Over the last few weeks, the Federal Government has announced that they will be extending the JobKeeper payment scheme beyond the September finish date for eligible businesses.
Initially, the announcement outlined that businesses would need to meet a 30% decline in GST turnover in both the June and September 2020 quarters as compared to the June and September 2019 quarters to be eligible for JobKeeper extension payments for the December 2020 quarter.
Further, to be eligible for JobKeeper payments for the March 2021 quarter, businesses would need to show an actual decline in GST turnover for all of the June, September and December 2020 quarters compared to the same 9-month period in 2019. This decline test is very different to the decline in turnover test for JobKeeper from April 2020. The current JobKeeper decline in turnover test only requires the business to expect to suffer a decline in turnover of at least 30% in one of the months of March through to September 2020 as compared to the same month in 2019 or alternatively an expectation of a decline in turnover for either the June or September 2020 quarters compared to the same quarter in 2019.
For most law firms that were eligible for the current JobKeeper scheme, they satisfied their 30% decline in projected GST turnover for either April, May or June 2020 or for the June 2020 quarter as compared to their GST turnover in the previous year for that period. Once you met the test, you were in the scheme to 27 September 2020 and you did not have to retest.
The decline in revenue test was then subsequently amended on Friday 7 August 2020 so to be eligible for the December 2020 quarter, the business only needs to satisfy an actual decline in GST turnover for the September 2020 quarter compared to the September 2019 quarter. For the March 2021 quarter, a 30% reduction in GST turnover for the December 2020 quarter as compared to the December 2019 quarter.
This change may now increase the likelihood of eligibility for JobKeeper extension payments beyond September for law firms, who, because of the additional lock down restrictions, continue to suffer decline in earnings and are stretched financially.
The government also extended the eligibility date from 1 March 2020 to 1 July 2020 for eligible employees. The eligibility rules remain the same in terms of casual employment. This reference date also applies to the current JobKeeper scheme, so any new employees between 1 March and 30 June 2020 may now be eligible as well as casual employees who were employed for more than 8 months but less than 12 months at 1 March 2020.
The announcements also outlined a reduction in the amount of the JobKeeper fortnightly payment from $1,500 as follows:
From 28 September 2020 to 3 January 2021, the JobKeeper payment rates will be:
- $1,200 per fortnight for eligible employees working an average of 20 hours or more in the four weeks of pay periods before either 1 March 2020 or 1 July 2020 and for business participants actively engaged in the business for more than 20 hours per week on average; and
- $750 per fortnight for other eligible employees and business participants
From 4 January 2021 to 28 March 2021 the JobKeeper payment rates will be:
- $1,000 per fortnight for eligible employees working an average 20 hours or more in the four weeks of pay periods before either 1 March 2020 for 1 July 2020 and for business participants actively engaged in the business for more than 20 hours per week on average; and
- $650 per fortnight for other eligible employees and business participants
To be eligible for these extended JobKeeper payments, the actual decline in turnover tests must be met for each extension period as well as all other eligibility requirements currently in place. You need to retest for December 2020 quarter and March 2021 quarter to be eligible.
As was the case with the first round of JobKeeper eligibility for businesses that did not meet the basic decline in turnover test by comparing projected revenue to the previous year comparable period, the Commissioner of Taxation was granted discretion to apply alternative tests. These tests included tests where businesses had grown GST turnover significantly before COVID-19, but after the comparable period in 2019. This may have been from organic growth, acquisitions or mergers or the business may not have been in existence in that comparable 2019 period.
The government has outlined that the Commissioner of Taxation will again be given discretion to set out alternative tests where it is not appropriate to compare actual turnover in the relevant 2020 quarter with actual turnover in comparable 2019 quarter. These alternative tests have not as yet been released by the Commissioner of Taxation, however, I would expect that the basis of the alternative tests for the JobKeeper extension payments will be similar to the existing alternative tests, but will be based on actual quarterly GST turnover compared to the more relevant comparable quarter.
So, depending on where your law firm stands in terms of its recovery and its billing since March 2020, you may still be eligible for the JobKeeper extension under the alternative tests.
Over the next two months, we will be keeping you abreast of announcements and developments in relation to the JobKeeper extension. We will also be running webinars each fortnight on JobKeeper eligibility and financial management and strategy prior to and post the end of September when JobKeeper will finish for some firms.
FWO Chartered Accountants has had significant experience over the last four months working closely with all of our law firm clients throughout Australia in guiding them through this difficult time by being uniquely positioned as specialist accountants for law firms. If you would like to discuss your JobKeeper and financial strategy through this continuing COVID-19 time, please use the form below to reach out.