JobKeeper 2.0: key dates, reduced rates, payroll cycles and more

Not unexpectedly, in light of the continuing COVID-19 crisis, the Government has announced it will extend the JobKeeper program by six months to 28 March 2021. This article discusses the extension to JobKeeper and what the redesigned rules mean for employers and employees beyond September.

JobKeeper redesigned

The Government announced on 21 July 2020 that a modified JobKeeper program will continue for another six months beyond its legislated end date of 27 September 2020 until 28 March 2021. This follows a three-month review of JobKeeper which concluded that the case for extending JobKeeper beyond September is strong. The review suggested that:

• The Government could introduce a two-tiered payment system under which part-time employees receive a lower payment; and
• A new decline in turnover test using actual rather than projected turnover should apply to ensure JobKeeper remains well targeted.

No changes will be made to the existing JobKeeper arrangements until 28 September 2020.

Reduced rates

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 (the ‘full rate’) than those employees who worked less than 20 hours on average in February 2020 (the ‘partial rate’). The rate will also taper the assistance to encourage businesses to meet a greater share of their own wages as economic conditions are expected to improve.

Under JobKeeper 2.0, 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.

Businesses and not-for-profits will need to nominate which payment rate they are claiming for each of their eligible employees or eligible business participants. The Commissioner will have a discretion to set out alternative tests where the individual’s working hours were unusual, for example where they were on leave, unemployed for all or part of February or were volunteering to fight the bushfires.

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 be available for an eligible business participant only if they are ‘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 for an eligible business participant where they are ‘actively engaged’ in the business for less than 20 hours per week on average in February 2020.

Under the current rules, an individual is eligible to be an eligible business participant if they are ‘actively engaged’ in the business. This term is not defined in the law and has never had to be accurately measured. Guidance on this will be necessary so businesses can correctly determine which JobKeeper rate applies to an eligible business participant.

To date, each month in the program has contained only two JobKeeper fortnights. It is timely to point out that three JobKeeper fortnights end in August 2020, and again, in January 2021. While this will mean a higher JobKeeper payment will be received from the ATO (i.e. $4,500 instead of the usual $3,000), it may also necessitate an adjustment to those payrolls that conform to a monthly cycle, depending on whether the employer has chosen to base the monthly payroll on actual JobKeeper entitlements or an average across the JobKeeper period.

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:

• 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.

In line with the existing discretion, the Commissioner 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.

Eligibility will shift from projected GST turnover to actual GST turnover. This will require businesses to determine their eligibility earlier than the BAS lodgment deadlines to meet the wage condition. Accordingly, the Commissioner will also have a discretion to extend the time an entity has to meet the wage condition.

The design of the rules which proposes to require businesses to demonstrate that their actual GST turnover has declined by the requisite percentage in consecutive quarters does 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. The Tax Institute, along with the joint professional bodies, will be seeking greater flexibility from the Government on this requirement.

What is not changing?

During the extended period of JobKeeper, it is not expected that there will be any 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 that a business must suffer — 15% for ACNC-registered charities, 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 Commissioner’s alternative decline in turnover tests;
• The special rules relating to service entity arrangements;
• The ability of ACNC-registered charities to elect to exclude government grants from their turnover;
• The meaning of ‘eligible employee’ and ‘eligible business participant’;
• The integrity rules, including the additional pre-12 March 2020 reporting requirements for businesses that qualify based on business participation;
• The enrolment process;
• The timing of the monthly payment of JobKeeper by the ATO in arrears;
• The monthly reporting of turnover to the ATO;
• The rule that prevents more than one employer claiming in respect of the same employee.

What happens next?

The announcement by the Government on 21 July 2020 needs to be reflected in legislative amendments. The current JobKeeper legislation prevents payments being made beyond 31 December 2020 so an amending bill requiring a sitting of Parliament will be necessary, and is likely to be complemented by a legislative instrument issued by the Treasurer which 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.

The Tax Institute welcomes the extension of JobKeeper for another six months through to March 2021. This gradual unwinding of JobKeeper ensures many businesses who need the continuing support are no longer facing a financial cliff at the end of September. However, it is too early to say whether JobKeeper should be further extended beyond March 2021.

The Government estimates that the total cost of the JobKeeper Payment until March 2021 will now be $85.7 billion. JobKeeper 2.0 represents an increase in the cost of the program by $15.7 billion. The revised cost of the program still falls short of the original expected cost of $130 billion by some $44 billion, so perhaps there is still some room on the Government’s credit card for further assistance should the COVID-19 pandemic further prolong economic recovery.

New JobKeeper fortnights

The JobKeeper fortnights start on 30 March 2020 and will end on 28 March 2021 inclusive. The minimum amount must be paid by the employer to each eligible employee in the fortnight. The schedule of JobKeeper fortnights is set out in the following table, together with the monthly JobKeeper payments paid by the ATO to the employer in arrears.

Payroll cycles

JobKeeper fortnights are set by the legislation but the JobKeeper Rules do not require any employer to change their payroll cycle to conform to the JobKeeper fortnights.

There has been widespread confusion regarding payroll cycles, and this is likely to continue as employers transition into the reduced rate periods in late September 2020 and early January 2021. There will inevitably be questions around the transition dates where employers may be unsure what amounts they should pay when their payroll cycle doesn’t align with the start and end of JobKeeper fortnights.

It is important to understand that the timing of a weekly or fortnight payment doesn’t need to align with a JobKeeper fortnight; the regularity will be such that the payment will be made at some time during the fortnight. In the case of monthly payments, a special rule applies to allow the employer to reasonably allocate the payment to a JobKeeper fortnight (s. 10(3) of the JobKeeper Rules).

The table below sets out the minimum amounts that employers need to pay to meet the wage condition, according to whether their payroll cycle is weekly, fortnightly or monthly.

¹ August 2020 would be $4,500 instead of $3,000 to include the payments for the three JobKeeper fortnights.

² January 2021 would be $3,200 instead of $2,000 to include the payment for the 20^th JobKeeper fortnight, ending on 3 January 2021, of $1,200.

³ January 2021 would be $2,050 instead of $1,300 to include the payment for the 20^th JobKeeper fortnight, ending on 3 January 2021, of $750.

ATO guidance/Further rules needed

The following issues will require ATO guidance or further clarification through the legislative instruments:

• Alternative tests where the working hours of the individual in February 2020 were unusual
• Alternative tests where the actual GST turnover in 2020 is not comparable with the equivalent quarter in 2019
• Businesses can use details reported in their BAS so alternative arrangements will be needed for entities that are not required to lodge an activity statement
• The Commissioner will have discretion to allow an entity more time to pay employees to meet the wage condition, given that businesses would otherwise need to meet the wage condition before the BAS lodgment deadlines i.e. before they have determined if they are eligible
• The meaning of ‘actively engaged’ to determine which JobKeeper rate applies to an eligible business participant
• How the new JobKeeper rates interact with weekly, fortnightly and monthly payroll cycles