JobKeeper 2.0: The devil is in the detail for businesses with casual employees

JobKeeper 2.0 starts this week but the devil is in the detail for employers of casual staff when it comes to defining a ‘typical’ 28-day cycle for those seeking to access the higher tier payment. 

Insolvency protections have been extended until the end of the year and a revised JobKeeper scheme will be in place until March 2021.  

But it’s more complex than that. Companies currently on JobKeeper are not going to simply roll over onto JobKeeper 2.0.  

Changing rules

Now it will be harder for businesses to show they are eligible for support — for the first extension of  JobKeeper, they will need to demonstrate that their actual GST turnover has fallen in the September quarter 2020 (July, August, September) relative to a comparable period (generally the corresponding quarter in  2019). 

Ahead of the second JobKeeper extension, from January 4, 2021, to March 28, 2021, businesses will need to again show a decline relative to 2019. 

For the purposes of JobKeeper 2.0, businesses no longer have a choice of testing a month or a quarter, and will need to test the turnover against either the September 2020 or December 2020 quarters, regardless of their usual BAS reporting cycle. 

It’s an important change from the tax office’s perspective because GST turnover is easier to audit and ensure compliance. 

The rate of JobKeeper payment is changing as well.

For employees who worked more than 20 hours a week in the benchmark period, the rate falls form $1500 a fortnight to $1200. It will drop again to $1000 a fortnight from January 4, presuming the business remains eligible.  

For workers on fewer than 20 hours the fall is more significant. They will receive $750 per fortnight, down from $1500, and $650 per fortnight from January 4. 

To claim the higher rate of $1200 for the seven fortnights of the first JobKeeper extension, they must have worked 80 hours or more in the 28-day period ending at the last pay cycle prior to March 1 or July 1.

Working fewer than 80 hours means the employee will revert to the lower payment of $750. 

What about casual workers?

An employer must inform the tax commissioner and the employee about which JobKeeper 2.0 rate is applicable and this is where the waters can muddy.  

If the total hours in the period were not representative of a typical 28-day period for that employee, then an alternative period can be used: the most recent pay cycle representative of a typical 28-day period. 

But for casual employees, there may be no such thing as a typical 28-day period and that leaves employers at risk of claiming the incorrect amount. 

If an employee appeals against being paid the lower amount and wins, the employer will have to pay them the higher amount and may not be reimbursed.  

If the higher amount is paid and the tax office determines that it should have been lower, there are severe penalties if an entity is found to have made false or misleading statements. 

The complexities of the revised scheme are now becoming apparent as the fine print is released. 

Business owners who only heard the ‘JobKeeper extended until March’ part of the government’s message and are banking on the payment continuing may be in for a shock when it dawns that they no longer qualify.

And pity the poor accountant who must break the news.  

But that was the point of JobKeeper.  

It allowed business owners a moment to breathe during the COVID-19 pandemic’s early days. By taking away insolvent trading and putting in JobKeeper, the government’s message to business was: ‘they can’t wind you up for now, we’ll give you time to make an honest assessment’.  

Crunch time

The next few months will be critical for business survival.  

Some businesses will have an additional opportunity to regroup but the countdown to the end of insolvency moratorium is very real. 

The other side of the insolvency moratorium challenge is that you can’t issue statutory demands without a six-month wait, so companies who are trying to recover debts also can’t act decisively.

Insolvencies are inevitable. Even with protection measures in place, business still became insolvent and Victoria was the hardest hit state in the nation.  

Despite the moratorium, some 384 Victorian businesses entered voluntary administration in the June quarter, while another 133 fell in July, according to the Australian Securities and Investments Commission. 

The expectation is that as early as the end of September, closures will be many times these numbers. And there could be a domino effect as each business collapse tears down another. 

Under the current Victorian roadmap for returning to normal, many businesses will be effectively trading as normal for just three weeks prior to what would normally be peak trading during the Christmas break. That could see a second wave of insolvencies during January. 

The countdown to the end of the insolvency moratorium is ticking ominously, and businesses have 14 weeks to get their house in order.

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