More SMEs could be eligible for JobKeeper and cash flow payments following ATO appeal and IGoT review

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ATO commissioner of taxation Chris Jordan. Source: AAP Image/Mick Tsikas.

More small and medium businesses could become eligible for both JobKeeper and the federal government’s ‘cash flow boost’ payments, depending on the outcome of an appeal being pursued by the Australian Taxation Office in the Federal Court and a review conducted by the Inspector-General of Taxation at the end of 2020. 

Many in the small business community are closely watching the outcome of the ATO’s appeal in the Apted case, which relates to a decision made by the Administrative Appeals Tribunal (AAT) in December that granted a sole trader access to JobKeeper payments as a result of a backdated Australian Business Number (ABN). 

The ATO is seeking to have the appeal expedited through the courts and will provide test case funding given the urgency of the case, which national accounting bodies say could have important implications for business owners. 

While the case relates specifically to eligibility for JobKeeper wage subsidies, Tony Greco, general manager of technical policy at the Institute of Public Accountants, explains eligibility for other government stimulus measures, including the cash flow boost, is tied to the same criteria. 

The cash flow boost provided between $20,000 and $100,000 to eligible businesses between March and September 2020, and updated guidance on the ATO website suggests the outcome of the Apted case may have a bearing on eligibility for the payments. 

“For small businesses, these are substantial, potentially life-changing amounts,” Greco tells SmartCompany

In the Apted case, a sole trader was actively running their business prior to March 12 without an active ABN, but later successfully applied to reactivate the ABN and have it backdated to the year before. 

Given these specific circumstances, the outcome of the ATO’s appeal is “unlikely to have broader implications”, says CPA Australia senior manager of tax policy Elinor Kasapidis.

However, Kasapidis says there will “almost certainly” be other cases brought before the AAT by businesses that were denied JobKeeper, with wider-reaching implications. 

“Many businesses missed out on JobKeeper because of the way the eligibility criteria were framed by the government and interpreted by the ATO,” she tells SmartCompany

Greco says the number of business operators affected by the outcome of the Apted case will likely be smaller than the number affected by a recent investigation completed by the inspector-general of taxation Karen Payne, which concluded that some new businesses that were denied access to JobKeeper and the cash flow boost based on a specific integrity rule were in fact eligible. 

The review, which was finalised in December, looked at the eligibility requirement for business entities to have notified the ATO of taxable supplies made before March 12, 2020. 

It found the meaning of taxable supplies was broader than the ATO’s accepted definition and notice to the ATO of the commencement of a new business did not only have to be via a Business Activity Statement (BAS), but could also be through other means, such as opening a business bank account.

In practice, Greco says a relatively large group of new business owners could be affected by this finding. He estimates almost every accounting firm across the country will have at least a few cases of business owners applying for government stimulus payments but getting knocked back based on this integrity rule. 

These business owners may now be eligible for backdated payments, however, the ATO has said it will only review cases where a business has sought to challenge its initial decision, rather than identify all potentially affected businesses, according to Accountants Daily

In Greco’s view, these types of disputes often come back to the relationship between the “black-letter law” and the policy intent of the government. 

In the case of the coronavirus stimulus payments, the government’s policy intent was to help people who are running active businesses, and to do so quickly. Legislation was developed and enacted in a relatively quick time frame, and the ATO was then given the task of interpreting those laws. 

“They are testing a principle of law [in the Apted appeal] and that’s entirely appropriate,” he says. 

“There is always stuff on the fringes, and they have to establish boundaries. In this case, they’ve decided to allow the judicial system to give the guidance.”

Both Greco and Kasapidis emphasise the time-sensitivity of these questions around eligibility, as small businesses across the country continue to face challenges associated with the pandemic. 

“It’s important that this appeal and other cases yet to come are resolved quickly so that affected businesses know where they stand,” says Kasapidis.

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