During these difficult times, business owners and businesses often reach out for help in terms of financial assistance. 

But the thing is, there're a lot of new businesses out there that don't have a track-record of trading, and it can be hard to substantiate what their losses may have been.

Joining the discussion today are Marion Rodwell and Helen Driscoll.  

Could you elaborate on this in light of the current situation?

Marion Rodwell | Accountant

In regards to the current situation, there're JobKeeper payments available to claim, however, to be eligible they need to prove a decline in turnover by using a comparative period.

This obviously becomes an issue for new businesses as they don't have that 12-month comparative period, so they need to utilise an alternate test.

Helen Driscoll | Lawyer

From a compensation perspective, you would still need to prove that you have suffered a loss of income regardless of the impacts of COVID-19. So, if you receive a benefit through such a scheme as JobKeeper, you need to be able to separate that from your income and losses from your compensation claim.

If I draw attention to aparticular examples, an example might be a small dental clinic. So, the claimant is the main dentist. Now, that dentist can't see as many patients as they used to be and so, therefore, they've had to shut their doors. They need to show that they're shutting their doors, not because of COVID-19, but because of what's happened in their compensation claim.

Another example might be a cafe that's laid off their main barista - not because of COVID-19, but because the cafe owner can't do as much meal prep as they used to, meaning they want to reduce their opening hours.

And what's the first thing you do to attack this?

We've got almost the same problem, but just coming at it from a couple of different angles.

Regardless of which angle you're coming from, when you're dissecting this and working out how you're going to attack it, what's the first thing that you do?

Marion Rodwell | Accountant

So we, first of all, need to know who's involved in the JobKeeper claim and that's, obviously, the business entity or the list of employees and any eligible business participants.

Helen Driscoll | Lawyer

And that's very similar for lawyers. You have the claimant, and that could be the business owner or business owners, or it could be an employee of the business. You then have the respondent, who's usually an insurer.

What're the facts that surround this?

So, we know who's involved, we know who's seeking this compensation or benefit. So, what are the facts that surround this? What are some of the keypoints that we need to pay attention to?

Marion Rodwell | Accountant

The main fact to consider from the perspective of JobKeeper, is what type of business structure it is. As mentioned, you'll also need to formulate a list of employees. You need to be able to nominate a business participant because there can only be one.

If you have multiple directors, only one can actually claim.

You also need to determine the business turnover and for new businesses and the commencement date of the business.

What're the clients hoping to get out of this?

Marion Rodwell | Accountant

Well, that's quite straightforward. They're looking to be eligible to receive the JobKeeperpayment.

Helen Driscoll | Lawyer

From a compensation perspective, for a small business, the main thing will be to prove that the business would have still suffered a loss of income regardless of what's happening in the world, such as COVID-19. 

To achieve that, the main thing they'll need to do will be to set-off the difference in losses between COVID-19 and what's happened with the compensation claim, then calculate that difference.

And surely that comes with a few hurdles?

Helen Driscoll | Lawyer

Absolutely. One of the particular problems will, of course, being a small business, particularly a small business in its infancy, be that it doesn't have the history and track-record to prove that they still would have suffered those losses.

The good news is that there are lots of things that could be relevant in proving that income, irrespective of COVID-19.

That might be things like gathering the evidence:

  • Business activity statements;
  • Previous business success of the owner itself;
  • Discussions with business partners;
  • Initial business projections;
  • Business strategy discussions;
  • Items like why the business was started in the first place;
  • Why it was believed the business would be successful. 

All supporting documentation can be relevant in your compensation claim and help in distinguishing any impacts of COVID-19.

What about for claiming JobKeeper?

Marion Rodwell | Accountant

There are definitely obstacles involved in claiming JobKeeper.

The obstacles I generally come across is that people have insufficient bookkeeping records and insufficient records of what their turnover was.

There are also time constraints that need to be considered as well. These government stimulus packages come with strict deadline to enrol.

Finally, the major obstacle is not satisfying the basic decline in turnover test.

What's the first step you'd recommend to a client to overcome this?

If you could pick one thing that you could send a client away to work on right now, what would it be?

Marion Rodwell | Accountant

So, although timing's actually a priority and, obviously, you need all your records to be up to date, that can be fixed quite simply with some extra bookkeeping.

So, my greatest cause of concern for people would be trying to show them how to use alternate tests to prove their eligibility for the JobKeeper or other compensations.

Helen Driscoll | Lawyer

And to overcome our hurdle, my number one recommendation would be to gather the evidence I listed out above. 

The second thing would be calculation what your income was going to be for that particular business, and then giving some consideration to where that might be off-set by COVID-19. Those three things are the first places to start. 

Is there a checklist or take-home item for a JobKeeper perspective?

So from a compensation perspective, there's a list of evidence to start collecting to prove your projections are reliable.

Back to a JobKeeper perspective, is there something to give the clients to take home, a checklist, or something that can help them with solve the problem?

Marion Rodwell | Accountant

Yes, definitely.

The Commissioner of Taxation has developed alternate tests for seven different scenarios, and one is being a new small businesses. So, what I'd require the clients to get, is a list of all their business turnover for each whole month since commencement of trading. We would also need to know the turnover for the comparative period - for JobKeeper sakes, it is actually March 2020, but it also could be April 2020. 

From there, we can calculate the decline in turnover to see if they're eligible.

To conclude...

So, if you find yourself in one of these situations, whether it's applying for a JobKeeper grant, or whether you're in the midst of a compensation claim as a young business, there're two very handy resources there that might get you started, and you might be able to use both of them and pinch a bit from either of them. 

Marion Rodwell

Accounting Excellence

Helen Driscoll

MCW Legal


Why Does Being A New Business Affect My Economic Loss?

Economic loss is based on a comparison between your earnings before and after the accident, as well as what your projected losses will be into the future.

Your projected losses are based on what you were earning and where it was likely you were going to head. Without sufficient evidence of your earnings as new business, it becomes challenging to make a compelling case of how much you would earn in 10 years' time. 

Why will JobKeeper payments affect my Economic loss?

JobKeeper payments, and any other crisis relief payment or crisis alone that affects your income, will affect the ability to accurately project your losses into the future. 

How Can I Prove Economic Loss If I Run A New Business?

To prove you've experienced economic loss, notwithstanding any external factors or being a business in its infancy, you need to collect any evidence relevant to your business earnings, calculate what this might've looked like projected into the future, and then off-set that against any abnormalities such as being in receipt of a crisis payment.

what evidence can i collect to support my claim for economic loss as a new business?

To support your claim for economic loss, you should collect any types of evidence that relate to your business earning capacity. That could be things such as business activity statements, previous business successes of the owner, discussions with business partners, initial business projections, business strategy discussions, things like why the business started in the first place, and why it was believed the business would be successful.

This isn't an exhaustive list, and all forms of evidence should be considered.

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