The ATO’s warning comes after a chartered accountant attempted to access the maximum $50,000 initial cash flow boost by reporting a $107,500 one-week wage in his March 2020 quarter BAS, despite consistently reporting wages of $100 each week for the past five years.
The unnamed registered tax agent told the Administrative Appeals Tribunal that the sudden change was to enhance his borrowing and refinancing capacity after his lender had purportedly informed him that higher wages were looked upon more favourably than dividends.
He failed, however, to produce credible evidence of the advice, leading the tribunal to conclude that he had entered into the scheme for the sole or dominant purpose of obtaining the maximum cash flow boost.
In its decision impact statement released on Tuesday, the ATO said the tribunal’s broad view on the definition of a scheme would inform its future compliance action against those who artificially changed their salary and wage payments to maximise the cash flow boost.
The Tax Office also noted that the AAT’s focus on contemporaneous documentary evidence meant that self-serving statements and assertions were open to scrutiny.
“The tribunal’s decision confirms the importance of considering all of the surrounding circumstances (including objective factors) when determining whether the requisite ‘sole or dominant purpose’ has been satisfied, rather than merely having regard to an applicant’s stated intention,” said the ATO in its decision impact statement.
“The commissioner will continue to review entities whose eligibility for CFB was impacted by significant changes in their reporting of withholding amounts and will closely monitor and examine claims that do not appear to reflect the true nature of transactions or events.
“Entities who engaged in contrived arrangements should expect to be reviewed.”
Over $35.5 billion in cash flow boost payments have been paid to nearly 817,000 businesses since the stimulus measure was first announced on 24 March 2020.