With the news that JobKeeper will be extended for another six months until March 2021, many business owners and employees are relieved. However, with the latest tweaks to the wage subsidy, not everyone will benefit. So, who will win and who will lose out?
The winners
To be eligible for JobKeeper, a business must be experiencing a significant hit to revenue. So, as I acknowledged back when the scheme was first introduced earlier in the year, there are no real winners in the current environment.
However, many businesses have been able to stay afloat and continue to employ staff thanks to the JobKeeper scheme. Its extension will enable this to continue for many businesses, though the subsidy amount will be reduced.
While the eligibility criteria will be tightened, the businesses that rely on JobKeeper the most will continue to benefit from the scheme. Employees in those businesses will continue to receive the subsidy, even if they have been stood down.
With many businesses in Victoria now being forced to close once again, thanks to the current lockdown rules, JobKeeper will be a lifeline.
The losers
While the scheme will now continue beyond September, the amount will be reduced. At the end of September the subsidy will be cut to $1,200 a fortnight for full-time workers and to $750 for part-time workers (those working 20 hours or less a week), down from the current flat rate of $1,500. At the end of December this will fall again to $1,000 for full-time workers and $650 for part-time workers.
The new two-tiered framework closes a loophole that allowed many part-time workers to earn more on the scheme due to the current $1,500 flat rate. That amount will now be halved to $750.
There will be tighter eligibility requirements, which will make many businesses currently accessing the scheme ineligible to receive it beyond September. Previously recipients only needed to have experienced a fall in revenue at the outset of the scheme. Now, to be eligible to continue to receive JobKeeper until January 2021, in October 2020 businesses will need to prove a drop in quarterly revenue in the June and September 2020 quarters compared to last year. Businesses under $1bn in revenue will need to prove a drop of 30% in revenue, businesses over $1bn will need to prove a drop of 50% in revenue and charities will need to prove a drop of 15% in revenue. Businesses will be tested again in January 2021 on their results for the June, September and December 2020 quarters to be eligible for the payments until March 2021.
Casual workers employed for under 12 months, as of March 2020, still aren’t eligible for the scheme. For some industries such as the arts, where short-term contracts are the norm, many will continue to miss out. Migrants workers, excluding New Zealanders, are also not eligible. This has proven to have serious consequences to date, with the Australia Institute suggesting over 700,000 casual workers lost their job this year as they weren’t eligible for JobKeeper, creating a disincentive for employers to keep them on.
Related: Employees must legally return from JobKeeper
Businesses set up as partnerships or trusts will also continue to lose out. Only one working director, partner, beneficiary or shareholder (known as an eligible business participant) can receive JobKeeper payments. For small family businesses where the business is structured as a partnership between a husband and wife for example, that means only one will be eligible, despite both working in the business.
Whether or not the scheme will be extended again beyond March remains to be seen. It will be contingent on how the economy performs into 2021. With the latest economic forecasts looking fairly average and Victoria still in lockdown, we can expect government support to continue in some form until there are signs of recovery. Our ability to successfully control the virus will go a long way to determining how quickly our state and federal economies bounce back.
N.B: At the time of writing, this advice was current. This may change as government advice changes.
David Hancock is a director and Senior Financial Planner at Montara Wealth.
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