Government extends JobKeeper scheme

The support package was released in March to assist businesses with keeping the lights on and retaining staff as they bore the brunt of the economic impacts of the coronavirus pandemic and the social distancing measures that were implemented to curb the spread.

The government has now announced that the JobKeeper payment will remain available for eligible employers until 28 March 2021, but the payments will be tapered in the December and March quarters to encourage businesses to adjust to the new environment.

According to the government, this approach would support a gradual transition to economic recovery, while ensuring that those businesses who most need support continue to receive it.

The new JobKeeper payment arrangements are expected to cost an additional $16.6 billion.

Further, a two-tiered payment will also be introduced from 28 September, aimed at better aligning the payment with the incomes of employees before the onset of the COVID-19 pandemic.

From 28 September 2020 to 3 January 2021, employees will receive $1,200 in JobKeeper payments per fortnight, down from the previous rate of $1,500. This will be revised down again for the March quarter, with recipients receiving $1,000 per fortnight from 4 January to 28 March 2021.

Those who work less than 20 hours a week will receive $750 per fortnight, which will be revised down to $650 from 4 January to 28 March 2021.

From 28 September 2020, businesses and not-for-profits will need to reassess their eligibility based on their actual June and September quarter turnovers to demonstrate that they have suffered an ongoing significant decline in turnover.

Organisations will need to demonstrate a significant decline in turnover in both these quarters to be eligible for the JobKeeper payment in the December quarter.

Employers will need to again reassess their eligibility for the JobKeeper payment for the March quarter by demonstrating that they have met the relevant decline in actual turnover in each of the previous three quarters ending on 31 December 2020 to remain eligible for the payment in the March 2021 quarter.

“If they do not meet the turnover test in the extension period, this does not affect their eligibility prior to 28 September 2020,” Treasurer Josh Frydenberg said.

“The continuation of JobKeeper for these businesses will help support the economic recovery and provide them with sufficient time to adjust.”

Treasury review of JobKeeper

The announcement by the government came as Treasury released a review into the effectiveness of the $70 billion JobKeeper payment scheme in cushioning the blow of the economic impacts of COVID-19 on SMEs in Australia.

According to Treasury, there is no evidence of widespread business closures, which are currently well below average. The review attributed this to JobKeeper and other fiscal support, bank forbearance and temporary law changes.

“JobKeeper has kept jobs in place, especially among those in ongoing full-time and part-time roles. It achieved this by providing employers a subsidy to keep on employees and reduce business costs,” the review summary stated.

However, Treasury stated in the review that while JobKeeper was designed to prioritise macroeconomic support, and speed and ease of implementation, it has a number of features that create “adverse incentives”, which may become more distinct as the economy recovers.

“It distorts wage relativities between lower and higher-paid jobs, it dampens incentives to work, it hampers labour mobility and the reallocation of workers to more productive roles, and it keeps businesses afloat that would not be viable without ongoing support,” the review stated.

The review recommended that while it would be prudent to continue the JobKeeper payments, the government should consider what form it should take. Rather than targeting sectors affected by the economic shutdowns, the review recommended that the government should reassess eligibility in October based on actual decline in turnover.

“This would target the most affected businesses and would reduce the proportion of the economy at risk of the adverse incentives of JobKeeper,” Treasury said.

“This would give those businesses most affected by ongoing health restrictions and the downturn some additional breathing space to recover. It may also be appropriate at this juncture to consider reducing payments to wean off businesses from ongoing support.”

ATO figures have revealed that the JobKeeper program has had a large take-up of over 920,000 organisations and around 3.5 million individuals over the April-May period.

As at 23 June, payments have totalled $20.3 billion over the four payment fortnights to 24 May, equivalent to 7 per cent of pro-rata March quarter gross national income.

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