Slashing the JobSeeker coronavirus supplement will force thousands of Tasmanians into poverty, the state's peak social services body says.
Prime Minister Scott Morrison announced on Tuesday both the JobSeeker and JobKeeper payment schemes would be extended past September but from October businesses would have to prove a reduced turnover each quarter to remain eligible for JobKeeper.
Workers on JobKeeper will have their fortnightly payment reduced from $1500 to $1200 and those on JobSeeker will see their COVID supplement of $550 a fortnight reduced to $250.
Those on JobSeeker will be able to earn up to $300 without this affecting their payments but mutual obligation requirements will return from August and assets tests will be brought in at the end of September.
TasCOSS chief executive Adrienne Picone said reducing the JobSeeker COVID supplement would force 35,000 Tasmanian who were out of work through no fault of their own into poverty.
"This is equivalent to the entire population of the Kingborough municipality - or one-and-a-half times the population of Devonport - being deliberately consigned to poverty by our Prime Minister," Ms Picone said.
"Maintaining the rate of JobSeeker at the current level is key to supporting our population to seek out employment and training opportunities when and where they arise in the post-COVID-19 economy.
"When for every job available in Tasmania today there are 21 job seekers, now is not the time to be cutting back levels of income support.
Unions Tasmania secretary Jessica Munday welcomed the extension of the payments but questioned the rationale behind cutting the rates.
"If an employer has to demonstrate a continued drop in revenue in order to qualify [for JobKeeper], why cut the rate if they are still in that situation?" Ms Munday said.
"For those workers, their living expenses haven't gone down and they are expected to survive on significantly less than the minimum wage. It's not a livable rate."
Tasmanian Small Business Council chief executive Robert Mallett said he was pleasantly surprised the payments had only been initially reduced by $300 a fortnight.
"That's not an awful lot of money to take off when there are many businesses now that are reaching their potential," Mr Mallett said.
But Mr Mallett said businesses would need continued support going into next winter.
"Winter is tough usually. It is not the halcyon days of summer and autumn when people are out and spending money," he said.
Tasmanian Chamber of Commerce and Industry chief executive Michael Bailey said with it being clear the economic impacts of COVID would be felt for years to come, extending and targeting JobKeeper and JobSeeker was a great outcome.
"It will help businesses plan for the future and boost confidence," Mr Bailey said.
"It will be the business community that drives any economic recovery, so it's important that the state and federal government's do everything they can to support businesses and their employees."
Premier Peter Gutwein said the decision to extend both payments beyond September would allow for continued support to be provided to Tasmanian households and businesses.
"This support complements the Tasmanian government's significant support and stimulus measures to assist community and business through these unprecedented times," Mr Gutwein said.