With the current JobKeeper subsidy due to end on 27 September 2020, the AustralianFederal Government has now released amending rules setting out the detail of the six month extension to JobKeeper (dubbed JobKeeper 2.1 or JobKeeper Extension) from 28 September 2020 until 28 March 2021.
The JobKeeper Extension continues the JobKeeper subsidy, but at reduced rates from the current $1,500 per JobKeeper fortnight.
The amending rules are set out in the Coronavirus Economic Response Package (Payments and Benefits) Amendment Rules (No.8) 2020. The Government estimates that JobKeeper payments now total $101.3 billion.
In this article, we set out the key features of the JobKeeper Extension in the following areas:
1. JobKeeper Extension periods and payments
Under the JobKeeper Extension, JobKeeper payments are grouped into two periods:
- Period 1: Covers the period from 28 September 2020 until 3 January 2021
- Period 2: Covers the period from 3 January 2021 until 28 March 2021.
The amount of JobKeeper payment for each eligible employee or eligible business participant will depend upon the above mentioned payment periods, satisfaction of an actual decline in turnover test, and also whether an 80 hour work test is satisfied.
This can be summarised in the following table:
|JOBKEEPER EXTENSION PERIOD||DECLINE IN TURNOVER TEST - QUARTER TEST PERIOD||80 HOUR WORK TEST MET||80 HOUR WORK TEST NOT MET
|Period 1: 28 September 2020 to 3 January 2021 ||Based on actual turnover for September 2020 quarter compared to September 2019 or alternative comparable period where available||$1,200 per fortnight||$750 per fortnight
|Period 2: 4 January 2021 to 28 March 2021 ||Based on actual turnover for December 2020 quarter compared to December 2019 or alternative comparable period where available||$1,000 per fortnight||$650 per fortnight
2. Actual decline in turnover test – September and December quarters
The JobKeeper Extension now requires an entity to test their decline in turnover based on actual turnover rather than on projected turnover as required under the initial JobKeeper rules.
The new actual turnover test will be based on two key quarterly periods – the September 2020 and December 2020 quarters compared to relevant prior period quarters.
In particular and as shown in the above table, for JobKeeper fortnights between 28 September 2020 and 3 January 2021 (Period 1), an entity must determine whether it has an actual decline in turnover for the September 2020 quarter compared to the prior September 2019 quarter and have met the relevant decline percentage – 15%, 30% or 50% depending on the type of entity as originally announced under the initial JobKeeper rules.
Similarly, for Period 2 covering JobKeeper fortnights between 4 January 2021 and 28 March 2021, an entity must determine whether it has an actual decline in turnover for the December 2020 quarter compared to the prior December 2019 quarter and have met the relevant decline percentage (15%, 30% or 50%).
Where an entity does not satisfy the actual September 2020 quarter decline in turnover test for Period 1 there is still an opportunity to satisfy the test for the December 2020 quarter under Period 2 and be entitled to JobKeeper payments in Period 2 (i.e. starting from 4 January 2021 onwards).
Conversely, an entity that satisfies the actual turnover test in Period 1 may later fail the Period 2 actual decline in turnover test. In this case, the entity would therefore only be entitled to JobKeeper payments up to the end of Period 1 (i.e. up to 3 January 2021).
3. New 80 hour work test
Assuming the actual decline in turnover test has been met, each employee must also be assessed against an 80 hour work test which then determines the rate of JobKeeper payment for an employee.
In determining whether an eligible employee has met the 80 hour work test, the JobKeeper Extension rules have reference to an entity’s pay period over the last consecutive 28 days that end before:
- 1 March 2020 and
- 1 July 2020
The above means that an employee is required to have worked at least 80 hours in a 28 day period prior to either 1 March 2020 or 1 July 2020 in order for an employer to be entitled to the higher JobKeeper payment rate as shown in the above table. If the 80 hour work requirement is not met, the relevant lower JobKeeper payment rate applies (see above table). For employees on a fortnightly payroll, this would comprise the last two consecutive pay periods that ended prior to 1 March 2020 or 1 July 2020. For other pay cycles (e.g. monthly pay periods), see our comments below.
If the 80 hour work requirement is not met, the relevant lower JobKeeper payment rate applies (see above table).
The effect of the above testing periods broadly translates the 80 hour work test over two fortnightly periods (totalling 28 days or 4 weeks) to effectively a 20 hour per week test.
Where an employee has worked the relevant fortnightly periods ending prior to both of the above key dates, the employer must choose to count either the last two fortnightly pay periods ended prior to 1 March 2020 or count the last two fortnightly pay periods ended prior to 1 July 2020 that give the most favourable work hours for the purposes of the 80 hour work test.
Consider the following example:
Bob works part time for XYZ Ltd. Bob’s last two fortnightly pay periods prior to 1 March 2020 shows that he has worked 70 hours. Further, in the last two fortnightly pay periods prior to 1 July 2020 Bob has worked 85 hours. In this regard, XYZ Ltd can choose for Bob the 1 July 2020 reference date meaning that Bob has worked 85 hours and has met the 80 hour work test. As such, XYZ Ltd is entitled to JobKeeper payments under a higher JobKeeper payment rate for Bob (see above table).
In situations where an employee’s pay cycle is longer than two fortnights (i.e. longer than 28 days) such as a monthly pay cycle, a pro-rated calculation is required.
Consider the following example:
Mary is paid on a monthly basis on the 15th of each month. For the last pay cycle for Mary prior to 1 March 2020, this falls on 15 February 2020 covering a period of 31 days. Mary worked 90 hours during this pay cycle. For the purposes of the 80 hour work test, Mary’s work hours is pro-rated as follows: 90 hours / 31 days x 28 days = 81 hours. Based on this pro-rated approach, Mary has met the 80 hour work test (81 hours) and it is not necessary to further test for the pay period prior to 1 July 2020.
Other key observations:
- Entities which have not previously participated in the current JobKeeper scheme are required to satisfy both the original decline in turnover test and the new actual decline in turnover test for a particular JobKeeper fortnight. Where the original decline in turnover test has been previously met, there is no requirement to retest eligibility for the original test (only the new ‘actual’ test).
- The Commissioner’s power to specify alternative decline in turnover tests and modified test for certain group structures also carry over to the new actual decline in turnover test. However, if an alternative test is used, it must be based on a quarterly testing period. The ATO has not yet released alternative tests specifically applying to the extension period.
- The difference between the new ‘actual’ turnover test and the original ‘projected’ turnover test is that certain sales of capital assets and supplies made in winding down an enterprise may be included in turnover under the new ‘actual’ turnover test. This potentially makes it more difficult to pass the test if these supplies occur in the September 2020 or December 2020 quarters.
- The wage condition that employers must meet under the JobKeeper Extension compared to the current JobKeeper rules now effectively falls from $1,500 fortnight to $1,200 / $750 per fortnight or $1,000 / $650 per fortnight depending on the JobKeeper fortnight period and whether the 80 hour work test is met.
- For the purposes of the 80 hour work test, an employee’s actual hours worked and any hours for which they received paid leave (e.g. annual leave, long service, sick leave or other types of paid leave) or paid absence for public holidays can be counted.
- For eligible business participants the 80 hour work test is not based on pay cycles. Rather the calendar month of February 2020 is used as the reference period having regard to total hours of active engagement. The Commissioner is able to set an alternative reference period if the month of February is not considered appropriate.
- Entities must notify individuals in writing within 7 days of advising the Commissioner of the JobKeeper payment rate that applies to an individual.
The above is a brief guide only and there is some level of complexity on the operation of the JobKeeper Extension rules including various administrative reporting dates to be mindful of. Speak to your local Bentleys advisor if you need any assistance in this area.
We, at Bentleys, are doing everything we can to help businesses come out of this challenging time in good shape.
We will continue to update our COVID-19 resource hub with important developments, so please return soon.
Disclaimer: This information is general in nature and should not be relied on as advice. It does not take into account the objectives, financial situation or needs of any particular person. You need to consider your financial situation and needs and seek professional advice before making any decisions based on this information.