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New businesses denied JobKeeper or the cash flow boost may now be eligible in the wake of a new report, but the ATO will not be proactively reaching out to identify and review their cases.
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Inspector-General of Taxation investigation opens door to cash flow boost, JobKeeper eligibility
21 December 2020
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The Inspector-General of Taxation and Taxation Ombudsman (IGTO) has now finalised its investigation into the ATO’s administration of JobKeeper and the cash flow boost for new businesses.
The investigation, led by IGTO Karen Payne, scrutinised ATO decisions in cases where genuine new businesses were deemed ineligible for the economic support measures because of a restrictive integrity rule, which requires entities to have notified the ATO of taxable supplies made before 12 March.
The IGTO’s findings revealed two key points, namely that the meaning of taxable supplies was broader than the definition accepted by the ATO in its earlier decisions, and that a BAS was not the only way to provide notice to the Tax Commissioner.
Ms Payne explained that this was because the definition of taxable supplies had been modified for JobKeeper and cash flow boost purposes to include both GST-free supplies and input-taxed financial supplies, encompassing commonly made financial acquisitions in the commencement of a new business, such as opening a bank account.
Other acquisitions of financial interests, which constitute the making of financial supplies, can include borrowing money from a financial supply provider, entering a mortgage over real or personal property, and buying or selling shares or other securities — including incorporation of a shelf company or acquiring an interest in a managed investment scheme.
“Accordingly, a new entity may be eligible for JK and BCF support measures where they ‘acquired’ an interest in one or more financial supplies as part of the steps undertaken to commence their business, which is included as part of activities involved in carrying on an enterprise, and did so in a tax period that ended on or before 12 March 2020,” Ms Payne said.
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What’s next for affected entities?
Despite the ATO now confirming that acquisition-supplies made during the commencement of an enterprise may satisfy the integrity rules, it has stopped short of identifying all potentially affected taxpayers.
Instead, the Tax Office will only review decisions where the entity had challenged its decision.
“This is because the ATO considers that the process of specifically identifying these decisions, and distinguishing them from other decisions where an entity was ineligible for a different reason, would be too difficult and burdensome,” the report noted.
In response, Ms Payne has lambasted the ATO’s decision, warning that its inaction would “risk the erosion of public confidence” in the tax system.
“Effectively, this means that affected entities will either need to lodge an objection with the ATO or lodge a complaint with the IGTO or ATO in order to be identified by the ATO as requiring review,” Ms Payne said.
“Affected entities may only become aware that they have an opportunity for the ATO to reconsider their eligibility if they have already objected to the ATO’s original eligibility decision or lodged a complaint with the IGTO.
“Affected entities that did not take these actions may remain unaware of this opportunity. They may continue to labour under an erroneous belief that they were not entitled to access government support measures which were intended to provide them with financial support during this very difficult economic period.
“In the IGTO’s view, if the ATO does not take action to identify affected taxpayers (and initiate appropriate remedial action) or does not alert the potential class of affected taxpayers to its change in precedential view, it will risk the erosion of public confidence in the fair and transparent administration of Australia’s tax system.”
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