The ATO will respond “sympathetically” to good-faith JobKeeper participants but “forcefully” where businesses fail to pass on payments

The Australian Taxation Office (ATO) will respond “sympathetically” to firms that make mistakes on their JobKeeper applications, but will be ‘forceful’ in cases where businesses fail to pass on wage subsidies to workers, second commissioner Jeremy Hirschhorn said.

Responding to questions at a Senate Committee hearing into the Australian government’s response to COVID-19 on Thursday, Hirschhorn sought to address community concern the ATO will “nitpick” or “over-engineer” its JobKeeper compliance efforts.

Hirschhorn said the ATO expects businesses to make “reasonable estimates” in their GST turnover projections when enrolling for wage subsidies, but will respond proportionately in cases where estimates turn out to be wrong.

“If it ultimately turns out that the estimate was overly pessimistic, and a business only went down 29% instead of an estimated 35%, that is okay,” Hirschhorn said.

“Where people make a good-faith estimate to comply, and a good-faith decision that they’re eligible [for JobKeeper], the commissioner will be very understanding and sympathetic to their position,” Hirschhorn said.

The JobKeeper program is a self-assessment scheme, meaning firms are required to declare they meet the 30% year-on-year turnover decline criteria themselves.

While this fast-tracks delivery of wage payments to firms, the ATO is responsible for considering whether to clawback funds in cases where businesses don’t play by the rules or are ineligible.

This means initially receiving JobKeeper payments, which started flowing on Wednesday night, is no guarantee a business will continue to receive the payments, or won’t be subject to further compliance action.

More than 750,000 firms have now enrolled in the JobKeeper program and the ATO said on Thursday that about a billion dollars in payments have already been made under the scheme.

Hirschhorn said the tax office will be focused on firms intentionally breaking the rules, and will respond “forcefully” in cases where wage subsidy payments aren’t passed on in full.

“The first consequence is the clawback of the entire amount of JobKeeper payments that they received for all employees. That is the first lever,” Hirschhorn said when asked about failure to pass on payments.

“Of course, the worse the behaviour, the more likely we are to refer it to the police for criminal prosecution.”

The Australian Federal Police (AFP) is already actively investigating intelligence related to suspected JobKeeper fraud, the hearing revealed on Thursday.

Meanwhile, the ATO had received 1,160 tip-offs about alleged JobKeeper rule breaches by employers as of May 5 and about 2,000 “calls of concern”.

Some of these tips have been passed on to the Fair Work Ombudsman (FWO), ATO commissioner Chris Jordan said.

“We’re working with the Fair Work Ombudsman for them to determine who can demand what of the employees under the awards,” Jordan said.

The comments come after the ATO released detailed compliance guidance about the JobKeeper scheme late last week.

The eight-page document, published to the ATO’s website, outlines how the ATO will apply its compliance resources to JobKeeper participants.

The ATO confirmed on Thursday it is moving “hundreds” of staff into JobKeeper compliance and enforcement duties over the coming months.

“In deciding whether to apply compliance resources, the Commissioner’s predominant considerations will be the occasion for and result of the scheme in the context of the entity and its external operating environment,” the compliance guidance reads.

“In particular, the Commissioner will be concerned with an entity that accesses or increases JobKeeper payment entitlements: where the entity’s business is not significantly affected by external environmental factors beyond its control, and/or in excess of those that would maintain pre-existing employment relationships.”

However, the ATO said it will “generally not apply” its compliance resources in cases where:

• The external operating environment is affected by factors beyond the control of the entity (and its related parties); and
• That affected external operating environment significantly impacts the business of the entity or another entity the entity’s employees serve in; and
• The JobKeeper payment the entity receives is for individuals who were employed by the entity and serving in the significantly impacted business prior to that time and who remain employed as a result of that JobKeeper payment.

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