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JobKeeper and cash flow boost audits – should accountants in Australia be worried?

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Now that the JobKeeper 2.0 extension has been introduced many are wondering just how this might affect their business or even how it might affect them personally.

Sponsored Features Accountancy Insurance 06 October 2020
— 5 minute read

The JobKeeper payment scheme was put in place by the Australian government to try and keep Australia from lapsing into an economic recession as a result of the Covid-19 global pandemic. For the most part it has done a good job at assisting in reducing this in part but like many government initiatives it cannot be sustained in its original format long term. This isn’t because there is anything wrong with JobKeeper but it was always intended to be a temporary solution. 

Now that the JobKeeper 2.0 extension has been introduced and applied from the end of September 2020 through to March 2021 and there is now legislation in place to phase JobKeeper out at the end of March 2021, this means that Australia is not only hopeful that the economic effects of Covid-19 are starting to decline but that we can all transition back to a new Covid normal working economy sooner rather than later. 

Some of the questions, amongst others, that might come to mind with all of the changes to JobKeeper could include; what audits the ATO are doing around this already, if accountants should have any extras concerns about JobKeeper 2.0 audits and will the new JobKeeper 2.0 eligibility criteria and the imminent cessation of cash flow boost lead to more ATO audit activity?

Where are audits and reviews appearing?

Audits and reviews commenced after the original iteration of JobKeeper back in March 2020. As we originally predicted in our tax audit claim stats article, we have seen ATO audit activity concentrated on:

  • Evidence of the existence of employees – yes, there are documented cases of businesses that nominated employees for JobKeeper that never existed
  • Evidence of the employee JobKeeper nomination notifications
  • Proof of the wage payments to employees 
  • Whether the employer used the basic test or the alternative test to satisfy the fall in turnover eligibility criteria

With Single Touch Payroll (STP), the ability for the ATO to flag over or under payments of JobKeeper payments is very high. We have already seen and expect ongoing mismatches with JobKeeper payment, employee enrolments, and STP to be a big driver of ATO audit activity.  This will also include mismatches that have occurred because of flaws in the algorithm of the data analysis.  Since the inception of JobKeeper and cash flow boost we have seen: 

  • A number of March 2020 and June 2020 quarter activity statement audits and reviews all in respect of cash flow boost (covered under Audit Shield).
  • A large number of cash flow boost eligibility checks and eligibility information requests, which are not official reviews, or audits of an activity statement (not covered under Audit Shield).
  • A large number of cash flow boost audits and reviews where PAYG registration occurred in the March 2020 quarter or there was a large increase in W1 & W2 on the March 2020 and/or June 2020 quarterly activity statement compared to previous lodgements which attracted the attention of the ATO.

JobKeeper 2.0 vs JobKeeper – will changes to the JobKeeper 2.0 eligibility criteria lead to more ATO audit/compliance activity?

In an article recently published in Accountants Daily, ATO Assistant Commissioner Sylvia Gallagher said: 

“ JobKeeper behaviours that will attract the ATO’s attention include payments to people who don’t meet eligibility requirements, falsifying records or revisiting activity statements to meet the fall in turnover test, applying for JobKeeper where there is no evidence of carrying on a business or there is no assessable income, employers failing to pass on the full payment to eligible employees, multiple eligible business participant claims and employees being incorrectly excluded under the ‘one in, all in’ rule.”

In the original iteration of JobKeeper it was much easier to pass the eligibility test, not so with JobKeeper 2.0. The ATO is getting much more sophisticated with the program now and is imposing tougher regulations. For example, to be eligible for JobKeeper 2.0, employers must now show that their actual turnover has declined by the required percentage each quarter whereas with JobKeeper they only needed to consider this in their projected turnover. The JobKeeper 2.0 payment rate will also now be determined by the number of hours an employee worked in the 28 days prior to 1 March 2020 or 1 July 2020.

These new rules will mean that the ATO will be watching those employers who they think are ‘rorting’ the system, very closely. The ATO have some very good data analytics tools they use to be able to assist them in determining when an employer may have made an honest mistake verses those that are deliberately trying to defraud the government. 

The answer to the question of whether this will lead to increased audit activity is nothing short of a certainty – yes it will! Looking back on how strongly the ATO has reviewed other government benefit schemes in the past, and based on the sheer number of Australian employers that have enrolled in the JobKeeper payment scheme (and now JobKeeper 2.0) the ATO will be looking to ensure that all the employers who have received JobKeeper payments did so legitimately. This is not a criticism that the government is looking to recoup the money they have paid out, but more of a check that the JobKeeper payment and other government benefit entitlements are reaching those employers and their employees that need it most. 

If you missed our previously published article, in April 2020, we put in place an endorsement to our Audit Shield policy which includes JobKeeper payment audits and reviews. You can read the article here. It only covers JobKeeper payments and all reviews or audits of other Covid-19 support packages are not covered unless they form part of an audit or review of a lodged return (i.e. BAS audit, Payroll Tax audit etc.). The endorsement only covers post payment reviews or audits so any issues or queries with the JobKeeper payment application process are not covered. 

How will the cessation of cash flow boost impact employers?

It seems much of what is in the media recently has been focused on JobKeeper 2.0 but another important Covid-19 government benefit initiative that reached its conclusion at the end of September 2020 was cash flow boost. Eligible businesses and not-for-profit organisations have until the end of September 2020, via lodgement of their September 2020 activity statements, to receive the final cash flow boost payment. This payment can be for amounts of up to $100,000 which are paid to employers via the lodgement of their March 2020, June 2020 and September 2020 activity statements. 

As all accountants will know, cash flow boost isn’t something that businesses apply for; it is provided automatically and credited to the business’ activity statement account of employer businesses. However, the ATO systems that determine if a business is eligible can make mistakes and can on occasion credit a business that isn’t eligible. In this case, it is up to the business to self-report that they incorrectly received a payment. Make no mistake, the ATO will eventually catch up with the payment error and will come knocking on the door of a business that doesn’t self-report the incorrect payment. 

The ATO has recently announced that they plan on recommencing normal audit activity in October 2020. As official reviews, audits, investigations and enquiries of taxpayers lodged returns and their taxation affairs in general continue to remain prevalent, the best course of action is to ensure that your accounting firm has a comprehensive tax audit protection solution such as Audit Shield in place.

Audit Shield ensures your professional fees will be covered in the event of ATO and other government revenue authorities’ initiated audit activity with respect to lodged client tax returns and financial compliance obligations.

It also means that you can avoid the awkward conversation concerning additional fees incurred when dealing with government revenue authority initiated audit activity with your client. It’s a win-win and no net-cost solution for your accounting firm and your clients.

To find out more about Audit Shield visit the Accountancy Insurance website or call our team on 1300 650 758.

Rod Spicer
Associate Director, Accountancy Insurance

JobKeeper and cash flow boost audits – should accountants in Australia be worried?
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