JobKeeper 2.0: Wage subsidies reduced but extended until March 2021

The JobKeeper wage subsidy program has been extended until March 2021, albeit at lower rates and with additional eligibility testing for small businesses and sole traders.

The Morrison government unveiled long awaited changes to key COVID-19 stimulus measures on Tuesday, addressing fears of a September financial cliff by extending income support, while moving to better target payments to businesses and sole traders still struggling with the pandemic.

The decisions have been made following a Treasury review, a government curated summary of which was circulated on Tuesday morning. Here are the broad strokes:

• A second phase of the JobKeeper program will run to March 28, 2021;
• Two tiers of JobKeeper will be introduced, based on hours employees worked in February;
• The higher tier pays $1,200 a fortnight until January 3, 2021, after which it will reduce to $1,000 a fortnight;
• The lower tier pays $750 a fortnight until January 3, 2021, after which it will reduce to $650 a fortnight; and
• JobKeeper eligibility will be re-tested in October and early January 2021, based on turnover decline.

Morrison said the Treasury review found the JobKeeper program has been effective in saving businesses from collapse and workers from unemployment.

“We don’t set and forget when it comes to these arrangements, we continue to look at them and we continue to calibrate them to ensure they are being effective,” Morrison said.

“The report recommends that we should continue JobKeeper and we shall, but it needs to be done in a way that is responsive to the circumstances,” Morrison said.

Tiered approach: JobKeeper splits in two

There will now be two tiers of JobKeeper payments, delineated by how many hours eligible staff worked before the COVID-19 pandemic in February.

Eligible staff that worked 20 hours or more each week in February will be eligible for the higher tier, while those that worked less than this threshold are eligible for the lower tier of payments.

The higher tier will pay $1,200 a fortnight until January 3, 2021. It will then reduce to $1,000 a fortnight until the program ends on March 28, 2021.

The lower tier will pay $750 a fortnight until January 3, 2021. It will then reduce to $650 a fortnight until the program ends on March 28, 2021.

The minimum wage condition will still apply, meaning businesses still won’t be allowed to pay staff a lower hourly rate than they were previously entitled to.

In practice, this means employers will be required to pay a higher proportion of their wage bills under JobKeeper 2.0.

Revised eligibility tests

It was initially expected the government would move to limit additional income support by only providing it to sectors still subject to trading restrictions like hospitality and tourism. However, Treasury concluded this would be impractical, instead recommending government re-test business eligibility at the end of September and again in early January.

These tests will run along the same turnover criteria, but will require businesses to demonstrate an actual decline in revenue against a comparable period rather than forecasts.

Employers will be required to demonstrate their turnover declined at least 30% for both the June and September quarters to be eligible for JobKeeper payments covering the December quarter.

Additionally, employers will need to demonstrate they also meet the turnover decline across the December quarter to remain eligible for JobKeeper payments through to March 28, 2021.

How many businesses will access JobKeeper 2.0?

About 960,000 businesses are currently enrolled in the JobKeeper program, covering about 3.5 million workers. This number is expected to decrease substantially once new eligibility tests are applied.

Treasury predicts 1.4 million people will be eligible for the payments in the December quarter and 1 million for the March quarter.

About 175,000 workers are expected to be on the $750 payment over the December quarter, reducing to 125,000 on the $650 payment from January 3 to March 28, 2021.

Treasurer Josh Frydenberg said the scheme will now cost an estimated $86 billion, instead of the $70 billion previously earmarked.

More to come …

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