The Government announced on Tuesday 21 July 2020 that while there will be no changes to the existing JobKeeper arrangements until its end date of 27 September 2020, a modified version JobKeeper 2.0 will then apply until 28 March 2021. Under JobKeeper 2.0 there will be reduced payment rates and a new decline in turnover test for eligibility.
Reduced Payment Rates
A two-tiered system will apply so that employees who worked on average for 20 hours or more per week in February 2020 will be subject to the higher rate JobKeeper amount (the “full rate”) while those employees who worked less than 20 hours per week on average in February 2020 will be subject to a lesser rate (the “partial rate”).
Under JobKeeper 2.0, the fortnightly rate will reduce from the existing $1,500 in two stages:
- From 28 September 2020 to 3 January 2021, the full fortnightly rate will be $1,200 and the partial rate will be $750;
- From 4 January 2021 to 28 March 2021, the full fortnightly rate will be $1,000 and the partial rate will be $650.
Businesses will need to nominate which payment rate they are claiming for each of their eligible employees or eligible business participants. Employers must pay, at minimum, the applicable fortnightly rate to their eligible employees in each pay period. The ATO will continue to pay the JobKeeper monthly in arrears.
For Eligible Business Participants, the full rate of $1,200 (from 28 September 2020 to 3 January 2021) or $1,000 (from 4 January 2021 to 28 March 2021) will only be available if they were “actively engaged” in the business for 20 hours or more per week on average in February 2020. The partial rate of $750 (from 28 September 2020 to 3 January 2021) or $650 (from 4 January 2021 to 28 March 2021) will be available where they were actively engaged in the business for less than 20 hours per week on average in February 2020.
New Decline in Turnover Test
Unlike the current JobKeeper rules which require businesses to satisfy the decline in turnover test only once for a single month or quarter between March and September 2020, the new rules will require businesses to continue to meet a modified decline in turnover test from September 2020 to March 2021.
Under the new rules, to be eligible for JobKeeper 2.0:
- From 28 September 2020 to 3 January 2021, businesses will need to demonstrate that their actual GST turnover has declined by the requisite percentage in both the June and September 2020 quarters, relative to the corresponding quarters in 2019;
- From 4 January 2020 to 28 March 2021, businesses will need to demonstrate that their actual GST turnover has declined by the requisite percentage in each of the June, September and December 2020 quarters, relative to the corresponding quarters in 2019.
The ATO will have discretion to set out alternative tests where the actual GST turnover in 2020 is not comparable with the actual GST turnover for the equivalent quarter in 2019. Businesses will be able to use their reported BAS details to determine their eligibility, and alternative arrangements will be available for entities that are not required to lodge an activity statement.
Under JobKeeper 2.0 planning is required as both the periods above commence before the due date of the relevant BAS lodgement date. Businesses will need to determine their eligibility earlier than the BAS lodgement deadlines and nominate the pay scales for their employees in order to meet their wage payment condition.
What is not likely changing?
For JobKeeper 2.0 there should be no changes to:
- The requirement for employers to satisfy the wage condition — the employer must still pay their eligible employees an amount in the fortnight that is at least equal to the JobKeeper amount;
- The specified decline in turnover percentage that a business must suffer — 30% for entities with an aggregated turnover of no more than $1 billion and 50% for entities with an aggregated turnover of more than $1 billion;
- The ATO’s alternative decline in turnover tests;
- The special rules relating to service entity arrangements;
- The meaning of “eligible employee” and “eligible business participant”;
- The monthly reporting of turnover to the ATO
The JobKeeper 2.0 announcement by the Government on 21 July 2020 needs to be reflected in legislation/regulations.
Treasurer’s Economic Statement
On Thursday 23 July 2020, the Minister for Finance and the Treasurer released the Economic and Fiscal Update July 2020 and an accompanying joint media release.
The Economic Statement contained no new tax policy announcements, we will need to wait for the 2020–21 Federal Budget on 6 October 2020 to see what changes are in store on the tax front.