JobKeeper Outlines: What is the ATO’s Goal and How to Prepare for an Audit?

Australia:

JobKeeper Outlines: What is ATO’s goal and how to prepare for an audit?

May 10, 2020

Cooper Grace Ward

The ATO has released a guide showing the JobKeeper
‘schemes’ that will be audited. Businesses that are
receiving JobKeeper payments must verify that your payments are
there is no risk of it being returned by the ATO.

Companies that have a decrease in turnover for a particular test
period, but whose rotation is relatively stable,
Prepare for the ATO review activity.

What is a JobKeeper ‘schema’?

The term “scheme” is broadly defined. A scheme does not
it needs to be elaborate, artificial or artificial. It may include a
simple fix or just make a decision. For example, a
The scheme will include deciding:

1. not bill customers in a particular period
2. extend payment terms for customers
3. reduce prices

While each of these examples will be ‘schematics’, only
some will be trapped by anti-evasion provisions.

What JobKeeper Schemes Are Trapped In The Fight Against Evasion?
provisions?

For a JobKeeper scheme to be caught up in the fight against evasion
provisions, the scheme must have been signed by the sole or
Dominant purpose of:

• receive a JobKeeper payment
• receive a higher JobKeeper payment than I would have
  It has been the case.

The test for ‘single or dominant purpose’ is not
subjective. The legislation establishes eight factors that must be
considered when determining whether, objectively, the business
entered the scheme with the sole dominant purpose of obtaining
JobKeeper payments.

What does ‘single or dominant purpose’ mean?

Income tax cases refer to the phrase ‘single or dominant
purpose ‘in the context of the general provisions against evasion
in the VAT part of the Income Tax Assessment Act of 1936.

The High Court has held that “dominant” means the
‘Most influential and dominant or dominant purpose’.

There will be cases where the sole or dominant purpose is
obvious, for example:

• Consider a business that typically bills at the end of a
  calendar month, but then deferred billing for April 2020 to
  first week of May 2020. If that decision results in a decrease in
  30% turnover compared to April 2020 to April 2019, this would be
  indicate, in the absence of other reasons, a single or dominant
  purpose of getting JobKeeper payments.
• Rather, consider a business that typically bills
  before providing services, and billing deferred until May 2020
  because you are not sure, as a result of government restrictions,
  if it will provide its services in April or May 2020. If the
  the decision to defer your billing results by decreasing your billing
  30% comparing April 2020 with April 2019, this would not indicate, in
  the absence of other reasons, a single or dominant purpose of
  getting JobKeeper payments.

In most cases, the analysis will not be in black and white. A
The company will make commercial decisions based on: the supplies that
anticipates what your customers will do if they will continue paying
wages and whether you are entitled to JobKeeper payments. These
considerations and others will be part of the matrix of facts.
Outside of that context, the company needs to ensure that it gets
JobKeeper payments are not the sole or dominant purpose of any
decision.

What is the ATO looking at?

ATO PCG 2020/4 indicates that they will audit
business:

1. who differ by making supplies, invoicing or receiving payments to
   achieve a decrease in turnover during a particular period
2. that advance supply manufacturing, billing, or receiving
   payments to achieve a decrease in the billing of a certain
   period
3. transfer income generating assets to achieve a decrease in
   rotation for a particular period.

ATOs are particularly interested in companies that access
JobKeeper payments that have not been significantly affected by
External environmental factors.

In its PCG 2020/4, the ATO correctly notes that the
the examples set the types of arrangements where they will
‘apply compliance resources’, which means euphemistically
‘audit’. Those examples are not designed to show how
ATO will apply the legislation.

What are the consequences of the ATO finding that there was a
JobKeeper scheme?

If the ATO determines that there was a scheme, then:

• the company was never entitled to JobKeeper payments
• the company will have to return the JobKeeper payments
  – which can be problematic if the company has paid the same
  equals your eligible employees as wages
• the business will have to pay interest at the general interest
  loading rate – currently 7.89%
• The ATO can impose penalties for business that makes false or
  misleading statements (as the company will have stated was a
  eligible employer when you were not).

What evidence must companies keep?

The critical evidence in these types of cases tends to be
documents showing the commercial purpose of the scheme. To consider
The following examples.

1. A company with a monthly service agreement decided not to
   bill customers in April 2020 as they did not provide services in April
   2020 due to government restrictions. Objective evidence
   could include documents showing that no services were provided, or
   could be provided due to the government
   restrictions
2. A commercial owner decided to extend the payment terms for his
   retail tenants because their cash flow was affected by COVID-19. the
   Objective evidence may include documents that show:

3. (a) the agreements reached with the tenants
   (b) the lessor’s obligation to comply with the lease
   beginning
   (c) the effect that government restrictions had on tenants
   Rotation.

3. A company decided to reduce the rates charged in the long term
   clients on the basis that they preferred revenue reduction in the
   in the short term due to the possible loss of a client in the long term. the
   objective evidence may include documents showing financial
   analysis between short-term reduction in income compared to
   lose a customer and documents that show the risk that the business
   you would lose the customer if you did not reduce the rates.

Contemporary evidence is generally more convincing than
evidence obtained at a later date by responding to an ATO review.
Companies at risk of being reviewed must maintain evidence of
their decisions now, so they are ready to respond to any ATO
comments

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Cooper Grace Ward attorneys

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Brisbane

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