Slimmed Down Version of JobKeeper 2.0 to Continue until March 2021

The Federal Government has today announced that it will extend JobKeeper and JobSeeker until March 2021, though in a scaled back version. This is clearly a recognition from the Federal Government of the need to balance the ongoing impacts of the COVID-19 pandemic on certain sectors with a need to start to wean the economy off the stimulus package.  You can click here to read the official media release from the Prime Minister, Treasurer and Minister for Families and Social Services:  

Key takeaways: 

• The JobKeeper wage subsidy (JobKeeper Payment) will continue until March next year, but payments will fall from $1,500 to $1,200 a fortnight after September.  People working fewer than 20 hours a week will receive $750. 
• The payments will fall again to $1,000 a fortnight, and $650 a fortnight for people working fewer than 20 hours, for the first three months of 2021. 
• Businesses will have to show that they are experiencing distress of at least 30% on pre-pandemic levels to remain eligible for the extended JobKeeper Payment.
• If businesses are no longer eligible for JobKeeper Payments, they need to consider the impact on their cash flow position and other liabilities beyond employee wages. 
• There has been no corresponding extension at this stage to the moratorium on director’s personal liability for insolvent trading or the extended timeframe to comply with statutory demands, both of which are set to expire in late September 2020.  In our view, absent such an extension the reversion to the pre-COVID legal position will place significant pressure on businesses (even those eligible for the extended JobKeeper Payments). 
• Albeit we welcome the certainty that the Federal Government’s announcement in relation to JobKeeper 2.0 provides, given the increased scrutiny on eligibility and reduced payments, businesses should be encouraged to continue to seek advice in relation to their ability to meet accrued and new liabilities beyond September 2020. 

JobKeeper 2.0 – Tiered and new turnover tests 

From 28 September 2020, eligibility for the JobKeeper Payment will be based on actual turnover in the relevant periods, and the payment will be stepped down and paid at two rates.

Business eligibility

• From 28 September 2020, businesses seeking to claim JobKeeper Payments will be required to reassess their eligibility for the JobKeeper extension with reference to their actual turnover in the June and September quarters 2020.  Organisations will need to demonstrate that they have met the relevant continuing decline in turnover test in both of those quarters to be eligible for JobKeeper from 28 September 2020 to 3 January 2021.
• Businesses will need to reassess their eligibility in January 2021 for the period from 4 January to 28 March 2021.  Businesses will need to demonstrate that they have met the relevant continuing decline in turnover test in each of the previous three quarters to remain eligible for the March 2021 quarter.

JobKeeper Payment rates

The JobKeeper Payment rate is to be reduced and paid at two rates:

• From 28 September 2020 to 3 January 2021, the payment rate will be $1,200 per fortnight for all eligible employees who, in the four weeks before 1 March 2020, were working in the business for 20 hours or more a week on average and for business participants who were actively engaged in the business for more than 20 hours per week, and $750 per fortnight for employees who were working in the business for less than 20 hours a week on average and business participants who were actively engaged in the business less than 20 hours per week in the same period.
• From 4 January 2021 to 28 March 2021, the payment rate will be $1,000 per fortnight for all eligible employees who in the four weeks before 1 March 2020, were working for 20 hours or more a week on average and for business participants who were actively engaged in the business for more than 20 hours per week, and $650 per fortnight for employees who were working for less than 20 hours a week on average and business participants who were actively engaged in the business for less than 20 hours per week in the same period.

JobKeeper Payment rates from 28 September 2020 to 28 March 2021:

The Federal Government will be releasing an update on the Economic and Fiscal Outlook on Thursday, 23 July 2020. 

The Hamilton Locke finance, restructuring and insolvency team have a broad range of top-tier experience acting for a variety of stakeholders in distressed scenarios. For more information or advice on insolvency, distressed debt and restructuring generally please contact Nick Edwards, Brit Ibanez and Zina Edwards.