A decision by the full bench of the Federal Court that ruled in favour of sole trader Jeremy Apted could open the gates for more businesses to retrospectively gain access to coronavirus stimulus payments, including JobKeeper wage subsidies, according to one tax professional.
The ruling in the test case has granted Apted access to JobKeeper payments, and Holding Redlich senior tax partner Sue Williamson says it could also lead to more businesses becoming eligible for both federal and state-based support payments.
“This is a critical decision not only because it ensures access to JobKeeper to many that the ATO did not register, but also because so much of the state-based relief was premised on the applicant being registered for JobKeeper,” explains Williamson, who represented Apted in the test case.
“The next question will be whether businesses that are now able to access JobKeeper can access these state-based benefits retrospectively,” she adds.
In the case, the Australian Taxation Office was appealing an earlier decision by the Administrative Appeals Tribunal (AAT), which was handed down in Apted’s favour in December 2020.
Apted took his case to the AAT after the ATO initially ruled he was ineligible for JobKeeper payments on the basis that he did not have an active Australian Business Number (ABN) as of March 12, 2020, the date nominated in the eligibility criteria for the wage subsidy program.
The AAT found in December that Apted did in fact meet the JobKeeper eligibility criteria of having an ABN on March 12, 2020, because the Australian Business Registry had reactivated an old ABN and backdated the reactivation to before March 12.
At the time, the AAT said Apted is “the kind of person who was intended to benefit from the JobKeeper scheme”.
The ATO took its case to the Federal Court in January, seeking clarity around how it had applied the JobKeeper eligibility rules.
Last week, the Federal Court dismissed the ATO’s appeal and found that the Tax Commissioner should have used his discretion to allow Apted to meet the eligibility rules by holding an active ABN from a later date.
“As is made plain by government announcements and the provisions of the legislation, the JobKeeper payment was intended to benefit taxpayers in Mr Apted’s general circumstances,” said Justice Thomas Thawley.
Justice Thawley said the Commissioner “did not point to any good reason” not to exercise the available discretion to approve Apted’s application for JobKeeper payments, and “it is clear that the real reason for the Commissioner’s refusal to exercise the discretion was the lack of ABN registration on 12 March 2020”.
“But this was the very thing which lay the foundation for the exercise of the discretion. Of itself, this was not a proper basis to refuse to exercise the discretion.”
In addition, Justice John Logan said the ABR had accepted that Apted was carrying on his business before March 12, 2020, and this gives “pause for thought as to why Mr Apted has been put to so much bother” in trying to prove his eligibility for financial support that was intended to support businesses affected by the COVID-19 pandemic.
The same date of March 12, 2020, was also used for the cash flow boost payments, and the ATO has said it is now considering the implications of the Court’s decision.
It has also not ruled out seeking special leave to appeal to the High Court, an application that would need to be made by April 2021.
According to Williamson, it is now “difficult to envisage the Commissioner not being required to exercise his discretion to allow more time to acquire an ABN for pre-existing businesses”, as the Federal Court has made it clear that these businesses are meant to receive JobKeeper.
Williamson says the decision may also have implications for other business owners who were not informed that they were ineligible for JobKeeper because the ATO did not have notice on March 12, 2020; that income from the business in the 2018-19 income year would be returned as assessable; or that the business made a taxable supply in the 2018-19 year.
“The Commissioner has the power to allow a time later than March 12, 2020, to be on notice,” Williamson explains.
“Based on Apted, the Commissioner needs to revisit the decisions made to not allow further time for businesses to give the relevant notice of income or suppliers. Affected businesses should push for their registration to be reconsidered.”
Some business owners had a decision about their eligibility for JobKeeper payments postponed while the court case was running, and the ATO says it will contact those business owners soon to provide an update.
“We will provide further information on your next steps once we have considered the decision and its implications,” the ATO said on its website.