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The ATO’s compliance work around the cash-flow boost will need to take into account closely held entities who have inconsistent wages, says one bookkeeping association.
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Tax Office urged to be sensible around cash-flow boost reviews
04 September 2020
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11 minute read
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The Tax Office had recently written to a number of cash-flow boost recipients who had made an “unusual or unexpected change” to the amount of salary and wages reported in their business activity statements.
With the $20,000 to $100,000 cash-flow boost tied to payments of salary and wages, the ATO is concerned that some businesses have made either an honest mistake or undertaken a fraudulent arrangement to inflate their entitlement.
Institute of Certified Bookkeepers executive director Matthew Addison believes the ATO’s review needs to take into consideration closely held payees and their inconsistent wage cycle, and that their allocation of wages to the March or June quarter should not be considered a fraudulent scheme.
“It has been long accepted, including by the ATO, that closely held employee wages are set later and sometimes after the end of the year,” Mr Addison said.
“In a JobKeeper and cash-flow boost world, that annual adjustment has been performed quarterly or monthly.
“In some cases, the owners have taken payments out and then ‘book’ the level of wages and tax later. In some cases, the owners ‘book’ wages that they haven’t been able to take — cash flow hasn’t permitted it.
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“Current reviews by the ATO must also consider and allow for the ‘booking’ of wages especially where there is a long-term trend for the business that is evidenced for periods of time before COVID-19 came along.”
However, Mr Addison agreed that businesses that have sought to game the stimulus measure by reporting withholding amounts on behalf of fictitious employees or overstating PAYG withholding amounts should be weeded out by the ATO.
“The backdating of PAYGW registrations, the creation of wages where there never has been, should not be accepted,” he added.
“Where there is evidence of PAYGW registration, lodged and reported BAS, tax and STP together with super and workers compensation, the wages are real.”
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