Posted on 28/7/2020
Updated 13 August 2020 - Tax Advisory / HR & Recruitment
As Australia continues to deal with the economic consequences of COVID-19, the Federal Government has stuck to script that it is committed to keeping Australians in jobs despite the significant downturn being experienced across many industries.
The Government has moved to extend JobKeeper until late March 2021, while also introducing a series of amendments designed to make the program more fiscally sustainable.
This announcement will be welcome news for workers and businesses who have been hit hard by COVID-19; however, the changes will require careful assessment by employers to ensure they can continue to access the scheme and remain compliant with the relevant tax and employment legislation.
Here, we break down everything you need to know.
When announcing the new changes to JobKeeper during a press conference, the Prime Minister did not deny the initial scheme was created with great urgency. The Federal Government designed JobKeeper as an aggregated system, leveraging existing platforms to ensure it could be rolled out as quickly as possible, to as many people as possible.
According to a Treasury review, of the 3.5 million workers accessing JobKeeper, around 900,000 were better off under the scheme by an average of $550 per fortnight. There were also widespread reports of casual and part-time workers being reluctant to perform additional hours of work, as well as instances of stood down workers being reluctant to take on any hours of work, as affected businesses started to re-open.
In response to these issues, in addition to the recommendations from the Treasury review for the program to be extended, the Government is set to introduce JobKeeper 2.0 from September 28 - the day after the original scheme was due to expire. It includes a two-tiered payment system based on the number of hours worked by employees “pre-COVID“. From September 28 until January 3, these tiers will be $1050 and $750, with the lower band for those employees who worked less than 20 hours per week during February and/or June 2020. From January 4 until March 28, 2021, these payments will be reduced to $1000 and $650 respectively.
In terms of eligibility criteria, these remain the same; however the turnover tests will be reapplied at the end of September and again at the start of January to ensure that businesses accessing the payment for their employers are doing so due to the ongoing impacts of COVID-19.
As was the case when the current JobKeeper regime was released back in March, we can expect that the Australian Taxation Office (ATO) will release more detailed information about the amended scheme in the coming weeks. We anticipate that this will include details on how average hours of work should be calculated and how to deal with circumstances where, for example, an employee was on leave during February and/or June.
While we can only speculate at this stage about the details yet to be announced by the ATO, employers should start thinking sooner rather than later about their potential obligations to their workers and the potential tax implications. Accordingly, it is worthwhile touching base with your tax consultant in the coming weeks to ensure you stay abreast of the latest updates and are in a position to act as soon as the ATO releases more information ahead of the introduction of JobKeeper 2.0 on September 28.
Importantly, if you are planning to continue utilising JobKeeper for one or more of your workers, it is important to be aware of subsequent turnover tests that your business will be required to undertake to demonstrate that it continues to experience a significant reduction in turnover as a result of COVID-19. As detailed above, under JobKeeper 2.0, these tests will be reapplied in September and again in December and testing criteria remains the same – businesses with an aggregated annual turnover of more than $1 billion will have to demonstrate a 50 per cent reduction in turnover, while for business with a turnover of less than $1 billion must show a 30 per cent reduction and charities and not for profits (excluding schools and universities) only 15 per cent.
To access JobKeeper 2.0 from September 28 to January 3, businesses must show the appropriate reduction in turnover for the September 2020 quarter, using actual GST turnover. To access JobKeeper 2.0 from January 4 to 28 March, businesses must show the appropriate reduction in turnover for the December 2020 quarter, using actual GST turnover.
We have also previously discussed the benefits of a payroll audit, which can be critical to ensuring your business continues to meet its obligations to employees, particularly during a period of significant change and systemic upheaval. This is particularly important in light of recent Award changes announced by the Fair Work Commission (FWC), including an extension of certain provisions designed to provide additional flexibility for employees and businesses during COVID-19. While the announcement by the FWC to increase to Award rates is implemented in stages based on the level of impact the corresponding industry has felt due to the pandemic, it is another change employers need to be wary of.
Although the changes to JobKeeper program represent a reduction in the level of government support being provided, COVID-19 impacted businesses will welcome the news of the extension. It provides ongoing relief for an economy under significant strain and will help ensure the ongoing viability of a large number of businesses who are feeling the ongoing impacts of the pandemic. The changes to the program also highlight the need for employers to be on top of their obligations from a payroll and tax perspective and, as more details on the updated JobKeeper program are announced, it pays to get ahead of the curve before they come in effect on September 28.