This month, my column focuses on the latest changes to the JobKeeper program. The original program, JobKeeper 1.0, commenced on 30 March 2020 to support businesses through the economic crisis caused by the COVID-19 pandemic.
The JobKeeper program was designed to be adaptable and scalable so that it could be adjusted to respond to changing and unpredictable economic conditions. The JobKeeper legislation provides the Treasurer with broad powers to make rules by way of legislative instruments outside parliamentary sittings. Any tweaks or adjustments should be regarded as the government remaining nimble.
Following a three-month review of JobKeeper which concluded that the case for extending JobKeeper beyond September was strong, the government announced on 21 July 2020 that a modified program (JobKeeper 2.0) will continue for another six months beyond its legislated end date of 27 September 2020 until 28 March 2021.
Just two weeks later, on 7 August 2020, in response to the worsening economic conditions in Victoria due to the stage 4 restrictions, the government announced further changes to the JobKeeper program (JobKeeper 2.1). This announcement also contained some tweaks to the eligibility conditions for employees from 3 August (JobKeeper 1.1).
The JobKeeper 2.0 changes are explained in more detail in this article and are summarised in this handy infographic. The JobKeeper 2.1 changes are further explained in this article and are summarised in this handy infographic.
What are the changes to JobKeeper?
Change in relevant employment date
Changes announced on 21 July 2020
Under the changes announced on 21 July:
- • A two-tiered system will apply so that employees who worked for 20 hours or more in the four-week period before 1 March 2020 will be entitled to a higher JobKeeper amount than those employees who worked less than 20 hours on average in February 2020.
- • The fortnightly rate will be reduced from $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.
Change announced on 7 August 2020
However, a further change announced on 7 August will see the relevant date of employment move from 1 March 2020 to 1 July 2020, which will allow more employees to be eligible for JobKeeper. The partial rate will apply to eligible employees who were working in the business for less than 20 hours per week on average in the four weeks of pay periods before either 1 March or 1 July 2020.
The partial rate will apply to eligible business participants who were “actively engaged” in the business for less than 20 hours per week on average.
Businesses and not-for-profits will need to nominate which payment rate they are claiming for each individual.
Issues relating to the wage condition and eligibility of individuals
Even with the two rounds of changes, the modified JobKeeper rules are not perfectly clear. The following key issues have emerged in relation to the wage condition and the eligibility of employees and business participants:
- • How will the “20 hours per week on average” calculation be determined for eligible business participants (EBPs) without payroll records?
- • Will the “one in, all in” rule mean that from 3 August employers need to include all new employees (who meet the age and residency requirements) employed after 1 March but before 1 July 2020? This would necessitate employers having to meet the wage condition and obtain the necessary nominations by Sunday, 16 August.
- • Section 9(3)(b)(iii) of the JobKeeper Rules prevents an individual from being an eligible employee if they have given a nomination notice to another entity, or the commissioner. This will prevent an individual employed since 1 March from being an eligible employee where they have previously nominated with a former employer.
- • Will long-term casual employees still be required to meet the 12-month requirement? And could a casual employee who previously “just missed out” due to the employment date of 1 March 2020 now be eligible from 3 August?
- • The commissioner will have discretion to set out alternative tests where an individual’s hours were not usual during February and/or June 2020. This will be set out in future guidance.
- • A full-time employee who was part-time in February or June will be entitled only to the partial rate from 28 September, while a part-time employee who was full-time then will be entitled to the full rate even though their hours have reduced.
- • The commissioner will have discretion to allow employers more time to meet the wage condition under JobKeeper 2.1, given that this will need to be satisfied before they have determined their actual GST turnover for the preceding quarter. Further guidance will be issued by the commissioner setting out the extended deadlines to meet the wage condition.
- • Additional guidance on the interaction between JobKeeper fortnights and payroll cycles would be useful, particularly as employers transition to reduced JobKeeper rates or may exit JobKeeper altogether after 27 September or 3 January.
- • The reference to “self-employed” in the Treasury fact sheets is causing some confusion. The term is not confined to sole traders and includes business participants who operate through companies, trusts and partnerships.
- • Payments under JobKeeper will continue to be excluded from ordinary time earnings for superannuation guarantee purposes.
Change in decline in turnover test
Changes announced on 21 July 2020
The current JobKeeper rules require businesses to satisfy the decline in turnover test only once for a single month or quarter between March and September 2020. The changes announced on 21 July proposed that to be eligible for JobKeeper, businesses would instead need to demonstrate that their actual GST turnover has declined by the requisite percentage:
- • From 28 September 2020 to 3 January 2021 – in both the June and September 2020 quarters, relative to the corresponding quarters in 2019;
- • From 4 January 2020 to 28 March 2021 – in each of the June, September and December 2020 quarters, relative to the corresponding quarters in 2019.
This design did not have regard for those businesses whose situations may have improved slightly in the June 2020 quarter but have deteriorated in the September or December quarters, such as those in Victoria that are subject to the stage 4 restrictions.
Change announced on 7 August 2020
Under the JobKeeper 2.1 changes announced on 7 August, to be eligible for JobKeeper, businesses will need to demonstrate that their actual GST turnover has declined by the requisite percentage:
- • From 28 September 2020 to 3 January 2021 – in the September 2020 quarter only (instead of both the June and September quarters), relative to the corresponding quarter in 2019;
- • From 4 January 2020 to 28 March 2021 – in the December 2020 quarter only (instead of each of the June, September and December quarters), relative to the corresponding quarter in 2019.
This sensible modification will allow those businesses that had not suffered the requisite decline in their turnover in the June 2020 quarter, but have since suffered a significant deterioration in their turnover, to now qualify for JobKeeper. Obviously, many Victorian businesses are most likely to be in this position.
Any business that satisfied the test for the June quarter but not the September or December quarters is ineligible for JobKeeper after 27 September 2020. This is an appropriate outcome as JobKeeper 2.1 is designed to support those businesses that are continuing to suffer a decline in their turnover, or suffer the requisite decline for the first time in the September or December quarters.
Issues relating to the decline in turnover test
Once again, the modified rules are not perfectly clear. The following key issues have emerged in relation to the decline in turnover test:
- • There are concerns the basis on which GST turnover is calculated under JobKeeper 2.1 will have to be based on the BAS due to the following content in the Treasury fact sheet:
- Businesses and not-for-profits will generally be able to assess eligibility based on details reported in the business activity statement (BAS).
- The ATO’s Law Companion Ruling LCR 2020/1 sets out various options currently available to businesses to determine their GST turnover. These include the cash and accruals attribution methods which should continue to be available. It is expected that the reference to details reported in the BAS in the Treasury fact sheet should be read as “may be used” rather than “have to be used”.
- • The commissioner will have discretion to set out alternative tests where it is not appropriate to compare actual turnover in the September or December 2020 quarters with actual turnover in the comparable quarter in 2019. This will be set out in future guidance.
- • Alternative arrangements will be put in place for businesses and not-for-profits that are not required to lodge a BAS. This will also be set out in future guidance. It is unclear at this stage whether these alternative arrangements will address the known issue of start-up businesses (on or after 1 July 2019) lodging annual GST returns and quarterly BAS lodgers who commenced business on or after 1 January 2020. It is more likely that the alternative arrangements will relate to how the GST turnover is calculated, not the integrity rules regarding the 12 March 2020 reporting requirement for business participation.
- • The meaning of projected GST turnover currently excludes sales of capital assets. The change from projected GST turnover to actual GST turnover will result in these sales being included in turnover after 27 September unless the law is amended. This may make it harder to qualify, especially if an entity is selling down assets to generate some much-needed cash flow.
- • Input-taxed supplies cannot be taken into account in determining whether an entity has suffered a decline in turnover. It may be difficult to identify any input-taxed supplies which are shown in the same field as taxable supplies on a simple BAS.
- • The alternative decline in turnover tests will need updating for JobKeeper 2.1, as they reflect the months and quarters applicable under JobKeeper 1.0.
- • Monthly reporting will still be necessary, but it is unclear whether businesses will continue to report both current and projected GST turnover. This will be clarified once the new rules are available.
What happens next?
The announcements by the government on 21 July 2020 and 7 August 2020 need to be reflected in legislative amendments. The current JobKeeper legislation prevents payments being made by the government beyond 31 December 2020, so an amending bill before a sitting of Parliament will be necessary. A legislative instrument issued by the Treasurer will set out the details of the new rules. Further details will be available once the legislative amendments are released and updated ATO guidance is published.
Robyn Jacobson, senior advocate, The Tax Institute