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ATO clarifies JobKeeper repayment tax deductibility

Businesses looking to voluntarily return JobKeeper payments may be able to claim a deduction if it helps them achieve their “business objective”, new ATO guidance reveals.

Tax&Compliance Jotham Lian 16 March 2021
— 1 minute read

The Tax Office has now published new guidance on the tax consequences for eligible businesses who have received JobKeeper payments and are now looking to repay those amounts.

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According to the ATO, the voluntary repayment of JobKeeper may be deductible in limited circumstances if it helps a business achieve its objective, including if the payment is made to “prevent reduction in business” or “publicise and promote your business in the short term”.

“Provided you treated your original JobKeeper payments correctly as assessable income, if you then act in good faith and use your best endeavours to determine whether you are entitled to a deduction for the voluntary repayment, we will generally not apply compliance resources to confirm if the payment is deductible,” said the ATO in its online update.

“Businesses that are unable to claim a deduction may still wish to make a voluntary repayment. A voluntary repayment equal to the JobKeeper received less the tax paid on that amount will ensure a tax-neutral outcome overall.”

The ATO also notes that all JobKeeper payments are assessable income and voluntary repayments do not reduce the amount received and that must be included in a business’s assessable income.

Tax & Super Australia tax counsel John Jeffreys said the ATO had not categorically clarified if JobKeeper repayments were tax-deductible.

“However, it has offered somewhat of a lifeline to businesses by saying they can deduct the repayment, so long as their reasons for making the repayment is in line with the two points given on the ATO’s website,” Mr Jeffreys said.

“It could be interpreted that the ATO isn’t giving a total red or a green light for deductions, but perhaps an amber light. If you do run the amber light, the ATO is probably not likely to chase you.

“The only way to clear the ambiguity on the issue of if JobKeeper repayments are tax-deductible, is for it to be confirmed in legislation.”

The ATO’s guidance comes as a number of large corporates have publicly come forward to return JobKeeper payments on the back of increased profits and public pressure.

According to the ABC, 20 companies have since declared they will return $144 million in wage subsidies, although the ATO has received just $20 million so far.

The ATO notes that businesses choosing to return the payments will need to first contact the Tax Office, as voluntary repayments cannot be made through usual ATO payment channels and require a special payment reference number.

View the ATO’s guidance here.

ATO clarifies JobKeeper repayment tax deductibility
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Jotham Lian

Jotham Lian

Jotham Lian is the editor of Accountants Daily, the leading source of breaking news, analysis and insight for Australian accounting professionals.

Before joining the team in 2017, Jotham wrote for a range of national mastheads including the Sydney Morning Herald, and Channel NewsAsia.

You can email Jotham at: This email address is being protected from spambots. You need JavaScript enabled to view it. 

Tax&Compliance