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What the JobKeeper changes mean for small businesses

Mark Chapman
·Director Of Tax Communications, H&R Block
·5-min read
What the JobKeeper changes mean for small business. Source: Getty
What the JobKeeper changes mean for small business. Source: Getty

On 21 July 2020, the Prime Minister and Treasurer announced major changes and extensions to the key government COID-19 supports – JobKeeper and JobSeeker.

Here’s what the changes, particularly those relating to JobKeeper, could mean for you and your small business.

JobKeeper

The JobKeeper payment, which was originally due to run until 27 September 2020, will now continue to be available until 28 March 2021.

This is good news for Australian small businesses.

Many were dreading the “cliff” looming in September so knowing that support is potentially available until next year will provide a comfort to some.

However, as we’ll see, the way JobKeeper 2.0 has been designed, the emphasis is on reducing the reliance of businesses and their employees on government support – and that could lead to a rocky ride later in the year for some.

The headline change is that the payment rate will be reduced and a lower payment rate will be introduced for those who work fewer hours. Other eligibility rules for employees remain unchanged but employing businesses will have to deal with complex new tests in order to stay on JobKeeper.

What will recipients get?

From 28 September 2020 to 3 January 2021, the JobKeeper payment rates will be:

  • $1,200 per fortnight for all eligible employees who, in the four weeks of pay periods before 1 March 2020, were working in the business for 20 hours or more a week on average, and for eligible business participants (such as sole traders) who were actively engaged in the business for 20 hours or more per week on average in the month of February 2020; and

  • $750 per fortnight for other eligible employees and business participants, such as part-time workers who worked in the business for less than 20 hours a week.

From 4 January 2021 to 28 March 2021, the JobKeeper payment rates will be:

  • $1,000 per fortnight for all eligible employees who, in the four weeks of pay periods before 1 March 2020, were working in the business for 20 hours or more a week on average and for business participants who were actively engaged in the business for 20 hours or more per week on average in the month of February 2020; and

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

Which businesses are eligible?

In order to be eligible for the JobKeeper payment after 27 September 2020, businesses and not-for-profits will have to meet a further decline in turnover test for each of the two periods of extension, as well as meeting the other existing eligibility requirements for the JobKeeper Payment.

In order to be eligible for the first JobKeeper payment extension period of 28 September 2020 to 3 January 2021, businesses and not-for-profits will need to demonstrate that their actual GST turnover has significantly fallen in the both the June quarter 2020 (April, May and June) and the September quarter 2020 (July, August, September) relative to comparable periods (generally the corresponding quarters in 2019).

In order to be eligible for the second JobKeeper payment extension period of 4 January 2021 to 28 March 2021, businesses and not-for-profits will again need to demonstrate that their actual GST turnover has significantly fallen in each of the June, September and December 2020 quarters relative to comparable periods (generally the corresponding quarters in 2019).

A significant fall in turnover is as quantified as follows:

  • 50 per cent for businesses with an aggregated turnover of more than $1 billion;

  • 30 per cent for businesses with an aggregated turnover of $1 billion or less; or

  • 15 per cent for Australian Charities and Not for profits Commission-registered charities (excluding schools and universities).

The Commissioner of Taxation will have discretion to set out alternative tests that establish eligibility in specific circumstances where it is not appropriate to compare actual turnover in a quarter in 2020 with actual turnover in a quarter in 2019, for instance where turnover in the relevant 2019 quarter was depressed due to the impact of a natural disaster or where the business made a significant acquisition or disposal rendering the 2019 comparison meaningless.

There is no detail yet as to what this discretion will look like but meeting these new tests will be a potential compliance minefield for small businesses; good news for accountants who will need to interpret the rules on behalf of clients, but bad news for small businesses that may not have the resources to get professional help.

The impact of these new turnover rules could negatively impact some businesses and effectively force them off JobKeeper.

Because businesses are required to retest turnover for the June and September quarters in order to qualify from September, it appears that if the turnover of a business recovers in - for instance - the June quarter (so that they are no longer 30% lower than the same period last year), they will be kicked off JobKeeper for good.

If turnover falls again in the September quarter, they will have no way back on to the JobKeeper program.

With localised lockdowns and ‘second waves’ very much a thing, this could have a big impact on businesses that take a further battering later in the year, even if they have briefly returned to some form of normal trading now.

Which employees are eligible?

The eligibility rules for employees are unchanged. If you are eligible for JobKeeper now, you will remain eligible during the extension period, provided you remain employed by your employer.

What about the self-employed?

Thousands of small Australian businesses that don’t employ staff have benefited from JobKeeper over the past few months because business owners, such as sole traders, have also been able to claim.

The self‐employed will continue to be eligible to receive the JobKeeper payment where they meet the relevant turnover tests set out above, and are not a permanent employee of another employer.

Read next: $100k cash boost for small businesses

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