As Victoria gradually emerges from lockdown and the economy is on the verge of coming out of a recession, it’s a clear sign that things are heading in the right direction, but we’re not out of the woods yet.
The ATO continues to do its bit to boost its resources and targeting schemes designed to take advantage of the Government’s generous COVID-19 stimulus package.
Jobkeeper payments, early release of super, and cash flow boosts for employers are all high on its radar.
The complexity of the rules around its eligibility, especially JobKeeper, means that it’s easy to make mistakes.
As our tax system works on a self-assessment model, the ATO usually accepts the information on the basis that it’s true and correct. This makes it even more important to seek advice before applying for any such measures.
With reports of the ATO sending out letters to 8,000 businesses warning them they may have to repay JobKeeper money, business owners and advisers are strongly advised to review their supporting documentation in relation to these claims to ensure a decline in turnover calculations will stand up to an ATO scrutiny and claims have been made in respect of eligible employees and business participants.
What are the warning signs?
JobKeeper:
- Made claims for employees without a nomination notice or have not paid their employees the correct JobKeeper amount (before tax)
- Made claims for employees where there is no history of an employment relationship
- Amended their prior business activity statements to increase sales in order to meet the turnover test
- Recorded an unexplained decline in turnover, followed by a significant increase
- Business owners made multiple claims for themselves as employees or as eligible business participants
It’s a timely reminder that the ATO will be targeting businesses that:
- Reflect apparent irregularities in their current GST turnover in the September 2020 or December 2020 quarters which may be due to:
- omitting sales from their reporting
- delaying or altering the recognition of their sales from normal practices
- Make unusual amendments to their business activity statements which inflate their sales for the relevant comparison periods.
- Claim the incorrect, higher tier rate for their employees, eligible business participants, or religious practitioners when they should have been on the lower tier.
Cashflow Boosts for Employers
- Artificially restructuring or arranging your business to meet the eligibility criteria
- Increasing wages paid in a particular month to maximise the cash flow boost amount
- Inflating reported withholding amounts to maximise the cash flow boost
- Resurrecting dormant entities or phoenixing
Early Release of Superannuation
- Accessing the scheme when one hasn’t been made redundant or had a reduction in working hours of at least 20% or being eligible for welfare assistance payments
- Artificially arranging affairs to meet the eligibility criteria
- Possible withdrawal and contributing super for a tax advantage
What documentation do I continue to keep?
The list can be a combination of any of the documents below subject to the stimulus being applied for:
- sales and trading records
- sales contracts or customer correspondence
- invoices issued
- bank statements
- business participant declaration including a reasonable and genuine attempt to work out the 80-hour requirement based upon the business records available where relevant
- employment records, such as payroll data or time sheets and other attendance records
- employment contracts
- business diaries, appointment books, and logbooks
- records of store trading hours
If individuals and/or businesses find that they have made an honest mistake, it’s best to make a voluntary disclosure than wait to be audited. The ATO has even released guidance on JobKeeper overpayments that occur as a result of honest mistakes/oversights.
If still in doubt, please seek professional advice.
HOW CAN RSM HELP?
If you today are unsure that your documentation in relation to any of the above would stand up to an ATO scrutiny, or you require assistance with a review of your individual circumstances to comply with the administrative obligations, please contact your local RSM office.