Update: 27 July 2020

The Government has announced it is extending the JobKeeper program until 28 March 2021, at a forecast cost to the budget of $16 billion. The extended program will be targeted towards those employers who continue to be significantly impacted by COVID-19. It is expected that legislative instruments giving effect to these announcements will be gazetted later in the year.

As initially planned, the existing JobKeeper program, will remain in place until 27 September 2020.

From 28 September 2020, the JobKeeper program will have two key differences from the version that it supersedes – a two-tiered payment structure, and a further requirement for the employer to re-assess the decline in turnover test, demonstrating a sustained loss of revenue.

New tiered payment structure

From 28 September, the JobKeeper payments will be staggered according to hours worked in February 2020. The following table summarises the payments under the extended JobKeeper regime:

For eligible employees and business participants   Payment from 28 September to 3 January Payment from 4 January to 28 March 
Who worked an average of 20+ hours per week in February 2020 $1,200 per fortnight $1,000 per fortnight
Other eligible employees and business participants $750 per fortnight $650 per fortnight

Requirement to demonstrate ongoing decline in turnover from 28 September 2020

From this point, businesses who wish to claim a JobKeeper payment will need to meet additional criteria relating to their decline in turnover.

To qualify for the December quarter, the employer must demonstrate that its actual GST turnover in both the June 2020 and September 2020 quarter declined by the required amount compared with the corresponding period in 2019 (subject to the potential application of alternative tests that may apply).

To qualify for the March 2021 quarter, the employer will additionally need to demonstrate that its actual GST turnover for the December 2020 quarter has also declined by the required amount relative to that quarter in 2019.

To recap, the decline in turnover thresholds are:

  • For employers with aggregated turnover exceeding $1 billion: 50%
  • For certain ACNC registered charities: 15%
  • All other employers: 30%

Practical steps

With the introduction of these new measures, employers may need to make changes to their payroll depending on how many hours an employee has worked in the fortnight and whether their pay needs to be adjusted after applying the above criteria.

As employers will need to specify the rate they are claiming for each employee, it will be important between now and October for employers to check the accuracy of their February payroll data. Treasury has indicated that by October the ATO should provide further guidance in terms of how to treat employees who were not employed for the whole of February 2020, or who were on leave for all or part of that month.

As a minimum, employers should:

  • Establish categories which reflect the level of JobKeeper entitlement based on the average hours worked in February 2020; and
  • Reduce minimum payment amounts in the payroll system, to reflect the appropriate minimum level based on the relevant category above.

Employers with large casual employee populations should be conscious that it will take time to correctly assess the hours worked in February 2020. Therefore, that analysis should be undertaken soon.

If employers determine they are no longer eligible for the JobKeeper scheme after 27 September they should ensure the last JobKeeper fortnightly period includes the description JOBKEEPER-FINISH-FN13.

Compliance activity

The changes to the scheme add further complexity when assessing eligibility and determining the correct amount to pay employees. The ATO have already commenced compliance activity around JobKeeper claims, and will continue to review claims to maintain the integrity of the scheme.

Two areas of ATO focus in relation to JobKeeper compliance are:

  • Employers that did not meet the turnover threshold that may have used inappropriate assumptions to assess projected GST turnover, or artificially manipulated income to fall within the criteria; and
  • Significant Global Entities that incorrectly applied the 30% decline in turnover test rather than the 50% test.

Compliance activity has already begun and taxpayers have received review letters to verify their eligibility for the scheme. With compliance activity anticipated to continue well into 2021, it is critical to ensure employers are appropriately documenting their eligibility for the scheme and maintaining records to satisfy the ATO in the event of an audit.


Previous updates

Update: 5 May 2020

On 1 May the Treasurer signed the Legislative Instrument (LI) Coronavirus Economic Response Package (Payments and Benefits) Amendment Rules (No.2) 2020 (Rule Modifications) which introduces some welcome changes to the rules of the JobKeeper program. The previous rules were signed off by the Treasurer on 9 April.

On the same day the Commissioner of Taxation published Practical Compliance Guideline (PCG) 2020/4 on how the Australian Taxation Office (ATO) will administer the integrity provisions in the JobKeeper legislation, which empower the ATO to reduce an employer’s JobKeeper payments where there are contrived circumstances.

Further to the release of the Rule Modifications and PCG 2020/4, on 2 May the ATO also released guidance on the application of the alternative tests that were provided in the Commissioner’s LI Coronavirus Economic Response Package (Payments and Benefits) Alternative Decline in Turnover Test Rules 2020 (Discretions) released on 23 April. View the Alternative Test Guidance.

The one-in, all-in principle was given effect in the Rule Modifications by requiring an employer to notify to all its relevant employees that they are eligible to be nominated for the JobKeeper and that the employer has elected to participate in the scheme.

The Rule Modifications and the Discretions will make the JobKeeper program available to many employers, in particular a sole employing entity within certain corporate groups, which may not have otherwise been eligible under the Rules.

However, there may still be a number of service entities that do not qualify for JobKeeper because their circumstances do not meet the requirements. We will continue to raise these issues with the Government where opportunities arise.

Please read our latest publication on Update on the JobKeeper Program, including an illustration of the modified decline in turnover test on page three.

We have summarised our key observations and practical considerations below.  

Key observations and practical considerations

Rule Modifications

  • One of the key features of the Rule Modifications is that the decline in turnover test is assessed based on the sum of the GST turnovers of the test entities (i.e. the operating entities that receive employee labour services from the service entity) that are members of either an existing GST group, a tax consolidated or a consolidatable group. In practice, given the composition of the GST group can be different to that of a consolidated/consolidatable group, even where the service entity fails the decline in turnover test under the GST group option, it may still qualify for JobKeeper under the consolidated/consolidatable group option (or vice versa).
  • An entity that does not make supplies to entities outside its GST or consolidated/consolidatable group does not qualify as a test entity under the Rule Modifications.
  • The test entities continue to be subject to the Modified GST Turnover rules that exclude input taxed and any other non GST taxable and non GST-free supplies1 from the GST turnover calculations.
  • It is quite common for family and private businesses to have a structure consisting mainly of discretionary trusts. Such structures however may not be eligible to form a tax consolidated group. Therefore, without meeting the basic test or any of the alternative tests and in the absence of a GST group, entities with such a group structure may not qualify for the JobKeeper.

Key criteria for the Service Entity Test

Many corporate groups are structured with just one service entity employing all of the employees who work in the other operating entities of the group. A service entity can now qualify for JobKeeper even if its own projected GST turnover does not decline by the required percentage, provided that:

  • The service entity is a member of a tax consolidated or consolidatable group, or a GST group
  • The service entity’s principal activity is to provide labour services to one or more test entities in the group (and its supplies of labour services outside that group are no more than incidental)
  • Each test entity’s principal activity is making supplies to entities outside the group; and
  • The sum of the GST turnovers of the test entities satisfy the necessary decline in turnover.

A principal activity would generally be more significant than any other single activity that the entity carried on, but would not necessarily be the dominant activity. However situations where the service entity carried out a variety of activities could be at greater risk of the Commissioner using his power to disallow access to this additional test.

Importantly in this respect PCG 2020/4 also indicates that the ATO generally regards as low risk a situation where a service entity satisfies the decline in turnover test itself, by reducing its service fees in response to the decline in turnover of the group members who use its labour services. This is regardless of whether the service fee reduction is a consequence of a reduction in employee working hours or not.

Many service entities could be expected to qualify for JobKeeper as a result of the Rule Modifications and the PCG.

ATO PCG 2020/4 on contrived schemes relating to JobKeeper

The PCG discusses the scenarios which are at high risk of being treated as contrived schemes in the ATO’s view.

For example, the PCG regards the deferral or bring-forward of invoicing, with no dominant commercial purpose, as a high-risk scheme. Similarly, it would treat the transfer of a business to a related party as high-risk.

The ATO would also be likely to apply compliance resources where a service entity reduces its charges to other group members, without those group members having shown a decline in turnover that would justify this.

On the other hand, that the ATO indicates that it generally regards as low risk a situation where a service entity satisfies the decline in turnover test itself, by reducing its service fees in response to the decline in turnover of the group members who use its labour services.

The discretions

The ATO issued guidance on the application of the alternative tests and provide illustrations of each of the alternative tests.

These alternatives are to address the situations where, as a result of an event or circumstance that is outside the usual business setting, it is not appropriate or possible to use the prior year’s basic comparison period.

One of the tests which needed further guidance was the substantial increase in turnover test. The ATO’s guidelines state that if an entity’s increase in current GST turnover meets the 12.5 percent, 25 percent or 50 percent increase thresholds, it is necessary to compare the entity’s current turnover for the month immediately before the applicable turnover test period with its current GST turnover for the month immediately before the start of the 12, or 6, or 3 months.

Cashflow matters

Importantly, the deadline for payment of the first two JobKeeper fortnights was extended to 8 May, however it is important to note that the payment for the third JobKeeper fortnight ends on 10 May, so the third payment is also effectively due on 8 May.

In addition, the claim process for JobKeeper opened on 4 May, so employers are now able to identify and maintain their eligible employees, and make the first monthly declaration in order to receive the payment from the ATO. The process is also open for eligible business participants, and further to the Legislative Instrument on 1 May, religious practitioners who are not employees.

1. Exceptions apply to gifts and grants from government in certain circumstances


Update: 9 April 2020

Yesterday, 8 April, the Australian Parliament passed the legislation to enable JobKeeper payments to begin to flow to employers from the start of May, and the Treasurer has announced rules governing eligibility for the payments which, as of last night, remain in draft form.

This is a bold plan which is expected to cost $130 billion over the 6-month period to September 2020. It will see an estimated 6.5 million workers receive a minimum payment of $1,500 per fortnight to assist them in bridging the financial challenges caused by coronavirus (COVID-19).  

The federal government’s announcement of the scheme on 30 March left many questions open for employers. In particular, how would they satisfy the test of having at least a 30 percent or 50 percent reduction in turnover, if the comparison to the equivalent month, or tax period, a year ago was not a true reflection of the impact coronavirus (COVID-19) has caused. It has now been made clear that the decline in turnover can be measured on a monthly or quarterly basis, and the entity is not bound by their activity statement cycle, but must be compared against the same period in 2019.

Other important points to note that may be relevant to you include:

  • For businesses which operate through partnerships and trusts but do not take a wage themselves, the rules include a provision for one person who is actively engaged in the business to benefit from the JobKeeper payments. A similar rule allows a single company director or shareholder to be nominated to benefit. 
  • Not-for-profits that are registered with the Australian Charities and Not-for-profits Commission, other than schools and private education providers, only need to meet a turnover reduction of 15 percent. Other not-for-profits must meet the 30 or 50 percent reduction, depending on their turnover.
  • Where an employer is endorsed as a deductible gift recipient, gifts will be counted towards the GST turnover to assess the turnover reduction.

Other critical issues have been left to the discretion of the Commissioner of Taxation. Businesses who consider that the comparison to a month or tax period a year ago is not a true measure of the turnover reduction caused by COVID-19 would need to rely on this discretion in order for their JobKeeper application to be accepted. This may apply to businesses that were growing organically or via acquisitions relative to the corresponding period in the prior year, but have since suffered the prescribed reduction in business caused by COVID-19.

A pre-requisite for businesses to receive the subsidy (in arrears) will be that there is a system in place in April to ensure that the employees covered by its JobKeeper application receive (in April) at least the necessary $1,500 per fortnight (or equivalent for a monthly pay cycle), backdated to 30 March.

Changes to the Fair Work Act, that form part of this legislative package, will enable employers to manage their workforce more flexibly over the next six months, so that employees may stay on the books and qualify for JobKeeper, rather than being made redundant. Reaching an agreement on these temporary measures is a credit to all stakeholders.

The JobKeeper scheme is progressive in that it benefits the low-paid or stood-down worker relatively more and is aligned with the notion that members of the community need to support each other along the path to physical and economic recovery. It has a hefty price tag, but the potential to go down in history as value for money.

Read the KPMG analysis of this legislative announcement as well as our initial summary below.



Update: 30 March 2020

This $130 billion stimulus package will help Australian businesses keep in contact with their employees throughout the coronavirus challenges. 

On Monday 30 March, the Australian Federal Government announced a $130 billion JobKeeper payment subsidy scheme in an effort to keep millions of Australians in the workforce. 

The JobKeeper Payment is aimed at providing financial support to eligible businesses so employers and employees can continue to stay connected while some businesses have to move into hibernation during the coronavirus crisis. This subsidy is welcome news – particularly for heavily impacted industry sectors such as aviation, tourism, retail and hospitality. It is expected that the wage subsidy will keep six million Australians employed.

A fortnightly flat payment of $1,500 will be made to employers for each employee, regardless of how much employees have been previously paid for a maximum of 6 months. The payment will provide the equivalent of approximately 70 percent of the national median wage for most industries, and up to 100 percent in some of the hardest hit industries like tourism and hospitality.

The payment will be delivered via existing systems within the Australian Taxation Office (ATO). Employers are required to register their interest with the ATO from 30 March 2020.

Key points for businesses

Eligibility for employers

  • This assistance will go to companies, including not-for-profits, which experience, or will experience, either:
    • more than 30 percent reduction in their turnover compared to the same period last year – if turnover is less than $1 billion; or
    • more than 50 percent reduction in their turnover compared to the same period last year if turnover exceeds $1 billion. 
  • Businesses subject to the Major Bank Levy will be ineligible for the payment.
  • Not-for-profits and self-employed individuals not employing any staff will still be eligible provided they meet the turnover tests as outlined above.
  • The employer must have employed eligible employees by the 1 March 2020 and confirm that each eligible employee is still employed.
  • Employees who were stood down or made redundant will need to be reinstated by their employers to qualify for the payment. 
  • The assistance will be paid via the current ATO system in the first week of May 2020 with the payment backdated to 30 March 2020.

Eligibility for employees

  • Eligible individuals will be full-time, part-time, sole-traders and casual employees who have been with their employers for longer than 12 months and are at least 16 years of age.
  • New Zealand employees on the 444 visa will be eligible. 
  • Temporary visa holders will be ineligible.
  • Employees that have applied for JobSeeker payment will need to notify their employers as an employee will only benefit from either, but not both, of the wage subsidy schemes.

Immediate actions suggested to take:

  • Provide information to the ATO on eligible employees.
  • Continue to provide information to the ATO on monthly basis including the number of employees employed by the business.
  • Ensure that each eligible employee will receive at least $1,500 per fortnight (before tax).
  • Consider whether superannuation will be paid on the JobKeeper payment.

A similar wage subsidy is being offered by the governments in other countries, such as the UK and US. The JobKeeper Payment subsidy scheme has been announced to protect the Australian economy from the risk of collapsing and will give a further much needed boost to the country’s gross domestic product.

The government is actively considering further measures to offer support on an ongoing basis. We hope that the combination of the stimulus announced so far and the JobKeeper wage subsidy will enable businesses to weather these challenges and be ready for recovery.

Information accurate at the date and time published.

Key contacts


If you have any questions regarding the content of this article and would like speak to someone from our team please contact us.

Further reading