Image source: H&R Block
When the extent of the potential economic damage from coronavirus lockdown and social distancing measures became apparent, the Australian government was quick to act.
To help households impacted by the sharp rise in unemployment and underemployment, the government lifted the JobSeeker benefits to $550 per fortnight for those who were considered full time workers before losing their jobs.
And to minimise the number of people losing their jobs, and help businesses retain valuable staff through the pandemic slowdown, the government introduced the JobKeeper program. This gave qualified people $1,500 per fortnight.
But earlier this week, on Tuesday 28 September, both those relief packages were reduced. The next round of reductions is scheduled for 4 January before being terminated entirely on 28 March 2021.
With so much at stake for households and businesses, and a lot of uncertainty about the nature of the changes that have just passed, the Motley Fool reached out to Mark Chapman, H&R Block Inc (NYSE: HRB) Australia's Director of Tax Communications for his advice.
Read on for the full interview with Mark below…
Can you highlight the changes that have been made in the 2 programs?
The big change is that businesses themselves need to effectively retest themselves as to whether they're eligible for JobKeeper. So they've got to redo that 30% declining turnover test, based on their figures for July, August and September.
This could mean that some businesses which have experienced a bit of pickup over the course of the past few months could find themselves off JobKeeper. A significant amount of businesses are likely to no longer be eligible.
If a business is still eligible, if it meets that 30% decline in turnover, the employees of those firms will get reduced rates. It's now gone down to $1,200 per fortnight where previously it was $1,500. And that's for people who worked 80 hours or more over a 28-day period, so it's aimed basically at full time people. And then you've got the lower rate of $750 per fortnight for people who worked less than 80 hours over a 28-day period.
In terms of JobSeeker, that $550 per fortnight that people were getting earlier on in the year dropped down to $250 per fortnight. So a significant hit to your income. Particularly for people who are just becoming unemployed who might now be trying to get onto JobSeeker.
Is it possible to access both assistance packages?
Yes, because of the drop in the rate, it is possible for some people to claim JobKeeper as well as JobSeeker. That could make up some of the shortfall from those declining rates. The reduced rates of JobKeeper now fall within the thresholds of what you're allowed to earn and still collect JobSeeker, so you could have situations where people can claim both.
How do you recommend households prepare for the recent and upcoming changes?
It's going to be a difficult experience, because initially people who are on JobKeeper will not know whether or not they are still eligible going forward. Not until their employer actually does that test. It could take a few weeks into October before they get to doing the books. October will be a difficult month for many people, tight budgets and tight cashflow for a lot of households. It's worthwhile looking at whether or not they might be eligible for JobSeeker as well. That could potentially tide them over and could continue even if they do get JobKeeper.
What steps should businesses that believe they're still eligible for the program be taking now?
First, they need to measure their turnover, get their books for the July, August and September months up to date as quickly as possible. And then measure their turnover for those 3 months with that same period last year. And if they hit that 30% threshold, they can stay within the JobKeeper program.
What they then need to do, quite quickly, is tell the ATO what level of payment their employees are entitled to. Whether they're entitled to the high end $1,200 payment or the lower $750 payment. And they also need to tell their employees whether they're still receiving JobKeeper and at what rates.
What recommendations do you have for businesses that are no longer eligible for JobKeeper?
There'll likely be geographical differences there. In Victoria, most businesses will likely find it quite easy to still qualify for JobKeeper because of the stage-4 restrictions. But in the other states without the same level of restrictions, you'll probably find more businesses which will no longer qualify with the 30% reduced turnover test. But they may still be experiencing difficulties. If your business has lost 20% of your business, you won't qualify anymore, but that's still a big hit. And those businesses are going to have to work out how they make ends meet going forward based on that level of loss of business. I suspect some businesses will be looking at their staffing, and not be able to afford [to keep] all of their staff on their full salary.
That could mean we see a bit of a spike in the jobless rate.
With these changes in mind, what's the worst mistake a business could make?
I think the worst mistake a business could make is to not do anything. If your business was on JobKeeper up until the 28th of September and you choose not to do anything about it, then you're going to have issues. The old JobKeeper did end and you cannot continue unless you actually retest your turnover as I talked about.
There is complexity around all of this. There are some situations where that simple turnover test we discussed may not be appropriate. Talk to your accountant. Find out what these changes mean to your specific business and your employees.
With so much uncertainty around this virus, do you think the government may backflip on its next planned reductions in these programs, currently scheduled for 4 January?
I have heard some suggestions that the government may look at those January cuts again. I don't think they'll increase the programs. But I think they might look again at cutting the rates from the 4th of January next year, when JobKeeper falls to $1,000 per fortnight for fulltime people and $600 for part-time people. And businesses will again need to retest their turnover. So you're likely to find more businesses falling out in that first quarter of next year.
But certainly, if the economy is still doing it tough in January, I think it would be a sore development if the government did not pull those further cuts.
