IPA backs ATO decision not to claw back $50 million in JobKeeper payments made in error

A leading accounting group has backed the Australian Taxation Office’s decision not to pursue $50 million in JobKeeper payments from businesses that made genuine errors when applying for the wage subsidies. 

The comments were in response to calls from Labor politicians Katy Gallagher and Andrew Leigh for business owners to give back any funds they received in error. 

“If you’ve received money incorrectly, there’s a responsibility for you to either return it or for the authorities to collect it,” Gallagher told The New Daily.

Labor was responding to evidence given on Thursday by ATO second commissioner Jeremy Hirschhorn to the Senate select committee on COVID-19. 

During the hearings, Hirschhorn disclosed that $340 million in JobKeeper subsidies have been overpaid to businesses since the massive stimulus measure was introduced last March. 

The ATO has recovered about $135 million of those payments and is still pursuing about $150 million.

However, Hirschhorn said the tax office will not be seeking to recover another $50 million, which was overpaid as a result of genuine mistakes made by businesses. 

The ATO had previously said it would not seek repayment in cases where business owners applied for JobKeeper payments and got the rules wrong, and Hirschhorn confirmed during Thursday’s hearings the ATO would not attempt to recover payments that were passed on to employees. 

Hirschhorn also noted the overpayment rate of 0.4% for the $80 billion wage subsidy program — an outcome which he described as “very positive”. 

Tony Greco, general manager of technical policy for the Institute of Public Accountants (IPA), agrees with this assessment, and says it is important to remember the JobKeeper program was designed and implemented “in response to a crisis”. 

“We were all working at warp speed trying to develop the rules; it was a real ‘team Australia’ moment,” he tells SmartCompany. 

It was critical that the businesses received the payments as fast as possible, says Greco, and the ATO took a “pragmatic” approach in an emergency situation. 

“People have got short memories. This was a crisis payment and there was so much uncertainty,” he adds. 

“Hindsight is a wonderful thing.”

While Greco acknowledges there were incorrect claims that “slipped through”, the number of these is relatively small compared to the enormous size of the program. And those incorrect payments ended up in the pockets of employees, which is “in the spirit of what was asked”. 

He also notes the Inspector-General of Taxation has found there were cases in which the ATO was too restrictive in its approach to determining eligibility for the subsidies, and some new small businesses who were told they were ineligible should have in fact received payments. 

Just under 500,000 businesses were still receiving JobKeeper payments in December, supporting about 1.6 million jobs. 

This compares to 1 million businesses claiming JobKeeper during the first phase of the program to support about 3.8 million jobs. 

In total, the ATO has reviewed $7.5 billion in JobKeeper claims, with $6.9 billion worth of claims reviewed prior to payments being made. About $900 million of reviews are still in progress. 

Hirschhorn said the ATO rejected about $180 million in claims before money was paid out, and stopped an estimated $650 million of future claims from applicants who were found to be ineligible. 

Penalties have been issued in 43 instances and 14 other cases are under investigation for potential penalties. 

The wage subsidy scheme is due to expire at the end of March, despite calls from businesses and industry groups for Treasurer Josh Frydenberg to extend the support payments.