JobKeeper and JobSeeker payments will live on beyond September, but payments will be trimmed and fewer people may be eligible.

JobKeeper will also change to a two-tiered system, rather than a flat amount for all recipients, as the federal government looks to claw back from those industries that no longer need as much assistance.

“Treasury’s overall assessment is that an extension to JobKeeper is needed,” the department of Treasury said in its long-awaited review of the wage subsidy system.

Scott Morrison and Josh Frydenberg will announce more on Tuesday. Photo: AAP

Prime Minister Scott Morrison and Treasurer Josh Frydenberg will outline the specific futures of both payments on Tuesday, before the ‘mini-budget’ economic statement on Thursday.

However, The New Daily understands JobKeeper and JobSeeker will both be extended beyond their currently scheduled cut-off dates – albeit at a lower rate.

The actual dollar figures of the payments are expected to be announced on Tuesday, but both payments will remain at their current level until the end of September.

The long-awaited Treasury report into JobKeeper has also been released, revealing 3.5 million people across 920,000 businesses were supported by the wage subsidy between April and May.

Despite the program initially being valued at $130 billion, the government says the final $70 billion price tag is still the biggest one-off measure in Australian history.

And it may get even bigger.

“The case for extending JobKeeper beyond September is strong,” the Treasury report said.

• Related: JobKeeper cuts, eligibility restrictions in mini-budget

The report was finalised on June 29, but has only been shared now, three weeks later.

The report said that as of May 24, payments under JobKeeper represented the equivalent of 7 per cent of Australia’s gross domestic product on a pro-rata basis since March.

“A three-month review of the JobKeeper payment found the scheme met its objectives, preventing widespread business closures and putting a brake on the job losses that commenced in the second half of March,” said Mr Frydenberg on Monday, calling it “an economic lifeline to millions”.

“That lifeline will be extended for those businesses that need it most.”

Finance Minister Mathias Cormann said JobKeeper currently created “adverse incentives”. Photo: AAP

Mr Frydenberg said that one of the “modifications” in the second phase of JobKeeper would address the situation where some workers were paid more on the subsidy than they would normally receive in wages.

The Treasury report said about one-quarter of recipients actually received a pay rise on JobKeeper, attributed to part-time workers – who may only work a few hours per week – getting an effective pay rise under the flat $1500 per fortnight payment.

Finance Minister Mathias Cormann claimed situations like these were “adverse incentives”, which the government says may be keeping businesses from returning to full speed.

The Treasury report said JobKeeper had been “well targeted” and “met [its] objectives” of keeping businesses afloat, saying “there is no evidence of widespread business closures” and that it “put a brake on the rapid employment decline” as the pandemic set in.

• Related: Small business recovery loan scheme unveiled ahead of mini-budget

However, as flagged by Senator Cormann, Treasury also claimed the current form of the program has “adverse incentives” for business, claiming “it dampens incentives to work” and “keeps businesses afloat that would not be viable without ongoing support”.

Treasurer Josh Frydenberg and Prime Minister Scott Morrison will unveil the mini-budget on Thursday. Photo: ABC

JobKeeper will remain in its current form until September 27, with Mr Morrison saying on Monday that businesses would get time to adjust to the new system.

Treasury said there “would be merit in targeting JobKeeper to the most affected sectors”, but due to the difficulty in predicting the economy’s strength in a few months’ time, that the government should “reassess eligibility in October based on actual decline in turnover”.

That means it may be months yet before businesses know their eligibility for JobKeeper’s next phase of support.

“It may also be appropriate at this juncture to consider reducing payments to wean off businesses from ongoing support,” Treasury said of the October deadline.

More will be revealed on Tuesday.