Sceptical ATO has an eye on ‘miraculous’ JobKeeper businesses

It’s been revealed the tax office has already targeted thousands of businesses claiming the wage subsidy payments.

 

The Taxation Office is preparing a “wave” of compliance and will challenge the eligibility of businesses receiving the $1500 a fortnight JobKeeper payment if they recorded a “miraculous” rebound in turnover through the COVID-19 recession.

Second commissioner Jeremy Hirschhorn told the House of Representatives tax and revenue committee on Friday the ATO had already sent letters to thousands of businesses receiving the wage subsidy payments in an initial round of compliance focused on not meeting basic conditions for the scheme, such as whether they had lodged tax returns or had a valid ABN by the required date.

But Mr Hirschhorn said there would be “other waves” of compliance activity.

“We will be approaching some companies where they predicted a 30 per cent reduction in turnover, and their turnover has miraculously rebounded very strongly the next month, or there’s evidence something weird has happened in the pattern of their turnover.”

Mr Hirschhorn said that the ATO was taking a lenient approach to businesses and individuals who may have received JobKeeper payments, the small business cash flow boost or accessed their super early under the special COVID-19 rules, but who then proved to be ineligible.

Where recipients haven’t met the criteria but the ATO judges it was an “honest mistake”, the payments would not be clawed back, he said.

“The compliance response is usually to say, ‘Well, we won’t be paying you any more JobKeeper’.”

In previous testimony, Mr Hirschhorn has said there was a “round” of 8000 compliance letters sent to businesses telling them there was evidence in the Tax Office’s records that they were ineligible for the wage subsidy payment.

Businesses were asked for more information and given 14 days to respond.

Around half the firms failed to respond and were immediately kicked-off the program. A further 1800 were found to be ineligible for the payment because their businesses were too new, 800 didn’t qualify as they didn’t actually pay salaries at the relevant time, and about 550 made multiple claims for themselves or the same employee.

There are 32 businesses being investigated for defrauding the scheme, among the 960,000 firms receiving the payment.

The first mail-out to businesses receiving JobKeeper included “cut and dry” questions around eligibility, such as whether they had lodged an activity statement before the March 12 deadline, or whether they had an ABN by the same date.

The ATO is paying out $10.5bn a month for the JobKeeper package alone, the committee heard.

Mr Hirschhorn said that the number of employees receiving the wage subsidy had “stabilised” at around 3.6 million in June, and that as the payments were made in arrears, it was too early to gauge the impact of the Melbourne shutdown and second wave of coronavirus infections.

Mr Hirschhorn said he anticipated “we will get some extra activity from Victoria in the August claims for the July month, but it might not be as much as you would expect,” as once a business qualifies for one month it then remains on the program for the remainder of the scheme.

The ATO is also undertaking a pilot program to contact those who have accessed the COVID early release of super scheme and who, after investigation of data such as wages paid through the single touch payroll system, may not have met the hardship provisions.