Employers may need to obtain decline in turnover certificate under Fair Work Act

By Alexis Kokkinos - September 7, 2020

Under proposed amendments to the JobKeeper rules, employers who previously qualified for JobKeeper 1.0, but do not qualify for JobKeeper 2.0, may continue to issue certain directions to their employees beyond 27 September 2020 if they can demonstrate a minimum 10% decline in turnover for the relevant quarter.

To do so, affected businesses must obtain a certificate issued by a qualified accountant, registered tax agent or BAS agent that demonstrates the requisite decline in accordance with GST turnover concepts.

There are significant implications for employers who falsely provide information with respect to the certificate including Federal Court actions.  

Furthermore, as the certificate is required to 'confirm' a position, there is a risk that the documents could be construed as an audit or assurance. It is absolutely critical that Pitcher Partners only provides this service with an appropriate 'scope' that ensures this is not an audit or review.

What are the rules about?

New measures introduced into Parliament will provide flexibility for employers who previously qualified for JobKeeper to issue directions to certain employees under Fair Work legislation (e.g. to reduce their working hours – refer to the Fair Work website for general information) despite the employer not qualifying for the JobKeeper extension.

An employer may not qualify for the JobKeeper extension periods if they are not able to establish an ongoing 30% (or, if applicable, 50%) decline in turnover (however, we note that the new rules have not been released at the time of writing this bulletin). However, if the employer has experienced a 10% or greater decline in turnover under a revised test contained in the Fair Work Act, they will be able to provide the relevant directions to employees.

What is the 10% decline in turnover certificate?

To be able to demonstrate the requisite 10% or greater decline in turnover, the employer must obtain a certificate from a qualified accountant or registered tax or BAS agent. There is an exception to this rule for certain small business entities (see below).

The certificate must ‘confirm’ that the employer suffered the requisite 10% decline in turnover for the particular quarter. The decline in turnover is calculated in accordance with the current JobKeeper rules (with some modifications). The accountant, tax agent or BAS agent must be independent of the employer (e.g. not a director, employee or associated entity). Furthermore, the employer must provide information that is not false or misleading and must not omit any matter or thing that could cause the information to be misleading.

What quarters are relevant?

There are three periods in which an employer requires a certificate in order to issue appropriate directions to employees being:

  1. before 28 October 2020;
  2. 28 October 2020 to 27 February 2021; and
  3. on or after 28 February 2021.

The 10% decline in turnover needs to be demonstrated for the June 2020, September 2020 and December 2020 quarters respectively (e.g. a 10% decline in turnover for the June 2020 quarter to be able to issue directions from 28 September 2020 to 27 October 2020). An employer may require a 10% decline in turnover certificate for each period if they wish to be able to issue the necessary directions to employees beyond 28 September 2020 and until 28 March 2021.

Can an employer self-assess the 10% decline instead?

A small business employer (with fewer than 15 employees) may be able to have an authorised individual with knowledge of its financial affairs (e.g. a director) make a statutory declaration that the 10% decline in turnover occurred for the relevant quarter.

Alternatively, these same small business employers may request an accountant, tax agent or BAS agent to provide the certificate as they may prefer an external expert confirmation.

For employers that are not small business employers, they must obtain a certificate from an eligible financial services provider.

What risk issues must be addressed when issuing a certificate?

There are a significant number of risk issues associated with the certificate, both from an eligible service provider and employer perspective.


There is an onus on employers to provide appropriate information to eligible service providers as well as to ensure they have not provided a direction to employees where the employer did not meet the 10% decline in turnover test. Civil remedies can apply where the requirements on the employer are breached. It is important that the relevant employer understands their obligations and provides all of the required information.

Audit or assurance services

With respect to an eligible service provider, the certificate requires confirmation that the 10% decline in turnover has been achieved for the relevant period of time. There have been concerns that this would require an audit or review service to be provided, which cannot be provided by those that are not qualified (licenced and registered) auditors. The provisions were amended in the Senate to make it clear that the certificate is not an ‘opinion’ but only requires confirmation of the test. Furthermore, the Explanatory Memorandum states:

This requires the eligible financial service provider to confirm that the test has been met based on the information provided and does not constitute an audit or assurance engagement. The amendment achieves this by removing the word ‘opinion’ from the relevant provision in the Bill.

It is therefore critical that the certificate be based on information provided by the employer.  It is also imperative that the certificate only confirms that there has been a 10% or greater decline in turnover rather than being an opinion that could be construed as providing an audit or assurance service.

Actions in the Federal Court

Furthermore, actions in relation to the 10% decline in turnover can be taken to the Federal Court.  This would place a higher degree of risk with respect to information being challenged in the public domain.  As the certificates are based on complex GST rules, that are modified specifically under the JobKeeper provisions including LCR 2020/1, there is a significant risk that the GST provisions could be applied in an incorrect manner. Accordingly, it is critical that all certificates are at the very least reviewed and signed off by a GST specialist to ensure they conform with all of the GST provisions relevant to the JobKeeper rules.

Engagement letters

It is important, for the reasons outlined above, to ensure there are appropriate engagement letters in place for this engagement that covers the above specific items and outline the exact nature, scope of work being provided, and information being relied upon.

What are the next steps?

It is critical to seek independent legal advice to understand your rights and obligations from an employment law perspective and the effect of any directions given (or proposed to be given) to employees.

As the June 2020 quarter is the first relevant quarter, the first certificate may be able to be provided immediately. For assistance in assessing decline in turnover and, where applicable, to obtain a certificate demonstrating the minimum requisite decline in turnover, contact a Pitcher Partners representative.

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