The JobKeeper test case centred around sole trader Jeremy Apted and whether he met an eligibility requirement to hold an ABN on or before 12 March 2020.
Mr Apted, a specialist retail valuer, had held an ABN since 2012 but cancelled it in 2018 as he sought retirement.
He resumed work in September 2019 but failed to reactivate his ABN because he mistakenly assumed that he only needed one if he was required to be registered for GST.
When COVID-19 struck, Mr Apted reactivated his ABN and applied for JobKeeper, but was knocked back because he missed the 12 March 2020 deadline, prompting him to reach out to the Australian Business Registrar to successfully backdate his ABN reactivation to 1 July 2019.
Despite the backdated ABN registration, the ATO disallowed Mr Apted’s objection, leading the taxpayer to apply to the Administrative Appeals Tribunal (AAT) for a review.
The tribunal found in favour of Mr Apted, noting that he satisfied all of the eligibility criteria and was “the kind of person who was intended to benefit from the JobKeeper scheme”.
The ATO, however, turned to the Full Federal Court to appeal the AAT decision, arguing that the 12 March 2020 requirement was a point-in-time test and that if the Australian Business Register had been inspected on that date, it would have shown if an entity had an ABN.
The Full Federal Court agreed with the ATO’s view, but ultimately ruled that the commissioner should have exercised his discretion to allow a later date for Mr Apted to hold an ABN and thereby satisfy the eligibility rules for JobKeeper.
“As is made plain by government announcements and the provisions of the legislation, the JobKeeper payment was intended to benefit taxpayers in Mr Apted’s general circumstances,” said Honourable Justice Thomas Thawley.
“The commissioner, in his reasons, did not point to any good reason not to exercise the discretion in s 11(6) in Mr Apted’s favour; it is clear that the real reason for the commissioner’s refusal to exercise the discretion was the lack of ABN registration on 12 March 2020.
“But this was the very thing which lay the foundation for the exercise of the discretion. Of itself, this was not a proper basis to refuse to exercise the discretion.”
Honourable Justice John Logan also pointed out that the Australian Business Registrar — the Commissioner of Taxation in another guise — had accepted that Mr Apted was carrying on an enterprise before 12 March 2020, giving “pause for thought as to why Mr Apted has been put to so much bother in relation to his eligibility to receive a payment the object of which ‘is to provide financial support directly or indirectly to entities that are directly or indirectly affected by the coronavirus known as COVID-19’.”
Holding Redlich senior tax controversy partner Sue Williamson, who represented Mr Apted in the test case, said the ruling was important as the commissioner’s discretion also appears within the cash flow boost’s requirements.
“The broader application is that in every decision that the commissioner has made where he has refused to exercise a discretion, he now needs to go back and check it because the Full Federal Court has said you’ve taken a far too narrow approach in exercising the discretion and you need to look at the facts of the taxpayer,” Ms Williamson told Accountants Daily.
“A lot of state relief was based on the fact that you needed to be registered for JobKeeper, so there’s going to be flow-on issues if businesses can now get it.”
The ATO, who covered the legal costs of the taxpayer, has not yet ruled out applying for special leave with the High Court to appeal the judgment.
“The ATO is currently considering the decision and its implications to both the JobKeeper and cash flow boost programs,” said an ATO spokesperson.
“Updated advice and guidance will be published to the ATO website as soon as possible.”