Businesses told to prepare for ATO’s JobKeeper review PLUS some more JobKeeper clarity with FAQs answered.
The ATO has been flooded with complaints linked to the abuse of the JobKeeper program, with employers found guilty of deliberately rorting the system, facing penalties of up to $126,000 or up to 10 years in prison.
According to the ATO, the number of complaints received by its hotline numbered 3,338 as of 31 May 2020. “We are committed to tackling illegal activity and behaviour of concern to protect honest businesses and the community,” a spokesperson for the ATO said.
Law firm Cooper Grace Ward has cautioned businesses, noting that it is crucial for them to keep evidence of their eligibility for the JobKeeper scheme now, ensuring they are ready for any review activity.
In a blog posted on the firm’s website, tax lawyer Caitlin McKenna has explained that businesses manipulating their turnover to meet the decline in turnover test, by deferring issuing invoices or processing customer orders, will be required to repay the JobKeeper payments, together with interest and penalties. “While there will be cases in these examples that clearly fall within the anti-avoidance provisions in the JobKeeper legislation, other businesses may be caught in the audit activity despite making genuine commercial decisions,” Ms McKenna said.
She explained that it is critical for businesses to keep detailed, contemporaneous evidence of the basis on which they have calculated their decline in turnover for the relevant period, and the commercial purpose for any decisions that may have led to the business qualifying for the scheme.
Ms McKenna noted that relevant evidence will depend on the business’s circumstances, but may include:
- correspondence with customers relating to their ability to pay on normal terms
- details of any relevant government restrictions at the specific time
- records showing a decline in customer orders or enquiries
- documents showing changes in the business’ supply chain or other external factors that have required the business to defer or bring forward the making of supplies
- financial analysis of the commercial benefits of adapting the business’s practices to address changes in the market of other external circumstances (for example, offering discounts, extended payment terms or other concessions to customers)
- directions to or correspondence with employees explaining the reasons why a business has changed its ordinary practices or has made a particular decision
“The ATO has sophisticated data-matching processes and receives tip-offs from anyone concerned that a business is incorrectly claiming JobKeeper payments. Businesses should ensure that they assess their risk and keep sufficient evidence now,” Ms McKenna concluded.
When speaking with our clients at Highview Accounting & Financial, it seems that there’s still a lot of confusion in regard to eligibility. We are here to help you with this, and urge you to contact your Highview Accountant if you’ve got any concerns or queries, or if your circumstances have changed since applying.
To help clarify any ambiguity, Ms Jenkins from My Business online, alongside the Australian Small Business and Family Enterprise Ombudsman (ASBFEO), Kate Carnell, and Reckon CEO Sam Allert, recently hosted a podcast and talked about all things JobKeeper — from the eligibility criteria right through to processing payments in payroll software.
Here’s a summary of the most frequently asked questions – and answers!
Q: If a casual employee was on 31 March employed for 11 months and 2 weeks, are they eligible for JobKeeper, or will they be eligible for later fortnights?
A: To be an eligible employee, the employee must meet certain criteria, including the 1 March 2020 test.
In the situation for casual employees, they are required to be a long-term casual employee on 1 March 2020. A long-term casual employee is one that is employed on a regular and systematic basis for at least 12 months.
The employee would not be eligible in this case because at 1 March 2020 they were not a long-term casual employee.
The full list of requirements for an eligible employee is outlined on the ATO website: https://www.ato.gov.au/General/JobKeeper-Payment/Employers/Your-eligible-employees/.
Q: What is the monthly process to claim JobKeeper from the ATO and our monthly cross-check obligations?
A: If you’ve enrolled for the JobKeeper payment and identified your eligible employees, you need to make a business monthly declaration to the ATO. You will be able to do this from the first to the 14th day of each month, to receive reimbursements for the payments you have made to your employees in the previous month.
As part of this declaration, you need to:
- Ensure you’ve paid your eligible employees at least $1,500 (before tax) in each JobKeeper fortnight you’re claiming for.
- Reconfirm your eligible employees and your contact and financial details.
- Provide information on your current and projected GST turnover; this isn’t a retest of your eligibility — it will indicate to the ATO how your business is progressing.
If your eligible employees change or leave your employment, you need to notify the ATO through this monthly declaration so they can adjust your JobKeeper payments.
To lodge your business monthly declaration:
- Log in to the business portal using myGovID or to ATO Online services through myGov if you’re a sole trader.
- Complete this step each month you want to claim payments until the end of the program.
You can also complete this step through your registered tax or BAS agent.
Q: What is the definition of ‘significantly’? If the business turnover has dropped for other reasons than the coronavirus, is it still eligible?
A: The JobKeeper payment scheme is a temporary subsidy for businesses significantly affected by the coronavirus (COVID-19).
Employers will be eligible if they meet all the eligibility requirements outlined on the ATO website. See: https://www.ato.gov.au/general/jobkeeper-payment/employers/eligible-employers/.
There is no requirement that the drop in turnover be related to COVID-19 or the subsequent effect on the economy. The requirement is that turnover has fallen by the required percentage and you satisfy the other eligibility criteria in order to receive JobKeeper payments.
The commissioner has also published the Practical Compliance Guide 2020/4 which provides at paragraph 6… for this Guideline to apply to your circumstances you do not need to show that COVID-19 was the factor beyond the control of the entity (and its related parties) that affected the entity’s external operating environment.
However, it must be made clear that where arrangements are created for the sole purpose of obtaining access to JobKeeper payments or increasing the amount of JobKeeper payment, the ATO may investigate these applications. Guidance and examples are provided at paragraph 13 of the PCG 2020/4.
Q: Will there be an audit further down the track, and who will be ultimately held responsible for any clawbacks of the JobKeeper payments?
A: The ATO’s current focus is to ensure COVID-19 stimulus payments are distributed to those in need.
They want eligible entities to be paid quickly while ensuring there is integrity in the system.
The ATO knows that the overwhelming majority of employers are honest. Under a self-assessment process, the information provided by employers to the ATO is initially accepted as being true and correct, but they do cross reference with other information sources.
Where necessary or appropriate, the ATO will examine some payments to ensure the payments are correct.
If a payment is made and the ATO later determines that the employer was not entitled to that payment (or was entitled to a lesser amount), the employer will be contacted to confirm if the payment was correct.
The ATO has also issued Practical Compliance Guideline 2020/4 which provides guidance on how the ATO will apply compliance resources to schemes to obtain access to the coronavirus economic response payment (the JobKeeper payment) or an increased amount of a JobKeeper payment.
The commissioner will be able to recover any overpayments and will have the power to impose significant penalties and interest. See paragraph 10 of the guidelines.
Q: Is the ATO going to put in place a process to allow the amendment of JobKeeper applications and monthly declarations?
A: If you need to make an amendment to your JobKeeper enrolment or your business monthly declaration forms already lodged, you will need to call the ATO on 13 28 66.
Q: I’m a sole trader, haven’t lodged tax before 12 March 2020, not registered for GST but have lodged quarterly IAS for my PAYG ITI. Am I eligible for JobKeeper?
A: Assuming that the entity and the eligible business participant met all other JobKeeper eligibility requirements, apart from the requirement to provide notice of assessable income or taxable supplies by 12 March 2020, the sole trader should consider applying for commissioner’s discretion.
If commissioner’s discretion is granted, they will be eligible for JobKeeper.
Commissioner’s discretion is expected to be exercised (subject to the circumstances of each case) where:
- The entity has not lodged by 12 March 2020 because either a pre-existing lodgement deferral was in place, for example, a tax agent lodgment deferral.
- The entity is a new business that is not required to be registered for GST but made supplies in the relevant period.
Further information on the circumstances in which the commissioner will exercise his discretion is available in PS LA 2020/1 – Commissioner’s discretion to allow further time.
You cannot enrol to receive a JobKeeper payment until you are notified that the commissioner has granted the further time requested.
Q: If you are not eligible now but become eligible after the cut-off date, then is it advisable to register now in anticipation?
A: The JobKeeper payment scheme runs for the fortnights from 30 March until 27 September 2020. You can enrol any time within this period to claim JobKeeper. You must ensure you and your employees meet the eligibility requirements before you enrol.
To claim the JobKeeper payment for a fortnight, you must enrol before the end of that JobKeeper fortnight. For the initial JobKeeper fortnights, the commissioner extended the time to enrol until 31 May 2020.
If you enrolled by 31 May, you will still be able to claim for the fortnights ending in April and May, provided you meet all the eligibility requirements for each of those fortnights. This includes having paid your employees by the appropriate date for each fortnight.
If you do not satisfy the turnover test for the current month or quarter, you can still assess your eligibility at a later date. To qualify later, the turnover month can be May, June, July, August or September 2020, provided the fortnight you are qualifying for has ended that month or an earlier month. If the turnover for a quarter is being used, it can be the quarter:
- from 1 April 2020 to 30 June 2020
- from 1 July 2020 to 30 September 2020, but only if first seeking to qualify for fortnights ending in July 2020 or later
Once you satisfy the decline in turnover test, you do not need to retest again.