The Latest JobKeeper 2.0 Changes - Is your Business Still Eligible?

With JobKeeper 1.0 now officially over (September 27), the first extension period to January 3, 2021 has officially began. 

When has JobKeeper been extended to?

There are two separate extension periods:

• The first extension period begins from September 28, 2020 to January 3, 2021.

• The second extension period begins from January 4, 2021 to March 28, 2021.

Is my business still eligible for payments?

Actual Decline Turnover Test

For both extension periods, businesses already receiving JobKeeper payments but want to continue receiving payments beyond September 28, 2020 must satisfy the actual decline in turnover test.

For businesses applying for JobKeeper for the first time from September 28, 2020, they, too, must satisfy the actual decline in turnover test.

This turnover test declares that your business must show a 30% decline year on year. Click here for more information on the original decline test and actual decline turnover test.

How does a business fulfil the actual decline in turnover test?

There are two options here – a basic turnover test or the alternative test.

Most businesses will likely use the basic test, which is based on GST turnover. The alternative test should only apply to businesses where the normal comparison period is not appropriate. Read on for more information on alternative tests.

In applying the actual decline in turnover test, businesses should note that:

• It must be done for specific quarters only e.g. for the first extension period this will be measured against the September 2020 Quarter relative to the September 2019 Quarter (July, August, September).

• Businesses must use actual sales made in the relevant quarter, not projected sales, when working out their GST turnover.

• You must allocate sales to the relevant quarter in the same way you would report those sales in your business activity statement (if registered for GST).

Now that you know your business is eligible, what should you be paying your employees?

What JobKeeper Payment Rate Applies?

Ensuring you know the new JobKeeper payment tiers will ensure you are not out of pocket and overpaying!

From 28 September 2020, the JobKeeper payment rate will reduce and split into a higher and lower rate based on the number of hours the employee worked in a specific 28-day period prior to 1 March 2020 or 1 July 2020. Below is a table to summarise:

Eligible employees that have been employed on a full time basis since 1 March 2020 or 1 July 2020 will generally receive the higher JobKeeper rate (as full time employees work more than 80 hours in 28 days).

Businesses however will need to determine the rate applicable to eligible part-time and casual employees.

The reference period is the 28 days ending at the end of the most recent pay cycle for the employee ending before:

• 1 March 2020; or 

• 1 July 2020.

For eligible employees who have been employed since 1 March 2020, employers need to choose the reference period that provides the best outcome for the employees. For many employers, this will be the pre-COVID-19, 1 March 2020 reference date.

For eligible employees employed since July, use the pay periods prior to 1 July 2020.

If the pay cycle is longer than 28 days, a pro-rata calculation needs to be done to determine the average hours worked and on paid leave across an equivalent 28 day period. For example, if the relevant monthly pay cycle has 31 days, you take the total hours for the month and multiply this by 28/31.

In order for an employer to receive JobKeeper payments from 28 September 2020 onwards they must notify the ATO of the payment rates for all eligible employees. The employer must then notify its employees within 7 days of advising the ATO of the payment rate.

Can I still choose how to best show how COVID-19 has hit my business?

Business owners have previously been able to choose whether to register eligibility under an “accrual basis” or “cash basis”.

Accrual basis measures a business’s performance and position by recognising economic events, expenses and revenue regardless of whether the payment is actually received or paid. On the other hand, the cash basis only records transactions when payment occurs.

The flexibility of choosing which method best reflects a business’s COVID-19 losses has been removed. The reporting method – either accrual or cash – will now need to match the business’s registration preference for BAS reporting.

Am I still eligible for the Alternative Tests? 

While stricter eligibility tests are in place, alternative tests are still in place to help equitably assess COVID-19 impacts. These alternative tests are set to remain largely the same as the first version with the exception of a quarterly test period and a disclosure requirement.

Some of the businesses impacted by alternative criteria include:

• Businesses affected by the fires, flood, drought or other natural disasters;

• Businesses who launched after the comparison period;

• Businesses who have irregular turnover;

• Sole Traders impacted by illness, injury or leave.

For businesses that fall into the above categories, the ATO will need to be notified of what alternative test is being used.

Have any assets been sold during COVID-19? 

If you sold key assets during COVID-19 to boost your cashflow e.g. vehicles, machinery, this one-off income will now be included in a business’s turnover which may push your business over the JobKeeper threshold despite not being a true representation your business’s financial situation.

To discuss any of the above, please reach out to your client director to chat through your options or call us on 1300 932 584 if you are not an existing Kelly+Partners client.