each ABN).
- have total Australian annual wages below $10,000,000 as at 1 July 2020.
- have an aggregated annual turnover of between $75,000 and $50 million (inclusive) for the year ended 30 June 2020.
- have business costs for which there is no other government support available.
- Satisfy the decline in turnover test (set out in the “Grant Amount” section below) due to the Public Health Order.
- For employing businesses, maintain their employee headcount as at 13 July 2021 for the period which the business is receiving payments under this Grant and the JobSaver scheme.
- For non-employing businesses, the business receiving the Grant must be the primary income source for the associated person. Individuals with more than one non-employing business may only claim payment for one business. Non-employing businesses included in the aggregated turnover of an employing business are not eligible to apply.
Businesses that are not eligible
A business will not be eligible if any of the following criteria apply:
- the entity is a non-employing business if persons associated with the business, and who derive income from it, have applied for, or received, the Commonwealth COVID-19 Disaster Payment for the period between 26 June and 17 July 2021, or any part thereof.
- the Major Bank Levy was imposed on the entity or a member of its consolidated group for any quarter before 1 July 2021.
- the entity is an Australian government agency (within the meaning of the Income Tax Assessment Act 1997).
- the entity is a local governing body.
- the entity is wholly owned by an Australian government agency or local governing body.
- the entity is a sovereign entity or owned by a sovereign entity.
- the entity is a company in liquidation or provisional liquidation.
- the entity is an individual who has entered bankruptcy.
- the entity has been found to have been engaged in fraud.
- the entity primarily earns passive income (rents, interest, or dividends).
Eligible businesses will receive:
- $15,000 for a decline in turnover of 70%, or more
- $10,500 for a decline in turnover of 50%, or more
- $7,500 for a decline in turnover of 30%, or more.
The decline in turnover is calculated by comparing the business’s turnover over a minimum two-week period from 26 June 2021 to 17 July 2021, to any of the following:
- the same period in 2019, or
- the same period in 2020, or
- The 2-week period immediately before lockdown commenced (12 June to 25 June 2021).
The business may choose any comparison period. Therefore it could choose the period that demonstrates the largest decline in turnover and possibly a larger Grant amount.
Different comparison periods apply to ‘Southern Border businesses’ (as defined in the Guidelines – but broadly a business located near the Victorian border) impacted by the Victorian stay at home orders that commenced on 27 May 2021. The comparison period for these businesses is a minimum 2-week period from 27 May 2021 to 17 July 2021 compared to:
- the same period in 2019, or
- the same period in 2020, or
- The 2-week period immediately before lockdown commenced (13 May to 26 May 2021).
What you need before you apply
To apply, you will need to provide:
- a MyServiceNSW Account
- proof of identity
- a valid ABN/ACN number
- your business banking details for payment
- Australian income tax return or Notice of Assessment
- Details of your qualified accountant, registered tax agent or registered BAS agent
In addition, you will need to submit a letter from your qualified accountant, registered tax agent or registered BAS agent as evidence of your decline in turnover if one of the following applies:
- Your business is not on the highly impacted industries list. This applies for all three grant tiers.
- Your business is on the highly impacted industries list and you are eligible for a $15,000 grant (i.e. decline in turnover of 70% or more). Note – you will not receive the full amount unless you provide the letter.
How to Apply for the Grant
Applications for the Grant are made through the Service NSW website and are now open until 11:59pm on 13 September 2021.
- Check you meet the eligibility criteria.
- Have your documentation and evidence ready for uploading.
Note: You cannot save and resume your application once you’ve started.
- Select the ‘Apply online’ button.
- Log in,or create your MyServiceNSW Account.
- Select and verify your identity documents.
- When your identity is verified, select ‘Continue’.
- Confirm your personal details.
- Enter your business details and answer the eligibility questions, then select ‘Next’.
- Provide information about your decline in turnover and upload your supporting documentation, then select ‘Next’.
- Enter your bank details, then select ‘Next’.
- Review your application.
- Check the declaration boxes.
- Select ‘Submit’ to complete your application.
After submitting your application, you will receive a confirmation email with your application reference number. If you do not receive this confirmation email, check your junk mail folder, and then call Service NSW on 13 77 88 if you’re still unable to locate the email.
Service NSW will review your application and contact you should they require additional information to support your application. If your application is approved, funds will be transferred to your specified bank account within 5 to 7 business days from the approval date.
Accountants may now apply on behalf of their clients. They will need to provide a letter of authority from the business to show that they are authorised to act on behalf of their client.
In limited circumstances, there are alternative rules for businesses that do not meet the standard eligibility criteria.
If one of the following circumstances applies, the business may be able to demonstrate that it satisfies the aggregated annual turnover criteria through alternative ways:
- Business commenced after June 2019 but on or before 1 June 2021 (e.g. new businesses)
- A business acquisition, disposal, or business restructure occurred that impacted the business’ turnover
- A sole trader or small partnership impacted by sickness, injury or leave.
Where one of these applies, a shorter period can be accepted to demonstrate the minimum $75,000 aggregated annual turnover has been derived provided that shorter period is representative of the “normal operating environment” of the business. The turnover for this shorter period will be annualised to get an equivalent annual turnover figure for the business.
Businesses should generally use a minimum 3-month period to demonstrate turnover, and should provide:
- a BAS for at least one quarter (or 3-monthly BAS), or
- an Australian Tax Return annotated to show when the business commenced during the financial year.
Where a business does not have the evidence outlined above (e.g. because the business started between 1 January and 1 June 2021), the following may be provided as evidence of annual turnover:
- letter from a qualified accountant, registered tax agent or registered BAS agent; or
- business bank account statement for a minimum 3-month period (separate from any personal accounts), or the period for which the business has been operating if less than 3 months
Importantly, businesses that fall under one of those three alternative circumstances will still have to satisfy the decline in turnover using the standard comparison periods.
For businesses impacted by natural disasters, they will have to provide the same information to demonstrate they meet the aggregated annual turnover requirement. However, they may also compare their turnover to the same period in 2018 in addition to the standard comparison periods.
Where a business’s ABN is not registered in NSW but the business was operating in NSW as at 1 June 2021, it will need to provide additional information. This additional information should be in the form of commercial rates notices or lease agreements. Where none of these are available, the Service NSW website lists some alternative documentation that they may accept.
Where a business operates through a trust structure, the business will be required to provide a letter from an independent accountant that demonstrates that an aggregated annual turnover of $75,000 or more is derived through the trust, as opposed to a business linked to a trust.
Group Employing Entities
Similar to the JobKeeper scheme, group employing entities such as service entities that have the principal function of supplying employee labour to other members of the group may use an alternative decline in turnover test to assess their eligibility.
Businesses can only use this alternative test when they meet the requirements specified in the JobKeeper Rules which are then modified to apply to the JobSaver scheme. In broad terms, businesses need to be entities in a consolidated, consolidatable or GST group to be eligible. These requirements are complex so we recommend you speak to your William Buck advisor should you think these are applicable to your business.
Once you meet these requirements, turnover is defined as the sum of the current GST turnovers of all the group members to which the business supplied employee labour services during the defined period of restrictions and the relevant comparison period.
How do I determine if my business has aggregated annual turnover of between $75,000 and $50 million?
Aggregated Annual Turnover means aggregated turnover as defined in s. 328-115 of the Income Tax Assessment Act 1997 (Cth) (“ITAA 97”). Therefore it will include the worldwide turnover of the entity plus the worldwide turnover of its connected entities and affiliates – including non-Australian entities when assessing whether a business had aggregated annual turnover between $75,000 and $50 million (inclusive).
This means, for example, that a small Australian subsidiary of a large multinational group may not be eligible if the worldwide aggregated annual turnover was greater than $50 million for the year ended 30 June 2020.
Note this is a change in the aggregated annual turnover condition by Service NSW. Previously the Guidelines and Terms & Conditions on the Service NSW website specified it was “national Aggregated Annual Turnover”. Further, information dated 28 July 2021 which was provided to accounting bodies by the NSW Government specified that:
“Aggregated annual turnover means the annual Australian turnover of your business as well as the annual Australian turnover of any business that is “connected with you” or any business that is your “affiliate” for the year ended 30 June 2020.”
No guidance has been provided by Service NSW if businesses have already applied based on the original Terms & Conditions.
Annual turnover includes all ordinary income you earned in the ordinary course of running your business. It includes:
- trading stock sales,
- fees for services you provide,
- interest from business bank accounts and
- amounts received to replace business income.
The following are not included in aggregated annual turnover:
- the GST you charge on transactions,
- amounts borrowed,
- proceeds from selling business capital assets,
- certain insurance proceeds and
- JobKeeper payments.
Decline in Turnover Test – What is turnover? Do I use cash or accruals? Is it NSW turnover or national turnover of the business?
An entity satisfies the decline in turnover test if the entity’s current GST turnover for a minimum 2-week period from 26 June 2021 to 17 July 2021 declines by at least 30% compared to the relevant comparison period.
Current GST turnover has the meaning given by the Income Tax Assessment Act 1997 (Cth) and the A New Tax System (Goods and Services Tax) Act 1999 (Cth).
For businesses that are part of a GST group, their ‘GST turnover’ will need to be disaggregated from the GST turnover reported in the group’s BAS, including the re-instatement of intra-group transactions.
A business must use the accounting method they use when preparing their BAS – i.e. if they prepare their BAS on a cash basis, then they should calculate the decline in turnover using turnover calculated on a cash basis.
The decline in turnover is calculated on all turnover of the business (i.e. national turnover) and not just NSW turnover. It should be calculated based on a minimum 2 consecutive weeks; note the period used can start midweek.
Service NSW have updated their guidance to state that the JobKeeper modifications to include gifts and exclude grants do not apply for not-for-profit organisations when calculating aggregated annual turnover or decline in turnover.
My Business originally applied using the 2019 comparison period but if one of the new comparison periods had been used, it would have been entitled to a larger Grant amount. Can I amend the application?
There may be cases where a business has applied already for the Grant using the 2019 comparison period but would have had a greater decline in turnover if they had used one of the two new comparison periods being:
- The 2020 period; and
- The two-week period immediately before lockdown (12 June to 25 June 2021).
This may mean that businesses are now eligible for one of the higher Grant amounts. Unfortunately, NSW Government representatives stated on a webinar on Monday 8 August 2021 that they did not have a solution to this problem at that stage and would need to look into it.
If this applies to your business, we advise that you contact Service NSW to see what options are available.
Which employees are included in the employee headcount?
Employee headcount is the number of persons who are employed in NSW who are permanent (full-time or part-time), or have been employed by the business on a casual basis for more than 12 months (long term casuals).
What is meant by maintaining employee headcount?
Maintaining employee headcount means the employer will not take active steps to end the employment relationship with their employees. Employees who have been stood down under the Fair Work Act 2009 or take leave without pay are considered employees for the purpose of headcount.
Businesses will remain eligible if their employee headcount declines for reasons outside the control of the employer, for example if employees voluntarily resign or death of an employee.
My headcount has declined. What do I do?
If the reduction in employee headcount was as a result of circumstances outside the control of the employer (such as voluntary resignations, death of an employee), then you will not be taken as having had a reduction in employee headcount on 13 July. You will still be eligible for the Grant.
If the business reduced its employee headcount due to circumstances within the employer’s control, it will need to notify Service NSW. The business will no longer be eligible for the Grant and JobSaver (if also receiving that).
How is ‘total annual Australian wages’ calculated?
To calculate ‘total annual Australian wages’, businesses already grouped by Revenue NSW should apply these rules. Businesses not already grouped should apply the ownership grouping provisions set out in the New South Wales Payroll Tax Act. Please contact your William Buck advisor if you have questions regarding payroll tax grouping.
Can my business receive the 2021 COVID-19 Grant and I receive the Commonwealth COVID-19 Disaster Payment?
A business cannot receive this Grant if it is a non-employing business and persons associated with the business, and who derive income from it, have applied for or received the Commonwealth COVID-19 Disaster Payment for the period between 26 June and 17 July 2021, or any part thereof.
If the business is an employing business, the business may receive this Grant and employees may receive the Commonwealth COVID-19 Disaster Payment provided all eligibility criteria are met for both schemes.
What is a non-employing business?
Non-employing Business means a business that does not have employees. This may include a range of entity types, such as non-employing sole traders, partnerships, trusts or any other businesses without employees.
What additional information do Not-For-Profit organisations (NFPs) need to provide?
If you are an NFP you will need to provide all of the following:
- a copy of your constitution (or a governing document such as articles of association)
- minutes and resolutions from AGM (bi-annual meetings) for the previous 3 years
- audited financial statements for the previous 3 years.
Is the Grant assessable to the Business?
The 2021 COVID-19 Business Grant is tax free for income tax purposes if the following criteria are met:
- the payment was received by the entity in the 2021–22 financial year;
- the entity carries on a business; and
- the entity has an aggregated turnover of less than $50 million for the year in which the entity receives the payment.
Businesses receiving the Business Grant whose aggregated turnover has increased to $50m or more in the 2021–22 year will not be able to treat the Business Grant as tax-free income.
For information on NSW JobSaver Scheme, please read our article here.