In mid-September 2020, the Treasury finally made the Coronavirus Economic Response Package (Payments and Benefits) Amendment Rules (No. 8) 2020 (“Amendment Rules (No. 8)”) as a legislative instrument to implement the changes as announced by the Australian federal government on 21 July and 7 August 2020 to the JobKeeper (Wage Subsidy) Payment scheme.

The earlier Amendment Rules (No. 7) dated 14 August 2020 extends the JobKeeper Payment to eligible employees with reference to the 1 July 2020 testing point while the later Amendment rules (No. 8) give effect to the other announced changes.

Under the Amendment Rules (No. 8), the JobKeeper Payment will be extended for 6 months (from 28 September 2020) until 28 March 2021 upon expiry of the original JobKeeper Payment (JobKeeper 1.0) on 27 September 2020. The extended JobKeeper Payment (JobKeeper 2.0) will provide targeted support to those businesses and not-for-profits who continue to be significantly impacted by the Coronavirus (COVID-19) and need financial assistance the most.

The other changes to JobKeeper Payment are:

• The decline in turnover test must be applied at several points for JobKeeper 2.0 but the thresholds (requisite percentage decrease) will remain the same as follows:
  
  (i) From 28 September 2020 to 3 January 2021, an eligible business (including self-employed and not-for-profits) must satisfy:

  • The original decline in turnover test based on its projected GST turnover; and

  • The additional decline in turnover test in the September 2020 quarter (relative to the comparative quarter in 2019) based on its actual GST turnover.
    

        (ii) From 4 January 2021 to 28 March 2021, an eligible business (including self-employed and not-for-profits) must satisfy:

• The original decline in turnover test based on its projected GST turnover; and

• The additional decline in turnover test in the December 2020 quarter (relative to the comparative quarter in 2019) based on its actual GST turnover.

The original decline in turnover test has now been extended to include the months of October to December 2020, and the December 2020 quarter. This means that if a business experiences the required percentage of (projected) turnover decrease in any 1 month (between March and December 2020) or 1 quarter (between April and December 2020), it would satisfy the original decline in turnover test.

Practically, a business that can satisfy the additional (actual) decline in turnover test in the September and/or December 2020 quarter would also satisfy the original decline in turnover test for the same quarter. In addition, eligible businesses that claimed JobKeeper 1.0 should have already satisfied the original decline in turnover test and will not need to re-apply this test again.

However, it is important to note that the actual decline in turnover test must be met separately for the 2 extended periods above. Therefore, a business which does not qualify for JobKeeper Payment in the first extended period ending 3 January 2021 can become eligible in the second extended period ending 28 March 2021.

The required percentage of decline in turnover for both the original and additional tests is dependent on the employer’s aggregated (annual) turnover. Please refer to JobKeeper 1.0 Payment for further detail.

The need for businesses to reassess their eligibility for JobKeeper Payment over the extension period is to ensure that only those businesses that need the most help will continue to receive the payments.

• There will be 2 rates of reduced JobKeeper Payment for eligible businesses as follows:

(i) From 28 September 2020 to 3 January 2021:

• AU$1,200 per fortnight for each eligible employee who worked for at least 80 hours in the 28-day period ending at the end of the most recent pay cycle before either 1 March 2020 or 1 July 2020 (or eligible business participant who was actively engaged in the business for at least 80 hours in the month of February 2020); or

  1. AU$750 per fortnight for each of the other eligible employees and business participants.

(ii) From 4 January 2021 to 28 March 2021:

• AU$1,000 per fortnight for each eligible employee who worked for at least 80 hours in the 28-day period ending at the end of the most recent pay cycle before either 1 March 2020 or 1 July 2020 (or eligible business participant who was actively engaged in the business for at least 80 hours in the month of February 2020); or

  1. AU$650 per fortnight for other eligible employees and business participants.

The need for an eligible employer to count the number of hours worked by an eligible employee should only be relevant for part time or long term casual employees. For fortnightly payroll, the 28-day period comprises the last 2 consecutive pay fortnights, or for weekly payroll, the last 4 consecutive pay weeks, before 1 March 2020 or 1 July 2020. For monthly payroll, an eligible employee’s monthly wages will need to be pro-rated to 28 days. In addition, the actual hours worked includes any hours paid for leave (such as annual, long service, sick, carers and compassion) and for public holidays.

JobKeeper 2.0 will be tapered in the December 2020 and March 2021 quarters to encourage businesses to adjust to the new environment, supporting a gradual transition to economic recovery. The two-tiered rates aim to better align JobKeeper Payment with the usual income of employees (especially those who earned less than the minimum JobKeeper Payment amount before the onset of the COVID-19 pandemic).

• To be an eligible employee, the reference date when they must be a permanent (full time or part time), or a long term causal (on a regular and systematic basis for at least 12 months) employee of the eligible employer can be either the new 1 July 2020 (or the existing 1 March 2020) date.
  

• Please refer to our previous JobKeeper Client Update for more information on the new 1 July 2020 test.

In relation to reporting and payment obligations, an eligible employer must:

• Notify the Australian Taxation Office (“ATO”) through its monthly business declaration as to which JobKeeper 2.0 rate (i.e. higher tier 1 or lower tier 2 rate) will apply to each eligible employee (and/or business participant) by the extended due date of 31 October 2020 (for fortnights starting on 28 September 2020 and 12 October 2020 only).

• Notify each eligible employee (and/or business participant) in writing within 7 days of advising the ATO of the above.

• Pay each eligible employee at least the JobKeeper 2.0 amount (inclusive of PAYG withholding) based on their applicable rate on or before the relevant fortnight (“Wage Condition”). This requirement has also been extended to 31 October 2020 (for fortnights starting on 28 September 2020 and 12 October 2020 only).

• If it is a new participant, enrol into the JobKeeper Payment scheme by the end of the month in which the relevant fortnight (JobKeeper 2.0 is claimed for) ends (provided it meets the existing eligibility conditions and the new additional decline in turnover test during the extension period).

• Please refer to JobKeeper 1.0 Payment for existing eligibility criteria.

Generally, businesses will need to assess their eligibility for JobKeeper 2.0 in advance of their business activity statement lodgement deadline in order to comply with the Wage Condition.

In addition, subsequent to the Amendment Rules (No. 8) being enacted, the Commissioner of Taxation has made various legislative instruments to:

• Determine alternative reference (testing) periods for specified classes of employees / business participants including:
  
  (i) Those who became an employee or a business participant after 1 February 2020.
  (ii) Those who conducted business in a declared drought or natural disaster zone in February 2020.
  (iii) Those who were transferred within the same wholly owned group (or to the new owner of a business).
  (iv) Those whose working hours in the February 2020 or June 2020 reference period were unusual or not representative of their typical number of hours worked.

• Identify the following specific circumstances in which the higher tier 1 rate is to apply where an employee’s worked hours are not readily ascertainable (including piece rate workers):
  

  (i) The employee’s gross salary/wages (excluding any top up JobKeeper Payment), commission, bonuses, allowances (inclusive of PAYG withholding), fringe benefits and salary scarified superannuation totalled $1,500 in the testing period.
  (ii) The employee was required to work at least 80 hours in the testing period pursuant to a written industrial award, employment contract or similar instrument.
  (iii) The employee’s worked hours should be at least 80 hours in the testing period based on reasonable assumptions (taking into account ordinary business hours, average staffing level, common shift lengths, etc).

An eligible employer must always consider whether the higher tier 1 rate can apply under an alternative reference period where an eligible employee or business participant only qualifies for the lower tier 2 rate under a standard reference period. Please contact us for further information on these alternative testing periods and/or specific circumstances.

In the meantime, if you have any questions, please do not hesitate to contact one of our partners (Mark, Greg and Justin) or our tax director (Melanie).