The Tax Institute’s Senior Advocate: Robyn Jacobson published her ‘Report’ entitled JobKeeper 2.1: a nimble response, in the Institute’s Friday publication: TaxVine (No. 31 on 14.8.20). This tracks the most recent changes to JobKeeper, prompted largely by the ‘2nd Wave’ of COVID-19 in Victoria and the introduction of severe ‘Stage 4’ restrictions here – badly damaging many businesses from the beginning of August. It also looks at the ‘knock on’ effect on the rapidly looming deadline for ‘Superannuation Guarantee’ amnesty reporting and payments.

See below for details.

[Tax Month – August 2020]



JobKeeper 2.1: a nimble response

The JobKeeper landscape continues to evolve at a rapid pace, as evidenced by the Government’s announcement on 7 August 2020 indicating further changes will be made to the JobKeeper program. Accordingly, yet another preamble on the subject of JobKeeper is warranted — and this won’t be the last.

The announcement last Friday followed the Government’s announcement 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. My observations of the JobKeeper 2.0 package were discussed in the TaxVine preamble on 24 July.

Just two weeks later, in response to the worsening economic conditions in Victoria due to the Stage 4 restrictions, the Government had to rethink the eligibility conditions. Consequently, further changes were announced on 7 August in the form of JobKeeper 2.1. The announcement also contained some tweaks to the eligibility conditions for employees from 3 August, so I shall refer to these changes as ‘JobKeeper 1.1’.

The JobKeeper 2.0 changes are explained in this article and are summarised in this handy infographic.

The JobKeeper 2.1 changes are explained in this article and are summarised in this handy infographic.

It bears remembering that the Government designed the JobKeeper program to be fluid, adaptable and scalable so that it could be adjusted to respond to the changing and unpredictable economic conditions. Any tweaks or adjustments should be regarded as the Government remaining nimble.

This objective is also achieved through law design which gives the Treasurer broad powers to make JobKeeper rules by way of legislative instruments outside Parliamentary sittings. I shall further remark on this shortly.

Overview of JobKeeper 2.1

Under the JobKeeper 2.1 changes announced on 7 August 2020, 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 the September 2020 quarter only (instead of both the June and September quarters), relative to the corresponding quarter 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 the December 2020 quarter only (instead of each of the June, September and December quarters), relative to the corresponding quarter in 2019.

This sensible modification will allow many Victorian businesses that had not suffered the requisite decline in their turnover in the June 2020 quarter, but have since suffered a significant deterioration in their turnover, to now qualify for JobKeeper. Any business that satisfied the test for the June quarter but not the September or December quarters will not be eligible for JobKeeper after 27 September 2020. This is an appropriate outcome as JobKeeper 2.1 is designed to support those businesses that are continuing to suffer a decline in their turnover, or suffer the requisite decline for the first time in the September or December quarters.

A further change will see the relevant date of employment move from 1 March 2020 to 1 July 2020, which will allow more employees to be eligible for JobKeeper.

Issues with JobKeeper 2.1

A number of issues arise in relation to these further changes, in addition to those arising from the changes announced on 21 July, which will see the JobKeeper rate taper off after 27 September as well as the introduction of a partial rate for part-time employees.

Issues relating to the wage condition and eligibility of individuals

The following key issues have emerged in relation to the wage condition and the eligibility of employees and business participants:

  • 20 hours per week for eligible business participants: How will the ‘20 hours per week on average’ calculation be determined for eligible business participants (EBPs), without payroll records? More specifically, under JobKeeper 2.1, the partial rate of $750 (from 28 September) and $650 (from 4 January) will apply where the individual was ‘actively engaged for less than 20 hours per week on average. The term ‘actively engaged’ is not defined in the JobKeeper Rules and has never had to be measured this precisely.
  • Application of ‘one-in all-in’ rule for new employees since 1 March 2020: The 1 July 2020 employment date is designed to include additional employees in JobKeeper who may currently be ineligible due to not meeting the 1 March 2020 employment condition. But will this compel employers to include in JobKeeper any new employees employed after 1 March but before 1 July 2020 (who meet the other conditions in s 9 of the JobKeeper Rules) from 3 August due to the ‘one-in all-in’ rule? If so, this would mean by this Sunday 16 August employers would need to quickly consider eligible employees, send nomination forms and consider if any new employees need ‘topping up’ to meet the wage condition so they are not exposed to penalties under the Fair Work Act.
  • New employees who have previously nominated with former employer: The restriction in s 9(3)(b)(iii) of the JobKeeper Rules about preventing an individual from being an eligible employee if they have given a nomination notice to another entity, or the Commissioner will prevent new employees (that is, employed since 1 March ) from being eligible where they have previously nominated with a former employer. It is clear this provision was designed to prevent two employers claiming JobKeeper for the same individual at the same time. However, there cannot be a risk of ‘double-dipping’ in this case as the previous employer is unable to continue to claim JobKeeper for an employee whose employment has been terminated. The policy intent to include more employees in JobKeeper based on a later employment date of 1 July 2020 will be very limited unless s 9(3)(b)(iii) is amended.
  • 12-month rule for long term casual employees: Presumably long term casual employees will still be required to meet the 12-month requirement. With the employment date changing to 1 July 2020, it is further presumed that any casual employees who previously ‘just missed out’ due to the employment date of 1 March 2020 may now be eligible from 3 August, but this will be confirmed once the new rules are available.
  • Unusual hours in February or June: The Commissioner will have discretion to set out alternative tests where an individual’s hours were not usual during February and/or June 2020. This will be set out in future guidance.
  • Change in hours since February or June: The introduction of the partial rate for part-time employees is designed to remove some of the perceived inequity that some employees received more income from their employer under JobKeeper than they had previously earned. However, basing the entitlement to the full or partial rate solely on the working hours in February or June 2020 will result in other inequities arising. An employee who was part-time then, but is full-time now, will be entitled only to the partial rate from 28 September, while an employee who was full-time then, but is now part-time, will be entitled to the full rate even though their hours have reduced. While it would increase the complexity of the Rules, should there be an option to use June as an alternative to February, even if the employee was employed as at 1 March 2020? This would better reflect increases or decreases in working hours after 1 March but before 1 July 2020.
  • JobKeeper fortnight 10: The 1 July 2020 employment date is relevant from 3 August, the start of JobKeeper fortnight 10. Accordingly, new entrants to JobKeeper or new employees will need to arrange for nomination notices and the employer will need to meet the wage condition for fortnight 10 by Sunday 16 August most likely before seeing the changes under JobKeeper 1.1.
  • Additional time to meet the wage condition under JobKeeper 2.1: The Government has recognised that employers will need to meet the wage condition under JobKeeper 2.1 before they have determined their actual GST turnover for the preceding quarter. Given this, the Commissioner will have discretion to allow employers more time to meet the wage condition. It is expected that further guidance will be issued by the Commissioner setting out the extended deadlines to meet the wage condition.
  • Guidance needed on payroll cycles: The Tax Institute has suggested to the ATO that additional guidance on the interaction between JobKeeper fortnights and monthly payroll cycles (if not also weekly and fortnightly cycles, although these are more straight-forward) would be useful, particularly as employers transition to reduced JobKeeper rates or may exit JobKeeper altogether after 27 September or 3 January.
  • Reference to ‘self-employed’: The use of the term ‘self-employed’ in the Treasury fact sheets is often interpreted by the profession to mean ‘sole trader’, so this is causing confusion for business owners who qualify as eligible business participants. For clarity, the term ‘self-employed’ in the context of JobKeeper is not confined to sole traders.
  • Exemption from superannuation guarantee: The legislative instrument which exempts JobKeeper payments from ordinary time earnings for superannuation guarantee purposes covers any payments made from 30 March 2020, so it is unnecessary to make any amendments to this instrument to cover any JobKeeper 2.1 payments made in respect of JobKeeper fortnights ending on or before 28 March 2021.

Issues relating to the decline in turnover test

The following key issues have emerged in relation to the decline in turnover test:

  • There are widespread concerns about the basis on which GST turnover is to be calculated under JobKeeper 2.1 due to the following content in the Treasury fact sheet:

Businesses and not-for-profits will generally be able to assess eligibility based on details reported in the Business Activity Statement (BAS).

It is expected that the various options currently available to businesses to determine their GST turnover set out in LCR 2020/1, which include the cash and accruals attribution methods, will continue to be available. Accordingly, it is expected that the reference to the BAS in the Treasury fact sheet should be read as ‘may use the details reported in the BAS’ rather than ‘must use the details reported in the BAS’.

  • The Commissioner will have discretion to set out alternative tests where it is not appropriate to compare actual turnover in the September or December 2020 quarters with actual turnover in the comparable quarter in 2019. This will be set out in future guidance.
  • Alternative arrangements will be put in place for businesses and not-for-profits that are not required to lodge a BAS. This will be set out in future guidance.
  • Sales of capital assets are currently excluded from the meaning of projected GST turnover. Without an amendment to the current meaning of ‘current GST turnover’ for JobKeeper purposes, the change from projected GST turnover to actual GST turnover will result in these sales being included in turnover in the September and December quarters. This may make it harder to qualify, especially if an entity is selling down assets to generate some much-needed cash flow.
  • If the details reported in the BAS are used, there may be difficulties identifying any input taxed supplies which are shown in the same field as taxable supplies on a Simple BAS. Input taxed supplies cannot be taken into account in determining whether an entity has suffered a decline in turnover.
  • The alternative decline in turnover tests will need updating for JobKeeper 2.1, as they reflect the months and quarters applicable under JobKeeper 1.0.
  • Monthly reporting will still be necessary, but it is unclear at this stage whether the requirement to report both current and projected GST turnover will continue or change to something different. This will be clarified once the new rules are available.

What happens next?

While the JobKeeper program was scheduled to end on 27 September 2020, the current Coronavirus Economic Response Package (Payments and Benefits) Act 2020, otherwise known as the JobKeeper Act, which established the legislative framework, contains a buffer that prevents the Government from making JobKeeper payments beyond the prescribed period. This period ends on 31 December 2020. Parliament needs to amend the JobKeeper Act for the Government to continue to make payments until 28 March 2021.

However, the detailed rules are contained in legislative instruments issued by the Treasurer which do not require Parliamentary sittings or approval. Without waiting for Parliament to resume on 24 August 2020, the Treasurer has the power to register a legislative instrument to reflect the changes under JobKeeper 2.1 and can continue to pay JobKeeper until the end of this year. A legislative amendment to the JobKeeper Act is needed only to allow the Government to make payments beyond 31 December 2020.

It is unclear whether the new rules will be released in exposure draft form before they are registered, but it is hoped that the new rules will be available in the next one to two weeks.

Final comment: SG Amnesty

As you are all aware, the Superannuation Guarantee Amnesty of 7 September is fast-approaching. A submission of the Joint Bodies, including The Tax Institute, on 17 June 2020 sought a 6-month extension of the deadline to 7 March 2021. The various challenges arising from COVID-19, including depleted cash flow have left many employers without the capacity and resources to apply for the Amnesty by 7 September 2020.

The Tax Institute is continuing with its efforts to seek an extension to the Amnesty deadline. We invite all members to submit your real-life examples of businesses that have been unable to take advantage of the SG Amnesty, either due to an inability to:

  • Do the necessary work to put forward an application; or
  • Make the outstanding SGC payments.

You can submit your examples here.

We will continue to promote awareness of this issue in the media and advocating on your behalf with the Government.

As always, we welcome your views and thoughts, which you can provide here.

Kind regards,

Robyn Jacobson CTA

[Posted 14.8.20]