Payroll – JobKeeper: The latest of many changes

The stream of JobKeeper changes continues – are you up to date with these?  

Over the last few newsletters, we have featured articles regarding the JobKeeper Payment (‘JKP’) scheme.

Although we had hoped that we would be able to give our readers a break this month, there have been more changes and amendments announced and implemented since our last newsletter. We discuss some of these below

Loss of JKP for child care service providers

On 8 June 2020, the Minister for Education announced that the temporary Early Childhood Education and Care Relief Package (i.e. the COVID-19 free child care package) would be ‘turned off’ on 12 July 2020, with the Child Care Subsidy (CCS) being re-introduced as of 13 July 2020. The announcement included certain transition measures.

As part of this announcement, the Minister also announced that JKPs would cease from 20 July 2020 in relation to employees of a CCS approved service as well as for sole traders and other eligible business participants of entities operating a child care service. However, this is subject to amendments being made to the JKP Rules.

On 6 July 2020, the Treasurer registered a legislative instrument amending the JKP Rules to effect these announcements. Under these amendments, from the JKP fortnight beginning 20 July 2020 an individual is excluded from being an ‘eligible employee’ for JKP purposes where:

‘for an entity that is an approved provider of one or more approved child care services – at any time in the fortnight, the ordinary duties of the individual’s employment relate principally to the operation of one or more of those services’.

The explanatory statement to the legislative instrument has clarified that ‘duties’ in this case is not restricted to the direct provision of child care services, but also includes duties that support the provision of such services, such as:

  • any administrative support or payroll staff mainly involved in the child care aspects of an entity’s business; and
  • ancillary support, such as cleaners or gardeners who work only in relation to the child care service, even though they have no direct role in providing services to children.

In addition, an entity cannot claim JKP for an otherwise eligible business participant if the entity is an approved provider of an approved child care service.

Accordingly, the fortnight of 6-19 July is the last fortnight employees of a CCS approved service and business participants operating a child care service are eligible for JKP.

The ATO changes its position regarding ETPs and the wage condition

One of the key conditions for an employer to be eligible for JKPs in relation to an employee is that the employer must have met the wage condition (i.e. paid the employee at least $1,500 before tax) for the relevant fortnight in relation to that employee.

The JKP Rules prescribe what can be counted towards the $1,500. However, to make things easier for employers, in mid-May the ATO released guidance on what could and could not be counted. In relation to employment termination payments (ETPs), the ATO had previously stated that the taxable component of an ETP was included in the $1,500.

However, the ATO has now ‘clarified’ this position, with effect from the fortnight commencing 8 June 2020. ETPs (whether the taxable or tax-free component) cannot be included as part of the $1,500.

As this represents a change in position, the ATO has stated in its clarification that if an employer claimed JKPs that included an ETP paid to a termination employee for any of the JKP fortnights prior to 8 June 2020 (i.e. between 30 March 2020 and 7 June 2020), the ATO will not recover any overpayments of JKP that occurred as a result of these payments (i.e. the ETPs).

As part of this clarification, the ATO also reminded employers that once their employee is terminated, the employee is no longer eligible for JKPs and their eligibility status will need to be changed in the employer’s business monthly declaration.

It is worth noting that the ATO has also changed its position in relation to lump sum payments. All of these, (e.g. for unused leave paid on termination etc.) can no longer count towards the $1,500. Previously, the ATO had stated that lump sums ‘A’ (i.e. any lump sum payments for unused annual leave or unused long service leave), ‘B’ (i.e. the tax-free components of a genuine redundancy payment or an early retirement scheme payment) and ‘E’ (i.e. ‘payments relating to an earlier income year or years and are normally shown at ‘E’ on the ‘PAYG payment summary – individual non-business’) could be included. There has not been any commentary from the ATO about how it will treat employers that had previously relied on its guidance and included these amounts towards the $1,500.

JKPs and superannuation guarantee payments

As mentioned above, a key requirement of the JKP scheme is that employers must pay their eligible employees at least $1,500 (before tax) per fortnight.

This requirement raised a query over whether employers would be required to make superannuation guarantee contributions in relation to any amounts paid in excess of the employee’s normal ordinary times earnings (i.e. in cases where the employee did not earn $1,500 in the fortnight and received a ‘top-up’).

From the commencement of the scheme, both Treasury and the ATO have stated that superannuation guarantee contributions would not be required to be paid in relation to the excess (although there was nothing prohibiting an employer from doing so), subject to legislation or legislative instruments to effect the change to the law being passed/registered.

On 28 May 2020, a legislative instrument confirming these changes was registered, with the position in line with what had been previously announced.

Keeping JKP fair

The ATO has been vocal on its focus in relation to maintaining the integrity of the JKP scheme and to the resources it is allocating to ensuring employers are not undertaking actions to fraudulently access the JKP scheme. To this end, the ATO has released a general list of behaviour that is attracting their attention in relation to all businesses and employers as part of its JKP guidance. The list includes:

  • payments to people who do not meet the eligibility requirements or are not employees;
  • falsifying records or revising activity statements to meet the fall in turnover test;
  • applying for JobKeeper where there is no evidence of carrying on a business or there is no assessable income from carrying on a business;
  • employers failing to pass on the full $1,500 JobKeeper payment to eligible employees;
  • multiple eligible business participant claims; and
  • employees being incorrectly excluded under the ‘one-in-all-in’ rule.

The ATO has also stated that it will be focusing their attention on the application of the decline in turnover test, particularly where an entity’s actual and projected turnover have significantly diverged.

The ATO has also released in its not-for-profits newsroom more targeted commentary on what behaviours will be attracting their attention in relation to not-for-profit entities claiming JKPs:

  • payments to employers who do not meet the eligibility requirements or do not have eligible employees;
  • falsifying records or revising activity statements to meet the fall in turnover test;
  • applying for JobKeeper where there is no evidence of being an eligible not-for-profit organisation or and ACNC-registered charity.

This more targeted list excludes issues from the broader list that have no relevance for not-for-profits, such as the need to carry on a business or to only claim for one eligible business participant. However, it is not immediately clear why the ATO has chosen to exclude references to need to satisfy the ‘one-in all-in’ rule or pass through the entire $1,500 JKP to eligible employees, as not-for-profits are still subject to these requirements.

Given the ATO’s focus on this area and the resources it is applying to confirm eligibility, all entities that have applied should ensure that they have sufficient documentation to support the validity of their claims. Where errors are discovered, entities should consider the merits of proactively engaging with the ATO prior to the claims being reviewed.


This article provides a general summary of the subject covered and cannot be relied upon in relation to any specific instance. It is not intended to be, nor should it be relied upon as, a substitute for professional advice. TaxEd Pty Ltd and any person connected with its production disclaim any liability in connection with any use.