JobKeeper 2.0: A Parachute for Australian Businesses for a Softer Landing But Not All Will Pull Through

21 July 2020

The Federal Government’s changes to JobKeeper and JobSeeker, announced today, will see both schemes extended but payments reduced.

JobKeeper will become a two-tier system, with different rates for full-time workers and others. Starting in October, until December 2020, the $1500-per-fortnight JobKeeper wage subsidy will be reduced to $1,200 for full-timers and $750 for the part-time rate. This will reduce even further to $1,000 and $650 respectively from January 2021 until March 2021.

Businesses will need to pass a new eligibility test, for JobKeeper, in October, and again in January, to make sure they still require the support.  This process will look at testing actual turnover to determine whether the business has recovered in the last six months.

JobSeeker has been extended until December 2020 with the income free threshold increased to $300

Mark Molesworth, Tax Partner at BDO in Australia said the extension of the payments would provide a parachute for a softer landing for many businesses but for others it will mean they will no longer be viable.

“With a ‘fiscal cliff’ predicted for the end of September, when these schemes were to have finished, it’s clear that a parachute was needed to provide ongoing support to overcome the impact of the coronavirus pandemic,” Mark said.

“But an extension alone will not be enough for some businesses. Lowering the rates will mean that less support goes to businesses as a wage subsidy. This might make some that are currently surviving no longer viable.

“Similarly, where JobKeeper is acting as an income supplement to individuals, the reduction in support may lead to less money spent in the economy, which would have a flow-on effect for the viability of many businesses.

“The Government may need to recalibrate if larger swathes of Australia have to be locked down again.”

The Government confirmed that businesses would need to pass the new eligibility test in October, and again in January, to make sure they still require the support.  This process will look at testing actual turnover to determine whether the business has recovered in the last six months.

“The extended schemes take into account a more dynamic assessment of a business’s eligibility but it also means further testing which just adds to the heavy workload of businesses who are already stretched.”