25 November 2020
by David Prichard
- Related topics
- Corporate Tax & Regulatory
The ATO have commenced to knock on the door of businesses who have enrolled in and received payments under the initial JobKeeper program.
The JobKeeper program was introduced on an opt-in basis for businesses, requiring self-assessment of eligibility based on various prescribed eligibility conditions including decline in turnover as well as the identification of eligible employees. Following registration, payments were automatically made to businesses after the submission of monthly declarations, however, this was always on the proviso that any such payment was to be subject to ATO review and scrutiny even after the payment had been made.
The mainstream media have indicated that up to 3,000 ATO staff have been directed to conduct ‘compliance reviews’, and have already sent 8,000 letters to businesses to advise that they may have to repay their JobKeeper payments on the basis of ineligibility, or failure to provide adequate support documentation to demonstrate eligibility.
As you will recall, businesses were required to demonstrate how/why they were eligible (at the time they enrolled) and therefore should have calculations and supporting information at hand for when the ATO come calling. The practical issues surrounding making a reasonable forecast can be problematic for some businesses as the prescribed legislation allowed for eligibility based on a forecast of turnover reduction but did not provide explicit guidance on how forecasts ‘should’ be determined.
Broadly, the ATO are interested in:
- Eligibility of the entity / business including which test was used and for what period;
- Understanding the nature of the business and how it was impacted by Covid-19;
- The eligibility of staff claimed in monthly JobKeeper declarations; and
- The validity of declarations including copies of the signed declarations.
The ATO are also looking to match prior year financial statements, income tax returns and other information with current period financial records and comparatives used, to ensure there is no manipulation of comparative data.
Whilst businesses should already have support documentation to show they were eligible at the time of enrolment and at each declaration made, we would recommend:
- Revisiting the calculations and documentation to confirm that it all makes sense in the cold light of day;
- Documentation of any assumptions and estimates made including why these were important in determining any forecasts or projections;
- Ensuring that you have employee declarations on file for each employee;
- Review accounting records for any declaration made to ensure that all relevant invoices have been included as appropriate and recognised in the correct period.
Where businesses have enrolled and determined eligibility without external advice, it may be prudent to have a ‘second opinion’ on eligibility, any supporting calculations, or documentation – which ESV can assist you with. We can also run a mock review program to test the strength of claims should you have any concerns.
If you’d like to discuss how ESV can help further, please don’t hesitate to contact your Engagement Partner.