JobKeeper 2.0 – Determining Tier 1 or 2
JobKeeper 2.0 will see the introduction of two tiers of payment in both extension 1 & 2. The higher of the two payments, tier 1, will be for employees who worked 80 hours or more in the 4 weeks of pay periods before 1 March 2020 or 1 July 2020. Employees working less than 80 hours in the above periods, will receive the lower payment i.e. tier 2.
What is included in tier 1 payments?
Tier 1 fortnightly payments of $1,200 (extension 1) and $1,000 (extension 2) include the following aspects:
- For employees who performed 80 hours or more of work in the above periods (one or the other).
- Calculating the hours can include actual hours worked, hours for paid leave (annual, long service, sick, carers and other paid leave) and hours paid for public holidays.
- The calculation of hours relates to the end of the last pay cycle in the period, not the pay date. For example if the pay cycle ends on 28th June 2020 but payment was not processed until 7th July 2020, then you would include the pay cycle to 28th June and look backwards for 28 days.
What is included in tier 2 payments?
Tier 2 fortnightly payments of $750 (extension 1) and $650 (extension 2) include the following aspects:
- The same reference periods as for tier 1 but less than 80 hours worked per employee.
- The same calculation of hours as for tier 1.
What about eligible business participants (EBPs)?
- The reference period for EBPs will be all of February 2020 i.e. the entire 29 days (being a leap year).
- The two-payment tiers apply.
- Eligibility will be based on an assessment of hours spent actively engaged in the business during Feb 2020. A declaration will need to be submitted but is not yet available at the date of this blog – it may end up being a written and signed statement. Records that may substantiate the hours worked by the EBP can include: diaries, appointment books, log books, hours billed or invoiced, invoices issued, time sheets and/or records prepared for other business or statutory purposes.
What else do we need to know?
- Employers will need to nominate which tier their employees are on in order to qualify for payments. This will be done via STP in the accounting software during a payrun, prior to the start of JobKeeper 2.0 i.e. 28 September 2020. Eligible business participants can notify their tier choice via the business portal or ask their tax professional to do this for them.
- Employers will need to advise their employees which tier they qualify for within 7 days of the STP submission.
- There are alternative tests available regarding the reference period as above to help employers work out which tier applies to their staff. Alternative tests are also be available for EBPs.
- The ATO has extended the wage condition date for October to October 31 2020. This means that employers will have until 31 October to ensure they have paid their staff correctly depending on which payment tier applies.