Is JobKeeper ruling an Australian Taxation Office power trip?

ATO commissioner Chris Jordan appears before a Senate inquiry in Canberra. Picture: AAP

Sections of the Australian Taxation Office are using the fact that they are above the law to embarrass federal Treasurer Josh Frydenberg.

A taxpayer has had his JobKeeper application rejected on the basis that his April turnover was not down 30 per cent. They ignored the fact that the taxpayer’s turnover was down 47 per cent in March. Under the law, eligible taxpayers can claim JobKeeper if their turnover is down more than 30 per cent in either March or April.

The ATO can obviously question whether the taxpayer’s March turnover was in fact down 47 per cent but, according to the ATO documentation, that did not take place in this case. The taxpayer’s March turnover claim was simply rejected out of hand.

And it was not a clerical error because the ATO documents name the tax auditor who had actual contact with the taxpayer on the matter.

However I can’t emphasise too strongly that fortunately this is not symptomatic of a widespread ATO white-anting of JobKeeper. The ATO’s overall performance making the complex JobKeeper scheme work has been first class.

But it has happened at least once and the convoluted ATO response to my questions would indicate this may be more serious and that a number of ATO tax auditors appear to still enjoy being above the law and like to exercise their power.

In this case the taxpayer had previous disputes with the ATO and I suspect that the ATO officials were either taking out revenge or showing the taxpayer who is boss. The ATO denies this but adds “if an example of this comes or is brought to our attention, it would be treated as a matter of the utmost seriousness”.

One of Australia’s most reputable tax lawyers, Mark Leibler, in 2018 revealed the extraordinary powers of the Australian Taxation Office: “It would come as a surprise to most taxpayers, and perhaps some tax practitioners, that the commissioner has almost unlimited power to assess any person to any amount at any time.

“The commissioner can raise an assessment on almost any basis he pleases, and then require the taxpayer to prove before the Administrative Appeals Tribunal or the Federal Court what their liability should have been.”

If we are going to have a genuine recovery we need the parliament of Australia to amend the tax act to bring the ATO within the law and provide an appeal process that works.

The JobKeeper ruling was brought to the attention of the tax and revenue committee of the House of Representatives (chaired by federal member for Mackellar, Jason Falinski) by Self Employed Australia’s Ken Phillips. Falinski and his committee need to bring ATO Commissioner Chris Jordan before the committee to find out why this ruling was made.

I tried but failed. I put the following questions to the ATO:

1. Does the ATO believe that the “Frydenberg declaration” accurately describes the government legislation? (The Treasurer made it clear that both April and March turnovers and other triggers made eligible enterprises entitled to JobKeeper).

2. How many other tax auditors have ignored the government law as set out in the “Frydenberg declaration” on JobKeeper?

3. Will any such tax rulings be reversed –including the one in question---and what should taxpayers who receive such a false ruling do?

4. Is the ATO using deliberately false JobKeeper rulings as a way of putting pressure on taxpayers who have disputes in other areas.

This is how the ATO replied: “The below response can be attributed to an “Second Commissioner Jeremy Hirschhorn” as required.

* The ATO advises that there are various requirements that JobKeeper applicants must meet for them to be eligible for JobKeeper.

* One of those requirements is the decline in turnover test. This test is based on a reasonable self-assessment for a period which an eligible entity can choose.

* Our public advice on how we will administer JobKeeper is contained in ATO Law Companion Ruling 2020/1, and ATO officers are required to follow that advice.

* The ATO cannot comment on the tax affairs of any individual or entity due to our obligations of confidentiality under the law.

* Any decisions made by the ATO which relate to failing the decline in turnover test, for which an applicant does not agree with, can be objected to as per our usual processes.

* Applicants are entitled to request to be provided with detailed reasons for decisions and an opportunity to seek review and discuss.

* The ATO will review and consider the decisions of all matters brought to our attention.

* The ATO will not deliberately make false JobKeeper rulings for any purpose, and will not use JobKeeper to put pressure on taxpayers in other disputes. If an example of this comes or is brought to our attention, it would be treated as a matter of the utmost seriousness.

* Where a taxpayer disagrees with our JobKeeper assessment, including if the position is inconsistent with our guidance in ATO Law Companion Ruling 2020/1, they should not hesitate to contact the ATO, and an independent officer from an independent division of the ATO will reconsider their matter.

* If the disagreement continues, then taxpayers have normal recourse to the Inspector General of Taxation / Taxation Ombudsman, the Tribunal system (including possibly the cost free Small Business Tax Tribunal) and the ultimately the Courts.

Jason Falinski, it’s over to you.