On Tuesday 21 July 2020, the Federal Government announced the extension of the JobKeeper wage subsidy scheme (previously due to expire on 27 September 2020) until 28 March 2021 but with new rates and reapplication of the turnover tests. The temporary boost to the JobSeeker program will also now be available until the end of this year at a reduced rate and with additional eligibility criteria.
Changes to JobKeeper Scheme
On 21 July 2020, Treasury released updated information available here on the JobKeeper Scheme.
The current $1,500-a-fortnight JobKeeper payment rate will be replaced with a new two-tiered rate system:
From 28 September 2020 to 3 January 2021, the JobKeeper Payment rates will be:
- $1,200 per fortnight for all eligible employees who, in the four weeks of pay periods before 1 March 2020, were working in the business or not-for-profit for 20 hours or more a week on average, and for eligible business participants who were actively engaged in the business for 20 hours or more per week on average in the month of February 2020; and
- $750 per fortnight for other eligible employees and business participants.
From 4 January 2021 to 28 March 2021, the JobKeeper Payment rates will be:
- $1,000 per fortnight for all eligible employees who, in the four weeks of pay periods before 1 March 2020, were working in the business or not-for-profit for 20 hours or more a week on average and for business participants who were actively engaged in the business for 20 hours or more per week on average in the month of February 2020; and
- $650 per fortnight for other eligible employees and business participants.
Eligibility for employees remains the same. Refer to this previous BDO Tax Technical Update for details.
The JobKeeper Scheme turnover tests will remain the same, however, businesses will need to apply and satisfy them again at the beginning of October 2020, and again at the beginning of January 2021.
From 28 September 2020, businesses and not-for-profits seeking to claim the JobKeeper Payment will be required to demonstrate that they have suffered an ongoing significant decline in turnover using actual GST turnover (rather than projected GST turnover). From 28 September 2020, businesses and not-for-profits will also be required to reassess their eligibility with reference to their actual GST turnover in the June and September quarters 2020. They will need to demonstrate that they have met the relevant decline in turnover test in both of those quarters to be eligible for the JobKeeper Payment from 28 September 2020 to 3 January 2021.
From 4 January 2021, businesses and not-for-profits will need to further reassess their turnover to be eligible for the JobKeeper Payment. They will need to demonstrate that they have met the relevant decline in turnover test with reference to their actual GST turnover in each of the June, September and December quarters 2020 to remain eligible for the JobKeeper Payment from 4 January 2021 to 28 March 2021.
To be eligible for JobKeeper Payments under the extension, businesses and not-for-profits will still need to demonstrate that they have experienced a decline in turnover of:
- 50 per cent for those with an aggregated turnover of more than $1 billion;
- 30 per cent for those with an aggregated turnover of $1 billion or less; or
- 15 per cent for Australian Charities and Not for profits Commission-registered charities (excluding schools and universities).
If a business or not-for-profit does not meet the additional turnover tests for the extension period, this does not affect their eligibility prior to 28 September 2020.
The Commissioner of Taxation will have the 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 Commissioner’s existing discretion. Information about the existing discretion is available on the ATO website here.
Changes to JobSeeker Program
On 21 July 2020, the Government announced an extension of the JobSeeker benefit. However, it has also simultaneously imposed rules to restrict the eligibility, as well as gradually reintroducing obligations for payment recipients to seek work. Treasury released updated information available here on increased income support.
From 25 September 2020 until 31 December 2020, the $550 per fortnight coronavirus supplement, which effectively doubled the fortnightly income support payment, will be reduced to $250.
Effectively the JobSeeker payment rate will now be reduced from $1,100 to $800 per fortnight. The Government will also increase the income threshold to people on JobSeeker to $300. The income free area for JobSeeker Payment and Youth Allowance (other) will increase from $106 per fortnight for JobSeeker Payment and $143 per fortnight for Youth Allowance (other) to $300 per fortnight for both and a phase out rate of 60 cents in every dollar of income over $300.
Access to payments
Access to payments will change from 25 September 2020 to ensure appropriate targeting of income
support as the economy recovers.
- Means testing — From 25 September 2020, means testing will be reinstated in the following ways:
- asset testing for all payments will be reinstated, for both existing and new recipients; and
- the Liquid Assets Waiting Period (LAWP) for all payments will be reinstated.
- Partner income testing — the partner income test cut-out will increase to $3,086.11 per fortnight, or $80,238.89 per annum, for individuals with no personal income, from 25 September 2020. The taper rate will increase from 25 cents to 27 cents, with the higher income cut-out a result of changes to income testing for JobSeeker Payment. No one will be worse off under these temporary changes.
- Expanded criteria — JobSeeker Payment and Youth Allowance (other) criteria will continue to provide payment access for permanent employees who are stood down or lose their employment and sole traders, the self-employed, casual workers and contract workers who meet the income and assets tests until 31 December 2020.
From 4 August 2020, there will also be a mutual obligation requirement where those seeking employment will need to undertake four job searches a month. The penalties regime will apply if people refuse a job that has been provided and offered through that process.
Changes to the JobKeeper Payment may make some recipients of that payment also eligible for the JobSeeker Payment or other income support payments. The Government is making further changes to income support arrangements for JobKeeper Payment recipients who transition onto income support.
BDO welcomes the extension of the JobKeeper payment past 28 September 2020 although whereas previously it was a prospective test (businesses needed to have expected to see a 30% reduction) now businesses will need to demonstrate a 30% reduction in turnover across the past two quarters, and into the next quarter. This reapplication of the JobKeeper Scheme turnover tests on a retrospective basis may be problematic for businesses that were on the verge of recovery but forced back into lockdown in the coming months, as is presently the case in Victoria.
The JobKeeper Payment will continue to remain open to new recipients, provided they meet the existing eligibility requirements and the additional turnover tests during the extension period.
Other eligibility rules for businesses and not-for-profits and their employees remain unchanged. Contact BDO for assistance with applying for the JobKeeper Scheme for the first time or reapplying the JobKeeper Scheme turnover tests in October 2020.
The Federal Treasurer has advised that he will provide an update on the economic and fiscal outlook on Thursday 23 July 2020 where an estimated deficit of approximately $95 billion, 4.8% of GDP, is expected to be revealed. BDO Communication will be prepared. Further decisions on both the JobKeeper Scheme and JobSeeker Program may also be announced in the Federal Budget scheduled for 6 October 2020.