JobKeeper Extension Rules

The new JobKeeper Rules came into effect from 28 September 2020 and continues as JobKeeper extension 1 which runs from 28 September 2020 until 3 January 2021 and JobKeeper extension 2 which runs from 4 January 2021 until 28 March 2021. Under JobKeeper 2.1 there are two payment tiers as well as a new decline in turnover test, including updated alternative turnover tests which may apply in some circumstances.

Actual Decline in Turnover Test

In order to qualify for each of the two JobKeeper extension periods an entity will need to satisfy a new actual decline in turnover test.

The testing period under the actual decline in turnover test is:

  • for extension period 1 the quarter ending 30 September 2020, and
  • for extension period 2 the quarter ending 31 December 2020.

In each case to remain eligible the actual GST turnover must have declined by the required percentage relative to the same quarter in 2019. The test for each extension period must be satisfied independently in order to be eligible for both extension periods. An entity which does not satisfy the actual decline in turnover test for extension period 1 may still become eligible to receive JobKeeper payments in extension period 2 by satisfying the actual decline in turnover test for the December 2020 quarter.

The required percentages remain the same as under the original JobKeeper 1.0 test being 50% for entities with an “aggregated turnover” over $1 billion, 30% for entities with an aggregated turnover of up to $1 billion and 15% for ACNC registered charities.

It is important to note that regardless of whether an entity reports for GST on a monthly, quarterly or annual basis, the test period for each extension period is the relevant quarter.

Unlike under the JobKeeper 1.0 original decline in turnover test, most businesses are no longer able to choose between reporting on a cash or on an accruals basis. The rules specify the method to be used in a variety of circumstances in order to ensure that businesses use the same accounting method to calculate their actual turnover for each test period. The specific rules include:

  • if a business is not registered for GST it may choose between the cash and accruals basis and must apply the same basis to the test period and the comparison period
  • if a business has been registered for GST before the comparison period, and has reported its GST under the same basis through to the end of the test period, then the test method will be that reporting method

There are also specific rules which apply where the GST registration commenced after the start of the comparison period or where GST registration was cancelled before the end of the test period, as well as where the GST registration basis was changed between cash and accruals during the period from the start of the comparison period to the end of the test period.

In order to claim JobKeeper 2.1 an entity must confirm that the actual decline in turnover test has been satisfied. Where the entity is registered for GST the information is prefilled from the Business Activity Statements lodged with the ATO. It is therefore essential that activity statements for the September 2020 quarter are lodged in a timely manner.

Alternative Turnover Tests

Alternative Decline in Turnover Test rules have been registered to update the alternative tests that were able to be applied under JobKeeper 1.0. The rules set out seven classes of entities that are eligible to apply an alternative test relevant to their circumstances. Those classes of entities are:

  • new businesses
  • businesses which experienced a substantial increase in turnover prior to 1 March 2020
  • business with irregular turnover
  • businesses affected by drought or natural disaster
  • businesses where an acquisition or disposal substantially changed the turnover
  • businesses which have undergone a restructure which changed the turnover
  • sole traders or small partnerships with sickness, injury or leave

The alternative test provided for each class of entity allows that entity to compare its current GST turnover with an appropriate turnover test period which is not the corresponding period in the 2019 year. The appropriate turnover test period for use by each class of eligible entity is specified in the rules.

Where an entity applies an alternative test in order to satisfy the actual decline in turnover test the ATO must be notified that an alternative test has been used.

Eligible Employees and Eligible Business Participants

There have been no changes to the eligibility criteria for business participants. An eligible business participant of a partnership, trust or company is an individual who is “actively engaged” in the operation of the business and is not an employee of the business. There can only be one eligible business participant for each entity. An eligible business participant must be one of the following:

  • an individual partner in the partnership
  • an adult beneficiary of the trust
  • a shareholder or a director of the company

There were changes to the rules for eligible employees which came into effect on 3 August 2020 and they continue to apply. Under these revised rules, an employee may be eligible if they were employed by the business on 1 July 2020 and, in the case of casuals, satisfied the requirement of having been employed by the business for a period of at least 12 months as at 1 July 2020.

Both eligible employees and eligible business participants must be:

  • at least 18 years old. An individual who is 16 or 17 can qualify if they’re independent and not studying full time
  • an Australian resident or the holder of a Subclass 444 visa
  • not receiving government parental leave or Dad and Partner Pay
  • not receiving payments under workers compensation law in respect of total incapacity to work
  • not a nominated employee of another business

The requirement to complete either an employee nomination notice or business participant nomination notice also continue. There is no need for new nominations to be completed for eligible employees or eligible business participants that qualified under JobKeeper 1.0.

Two Payment Tiers

A two-tiered system now applies with the rate of JobKeeper being based on the average number of hours an eligible employee worked, or an eligible business participant was “actively engaged” in the business, during a four week reference period.  The reference period is the four weeks ending at the conclusion of the most recent pay cycle that ended on or before 1 March 2020 or 1 July 2020. The tier 1 rate will apply to eligible employees who worked for 80 hours or more during either reference period and employers must choose the most beneficial reference period for each employee.

Eligible business participants have a single reference period which is the month of February 2020. In order to be eligible for the tier 1 rate, eligible business participants must have been actively engaged in the business for more than 80 hours during February and must provide a declaration to that effect.

The payment rates which apply are as follows:

JobKeeper Extension
Period 1
JobKeeper Extension
Period 2
Tier 1$1,200 per fortnight$1,000 per fortnight
Tier 2$750 per fortnight$650 per fortnight

Where it is not possible to determine the hours worked in the reference period, the ATO has determined that the higher rate will apply in the following circumstances:

  • Where the employee or business participant was paid at least $1,500 during the reference period;
  • Where an eligible employee was required under an industrial award, enterprise agreement, individual contract or similar instrument, to work 80 hours or more during the reference period, or
  • It can be determined based on reasonable assumptions that an eligible employees hours were 80 hours or more during the reference period.

It is also possible for an alternative reference period to apply where:

  • The reference period is not representative of the hours in a typical 28 day period
  • An employee was not employed or a business participant was not in business during part of the reference period
  • An employee was employed before 1 March or 1 July but the first pay cycle ended after 1 March or 1 July
  • The business changed hands during the reference period, or
  • An entity conducted business in a declared drought zone or declared natural disaster zone during February 2020

Employers will need to determine whether the tier 1 or tier 2 rate applies to each eligible employee and notify both the ATO and the employees which payment rate applies. Employers will need to ensure that the each eligible employee continues to be paid, at a minimum, the applicable JobKeeper amount for the nominated payment tier. For the two JobKeeper payment periods that end during October 2020, this requirement will be met provided the minimum amounts have been paid to employees by 31 October 2020.

The notification to the ATO can be done through the Single Touch Payroll system where enabled by the software supplier. Alternatively, the ATO will be providing employers who are already registered for JobKeeper with a list of nominated employees and the employer will need to nominate the relevant tier for each employee.

The notification of the applicable tier is only made once and will apply for both JobKeeper extension periods provided the business remains eligible. Failure to notify the ATO of the applicable rate will result in the entity being ineligible for payments until valid notification is made.

Contact us for help

We are working closely with our clients on the application of the extension to the JobKeeper scheme. If you have any questions please contact your usual UHY Haines Norton partner or manager.