The extension of JobKeeper from 28 September 2020 until 28 March 2021 will also include a requirement for businesses and not-for-profits to demonstrate an actual decline (not merely predict a decline) in turnover under the existing turnover test. The JobKeeper payment will also be stepped down and paid at two rates. Importantly, the existing arrangements for those receiving JobKeeper payments continue until 27 September 2020.
Treasury review finds “strong case” for continuing JobKeeper
The Government’s JobKeeper extension was announced following the release of a Treasury review recommending that there was a “strong case” for continuing the JobKeeper wage subsidy, with some modifications. The Treasury review concluded that the JobKeeper payment has met its objectives to save businesses and jobs, maintain the formal connection between employer and employee, and provide income support. The Government has used these findings to help frame its six-month extension of the JobKeeper regime until 28 March 2020.
The Treasurer said the JobKeeper payment of $1,500 per fortnight for an eligible employee has been in operation since 30 March for 960,000 businesses and 3.5 million workers (or about 30% of the private sector workforce). Treasury found businesses receiving the payment had on average a decline in turnover in April of 37% compared with the same month last year. Sole traders represented 40% of the organisations receiving the payment but only 12% of individual recipients.
One of the consequences of the flat $1,500 fortnightly payment since 30 March has been that some people are receiving more income under JobKeeper than they did pre-COVID-19. About a quarter of JobKeeper recipients saw their income increase by an average of about $550. Accordingly, the Government said it will introduce a second-tier payment from 28 September 2020, reflecting varied working arrangements. Businesses will also be required to demonstrate an actual decline in turnover.
The new JobKeeper arrangements are expected to cost an additional $16.6 billion. The total cost of the JobKeeper regime, as extended, is now estimated to be $85.7 billion over 2019–2020 and 2020–2021. As recommended by the Treasury review, an independent evaluation will be conducted at the conclusion of the program.
Rate per fortnight where <20 hours worked per week
28 September 2020 to 3 January 2021
4 January 2021 to 28 March 2021
Phase 1: 28 September 2020 to 3 January 2021
Tier 1 – $1,200 per fortnight: from 28 September 2020 to 3 January 2021, the payment rate will be reduced from $1,500 to $1,200 per fortnight for all eligible employees who, in the four weeks before 1 March 2020, were working in the business for 20 hours or more per week on average and for eligible business participants who were actively engaged in the business for more than 20 hours per week on average in the month of February 2020.
Tier 2 – $750 per fortnight: for employees who were working in the business for less than 20 hours a week on average and business participants who were actively engaged in the business less than 20 hours per week in the same period.
Phase 2: 4 January 2021 to 28 March 2021
Tier 1 – $1,000 per fortnight: from 4 January 2021 to 28 March 2021, the payment rate will be $1,000 per fortnight for all eligible employees, who in the four weeks before 1 March 2020, were working for 20 hours or more a week on average and for eligible business participants who were actively engaged in the business for more than 20 hours per week on average in the month of February 2020.
Tier 2 – $650 per fortnight: for employees who were working for less than 20 hours a week on average and business participants who were actively engaged in the business for less than 20 hours per week in the same period.
Businesses and not-for-profits will be required to nominate which payment rate they are claiming for each of their eligible employees (or business participants).
The ATO will have discretion to set out alternative tests where an employee’s or business participant’s hours were not usual during the February 2020 reference period. For example, this will include where the employee was on leave, volunteering during the bushfires, or not employed for all or part of February 2020. Guidance will be provided by the ATO where the employee was paid in non-weekly or non-fortnightly pay periods and in other circumstances the general rules do not cover.
The JobKeeper Payment will continue to be made by the ATO to employers in arrears. Employers will continue to be required to satisfy the “wage condition” by making payments to employees equal to, or greater than, the amount of the JobKeeper payment (before tax), based on the payment rate that applies to each employee.
Note that under the existing rules, employers are not obliged to make superannuation guarantee (SG) contributions in relation to salary or wages that do not relate to the performance of work, and are only paid to an employee to satisfy the wage condition for getting a JobKeeper payment. That is, an employer is not required to make SG contributions in respect of top-up amounts of additional wages paid using a JobKeeper Payment. However, an employer's super guarantee obligations are unchanged where an employee is paid more than the JobKeeper Payment amount (before tax) per fortnight.
In order to be eligible for the first JobKeeper payment extension period of 28 September 2020 to 3 January 2021, businesses and not-for-profits will need to demonstrate that their actual GST turnover has significantly fallen in the both the June quarter 2020 (April, May and June) and the September quarter 2020 (July, August and September) relative to comparable periods (generally the corresponding quarters in 2019).
For the second JobKeeper payment extension period of 4 January to 28 March 2021, businesses and not-for-profits will again need to demonstrate that their actual GST turnover has significantly fallen in each of the June, September and December 2020 quarters relative to comparable periods (generally the corresponding quarters in 2019).
The ATO will have discretion to set out alternative tests that would establish eligibility in specific circumstances where it is not appropriate to compare actual turnover in a quarter in 2020 with actual turnover in a quarter in 2019, in line with the ATO’s existing discretion. Information about the existing discretion is available on the ATO website.
Businesses and not-for-profits will generally be able to assess eligibility based on details reported in the Business Activity Statement (BAS). Alternative arrangements will be put in place for businesses and not-for-profits that are not required to lodge a BAS (eg if the entity is a member of a GST group).
As the deadline to lodge a BAS for the September quarter or month is in late October, and the December quarter (or month) BAS deadline is in late January for monthly lodgers or late February for quarterly lodgers, businesses and not-for-profits will need to assess their eligibility for JobKeeper in advance of the BAS deadline in order to meet the wage condition (which requires them to pay their eligible employees in advance of receiving the JobKeeper payment in arrears from the ATO). The ATO will also have discretion to extend the time an entity has to pay employees in order to meet the wage condition, so that entities have time to first confirm their eligibility for the JobKeeper payment.
To be eligible for JobKeeper payments under the extension, the decline in turnover test remains the same as the existing rules. That is:
charities registered with the Australian Charities and Not-for-profits Commission (ACNC), excluding schools and universities: 15%;
entities with turnover less than $1 billion: 30%; and
entities with turnover greater than $1 billion: 50%.
Registered religious institutions responsible for religious practitioners will continue to be eligible to receive the JobKeeper payment provided they meet existing eligibility requirements and the additional turnover tests during the extension period.
The Treasury fact sheet sets out the following example to illustrate the operation of the turnover test under the JobKeeper extension.
Retesting turnover under JobKeeper extension
Carmen owns and runs the City Cafe. Carmen started claiming the JobKeeper Payment for her eligible staff and herself as a business participant when the JobKeeper Payment commenced on 30 March 2020. At the time, Carmen estimated that the projected GST turnover for City Cafe in April 2020 would be 70% below its actual GST turnover in April 2019. To be eligible for the JobKeeper Payment from 30 March 2020 to 27 September 2020, Carmen needed to show the turnover for the City Cafe was estimated to decline by at least 30%.
As a monthly BAS lodger, Carmen submitted her BAS for the City Cafe in April, May and June. For each of these, her actual turnover was as follows:
Total for June quarter
Decline for June quarter
From July to September, actual turnover improved as follows:
Total for September quarter
Decline for September quarter
The actual turnover decline for both the June and September 2020 quarters was still greater than 30%, so City Cafe was eligible for the JobKeeper Payment for the period of 28 September 2020 to 3 January 2021.
Business continued to improve for the City Cafe, and actual turnover for the December 2020 quarter was 20% less than the December quarter 2019, so the City Cafe was no longer eligible to claim the JobKeeper for the second extension period starting from 4 January 2021.
Working out JobKeeper payment rate to be claimed
In this scenario, Carmen also needs to calculate how much to claim for each of her staff, and for herself as a business participant. As Carmen was working full-time at the cafe herself throughout February 2020, she is entitled to claim $1,200 per fortnight from 28 September 2020 to 3 January 2021, as an eligible business participant.
She has three full-time employees who are also eligible to be paid $1,200 per fortnight because they each worked 20 hours or more per week throughout February 2020.
Carmen has an employee, Chris, who works part-time with different hours every other week: 14 hours one week; and 22 hours the next week. During the 2 pay fortnights prior to 1 March 2020, Chris was employed for 36 hours in each fortnight. On average, Chris worked less than 20 hours per week for City Cafe. Carmen is eligible to claim $750 per fortnight for Chris, from 28 September 2020 to 3 January 2021.
Cathy is an eligible employee who worked on a long-term casual basis during February 2020. To determine what rate of JobKeeper Payment to claim for Cathy, Carmen looks at pay records for the two fortnightly pay periods before 1 March 2020. She sees that Cathy was employed on average less than 20 hours per week, so Carmen claims $750 per fortnight for Cathy, from 28 September 2020 to 3 January 2021.
Carmen also started employing Charles from September 2020. Because Charles was not employed at City Cafe on 1 March 2020, Carmen cannot claim the JobKeeper Payment for Charles.
Treasury fact sheets updated
In addition to the fact sheet Extension of the JobKeeper Payment, Treasury has updated its other JobKeeper fact sheets to incorporate the extension of the regime, and the reduced payment amounts and additional turnover tests from 28 September 2020. The other previously-released Treasury fact sheets, updated to 21 July 2020, include:
JobKeeper Payment: updated to note the extension of JobKeeper payments until 28 March 2021, subject to reduced payment amounts and eligibility changes;
JobKeeper Payment – protecting integrity: includes a cross-reference to the JobKeeper extension fact sheet; and
JobKeeper Payment – changes to the Fair Work Act: Treasury notes that the amendments to the Fair Work Act 2009 that enable employers entitled to receive JobKeeper payments to temporarily vary working arrangements for eligible employees will cease entirely on 28 September 2020. Authorised JobKeeper Enabling Stand Down Directions will remain in effect until revoked or replaced by the employer, or until the provisions cease completely on 28 September 2020.
Legislative amendments required
The extension of the JobKeeper regime beyond 27 September is expected to require legislative amendments once Parliament resumes from 24 August 2020.
If you would like to know more please contact one of our accountants on 07 4639 1099 or come in and see us at 4 Bowen Street Toowoomba.