The Future of JobKeeper

The government has recently announced some changes in the JobKeeper payment.  We’ve had queries from quite a few clients about the new rules for JobKeeper.  Are you still eligible?  Did you miss out on claiming previously, but maybe now you are eligible for JK#2?  This blog has been updated as at the end of Sept 2020.  Treasury fact sheets are available here.

Here is a summary of what Julia Hartman, from The Ban Tacs Group, has written. The changes discussed here are commonly referred to as Jobkeeper 2.  

It is still a requirement that the business must have had an ABN as at 12th March 2020 and have reported income for the period 1st July 2018 to 12th March 2020 to the ATO by 12th March 2020, with some exceptions for businesses not registered for GST and ATO lodgement periods.  

With limited exceptions the Fair Work Act concessions have not been extended to cover Oct 2020 to March 2021.  These will finish at the end of Sept 2020 so employers can no longer direct their employees to work from home or vary their hours or duties.  If you need to continue to do this, you will need employment law advice.

Further, there has been a recent case in the Fair Work Court that suggests employers cannot make employees redundant if they qualify for Jobkeeper.  Reference Mathew Browne v My Shared Services [2020] FWC 4445

Turnover for Employers – Is Your Business Eligible?

Jobkeeper 2 still requires a 30% drop in turnover.  Turnover is now strictly limited to what you have reported in G1 in your BAS no other variations.   

There is no prerequisite that you have qualified for Jobkeeper in previous quarters.  Each period is evaluated on its own merits subject of course to being in business before 12th March 2020 and having employees or a business participant before 1st July 2020.  There is also a discretion for the ATO to set out an alternative test to allow immediate eligibility if a business has had to cease trading or significantly curtail its operations.  This is no doubt directed at Melbourne businesses that were going along just fine, but are no longer considered essential, so their employees can no longer come to work.      

Entities that are not registered for GST can choose to use either accruals or cash methods as long as they are consistent.  The turnover is calculated just as if they are registered for GST, under the same rules.

It is important to consider that the GST rules for reporting G1 include sales of capital assets.  This means that if you sell a capital asset to get cash to keep your business going the unusual increase in your G1 amount caused by the sale proceeds could mean that you will not show a 30% drop in turnover despite the fact your true sales have decreased.  

So, let’s have a look at what needs to go into G1:

Includes:Does not include:
* GST free supplies even to overseas customers
* All GST sales
* Input taxed supplies such as residential rent and the subsequent sale of residential property.
* Supplies not made in connection with Australia
* Jobkeeper payments or the Cash Flow Boost
* State Government Grants that did not require the business to do anything other than meet the relevant prerequisites

The quarter that you compare would normally be the exact same period in 2019 though there is an exception for particularly unusual circumstances.  Refer to the bottom of this blog if you would like to know more about unusual circumstances.

For clarity to receive Jobkeeper 2 for the period:

October 2020 to December 2020Your GST turnover for the quarter July 2020 to September 2020 needs to be 30% lower than the quarter July 2019 to September 2019.   
January 2021 to March 2021Likewise, you need to have a 30% drop in your October 2020 to December 2020 quarter compared with October 2019 to December 2019.

Employees who Qualify – How Much Do They Get?

Part-Time v Full-Time: The payment is now different for full and part-time workers.  This is measured on the hours worked in the 4 pay weeks or equivalent immediately before 1st March 2020, or 1st Jul 2020.  An alternative reference period other than February or June is available for employees whose employment during those months was abnormal.  Generally, the alternative period will be the first 28 day pay period ending after February or June but in the case of the first point below the 28 day pay period will be an earlier period.  

The alternative period can be used if:

  •  The employee’s total hours of work and paid leave in the standard reference periods were not representative of the total number of those hours in earlier periods (e.g., the employee took unpaid leave during February or June 2020 etc.)
  • The individual was not employed during all or part of the standard reference periods
  • The first pay cycle ended after the reference time  

Or

  • An employee has been transferred to a new employer as part of a business sale.  

Hours Worked:  If the employee worked for 20 hours or more per week on average over the 4-week period, they are considered full-time.  Those working less than 20 hours are considered part-time employees.  

Payment Amounts:  The fortnightly amount of JobKeeper payment will be as follows:

Full TimePart Time
Oct to Dec 2020 quarter$1,200 $ 650
Jan to Mar 2021 quarter$1,000 $ 550

Some important points:

  • These amounts must be paid to employees before the end of each month, to qualify for a reimbursement via JobKeeper from the ATO.  
  • Warning:  The test requires a 30% drop in turnover in the quarter immediately before you need to start paying wages.  If your employees are not actually working in return for receiving these payments, it is very important that you carefully test your income and consult with your accountant regarding the required 30% drop, before you begin to pay wages in the next quarter.  
  • Starting Date:  The requirement that an employee needed to have been on the employer’s books as a 1st March 2020, has now been shifted to 1st July 2020, for Jobkeeper payments from 3rd August 2020.  This 1st July date applies for wages paid from 3rd August 2020, so if you meet the other requirements and have employed someone new, get in now for extra JobKeeper payments to help with their wages.  

The first reimbursement started at the beginning of September.

  • New Employees:  Importantly, you can now apply for new employees (as long as they are not casuals) if they were on your books on 30th June 2020.  Casuals can only qualify if they have worked for you for 12 months.
  • Junior Staff:  This new employment start date of before 1st July 2020 will also allow young employees who are not independent but have turned 18 years of age before the 1st July, 2020 to be included in the JobKeeper scheme, if they meet all the other qualifications.
  • Casuals:  If they did not quite get their full 12 months up by 1st March 2020 casuals now have the opportunity to qualify if they have been working for their employer for 12 months by 1st July 2020.
  • Employees on parental leave paid by their employer will qualify for JobKeeper.
  • Employees on WorkCover:  Employees on workers compensation but doing some work for their employer, for example light duties at reduced hours, will qualify for JobKeeper.  

Receiving Payments for Yourself – Business Participant

The amounts have been reduced, just as they have for Jobkeeper Employees.  Business Participants need to test the hours they worked in February 2020, to determine whether they are 20 hours or more on average per week, to qualify for the full-time payment.  There is still no requirement that the business participant be actually paid a wage.

The explanatory statement states:

“Existing records of engagement may not be held by business participants, but if an entity has not been active during the reference period or had all duties and other activities carried out instead by employees, or if the business participant held a separate full-time job then it would be likely that they would not satisfy this test. Business participants and entities must be in a position to reasonably demonstrate the basis on which they determined that a business participant was actively engaged in the business for the required number of hours in February 2020.”

Note there is no change to the start date for Business Participants, they must have been working in the business before 1st March 2020.

JobSeeker v JobKeeper

Employees who only qualify as part-time may well be better off on JobSeeker, depending on their particular circumstances.  They can choose to continue to receive JobKeeper, and just declare that amount to Centrelink and receive a top up.  JobSeeker should be $800 per fortnight plus extra Centrelink concessions.  Jobseekers are still allowed to earn up to $300 per fortnight without affecting their Centrelink payments.  In other words, the first $300 of their JobKeeper payment will not reduce their JobSeeker payment, making them much better off than just being on part-time JobKeeper alone.  

 From July 2020 JobSeeker recipients will be required to apply for jobs and must accept work offered to them.  From 25th September 2020 the liquid asset test will come back in and the spouse income threshold will be reduced (currently $80,000).

What is Likely to Happen in the Real World

 The reduction in the part-time payment amount will not help employers with zombie employees, as the one-in-all-in requirement means employers still must pay JobKeeper to their casuals, even when they refuse shifts.  There is a little ray of hope, as those who worked less than 20 hours in February will be paid so much less; so it will be in their interests to apply for JobSeeker.  Once they are on the Centrelink payment, they will not be allowed to refuse any work offered, so employers may now be able to get casuals to work for their JobKeeper payments.  

There is still the incentive for casuals who do not qualify for JobSeeker (for example high spouse or parental income) to work for anyone else but the employer who pays them JobKeeper.  Their JobKeeper employer will still have to find someone else to work the shifts they refuse, and these employers are still stuck with the one-in-all-in policy, so they can’t not pay them JobKeeper.    At least now, if the employer had employed someone part-time or full-time to take these shifts, before 1st July 2020 they can also receive JobKeeper for the new employee  (that is, if the new employee is not already receiving JobKeeper from another employer).

The new fact sheet mentioned earlier in this blog also states that it is the employer to whom the employee gives their tax free threshold, that should, without argument, be the employer entitled to claim JobKeeper for employees with more than one employer.  It also goes into more detail about how the ATO will be recovering duplicate payments from the employee rather than the employer when the employer has acted in good faith.  (Makes you wonder how many employees double dipped, leaving poor employers out of pocket because they did not qualify to be reimbursed).  

There you go, the relevant facts without wasting an hour or so listening to Scomo and JoFry make excuses for why they had to rush through a badly planned process initially.  

For much more detail on JobKeeper, you can visit Ban Tacs’ our original blog.

Note – ATO’s Treatment of “Unusual” Circumstances

No formal guidance yet on how this will apply to JobKeeper 2.  The ATO has stated they will be similar to the alternative tests for Jobkeeper 1, though it will all be based on quarterly periods, not months.  So here is how it worked for Jobkeeper 1:  

  • Alternative Trading Test:  If you have not traded for a period exceeding 12 months, there is an alternative test, providing of course you were trading before 1st March 2020.  The relevant comparison month, if you were testing a one-month period, is an average of the trading months up to March 2020. If your relevant comparison period is a quarter the average month is multiplied by 3. It even goes as far as allowing you a daily average of you started business in February 2020. Alternatively, you can choose to measure only the 3 months immediately before 1st March 2020 instead of the whole period you traded. This is a great option if your business had a bit of lead time. It is important to note that you do not have to use the alternative turnover test just because you meet one of those circumstances. If you already satisfy the basic test you are in, and the alternative test cannot boot you out.
  • Natural Disasters/Reconstructions:  There are also concessions for businesses affected by natural disasters, sale or acquisitions of part of the business and other restructuring, even allowance for businesses who may have experienced a substantial increase in turnover immediately before the test period. Irregular turnover can also be considered. More details here.
  • Sole Traders and Small Partnerships (4 or less partners):  These businesses can apply an alternative comparison period, even if they have no employees and the sole trader or one of the partners was sick, injured, or on leave and it affected the turnover in what would normally be the comparison period. In this case, the comparison period would be the first full calendar month after the sole trader or partner returned to work. If the test period is quarterly, then multiply that comparison month by 3.
  • Rapid Growth:  There is also the opportunity to argue that your business was booming just before COVID so it would not be a true representation to compare 12 months prior.  

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