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Businesses that are seeking redress for their cash flow boost ineligibility may find their efforts futile unless a legislative amendment is made to correct the anomaly, says one tax expert.
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ATO’s ‘hands are tied’ on cash flow boost, JobKeeper anomaly: Tax Institute
23 September 2020
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10 minute read
Speaking to Accountants Daily, the Tax Institute’s senior advocate, Robyn Jacobson, said that barring a legislative change, the ATO would have no wiggle room to deviate from the cash flow boost’s restrictive tax notice requirement.
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Under the current law, entities seeking access to the cash flow boost, and those entities who seek access to JobKeeper on the basis of business participation, are required to have notified the commissioner of assessable income derived in the 2018–19 year, or a taxable supply made between 1 July 2018 and 12 March 2020.
This leaves new businesses that have made taxable supplies on or after 1 January 2020 unable to qualify if they report on a quarterly basis, but eligible if they report on a monthly basis.
Likewise, entities that commenced on or after 1 July 2019 and report their GST annually are also unable to meet the requirements, even if they made a supply before 12 March 2020.
“There are many businesses that have been badly affected by the economic impact of COVID-19 who can demonstrate business activity prior to 12 March 2020, yet do not satisfy the requirements of the law. The ATO lacks discretion to allow the cash flow boost and JobKeeper in these cases,” Ms Jacobson said.
“Many do not understand that the ATO’s hands are tied and that objections and appeals will not be of any assistance.
“Practitioners have continually raised these concerns with the Tax Institute and the other professional bodies, and these concerns have been raised with the government and the ATO.”
Ms Jacobson also noted that while the commissioner has the discretion to allow an entity more time to notify the ATO of the derivation of the assessable income or the making of a taxable supply after 12 March 2020, the ATO does not have the power to change the income year or the tax period in which the assessable income was derived or the supply was made.
‘A missed opportunity’
The Treasury was confronted on the issue at a Senate inquiry last week but responded by noting that the design of the program was a matter for the government.
The department also confirmed that it did not consider the issue in detail during its midway review of the JobKeeper program, despite joint calls from the top professional accounting bodies.
Ms Jacobson believes this was a “missed opportunity” and will continue to result in many legitimate entities that have suffered financially throughout the COVID-19 pandemic being ineligible for the cash flow boost and JobKeeper.
“The mid-year review of JobKeeper would have been an ideal time to rectify this anomaly in the law,” Ms Jacobson said.
“The redesign of JobKeeper 2 without addressing this known issue is a missed opportunity.
“The Tax Institute has repeatedly called for a legislative amendment which is the only way this outcome can change.”
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