Everything You Need to Know About JobKeeper Audits and Compliance
Article by Emma Harnas
The JobKeeper subsidy has progressed beyond the rush for eligibility and entered its second phase: compliance. Late last month, the Australian Taxation Office (ATO) released guidance highlighting where the regulator will focus its compliance resources. Understanding JobKeeper compliance and the ATO’s audit targets can help your business improve management of the subsidy and also prepare for a potential audit.
The ATO’s JobKeeper Audit Targets
The ATO is looking carefully at businesses that appear to have adjusted their circumstances to meet the JobKeeper eligibility requirements where, if those adjustments had not been made, the entity would have been ineligible or had lower JobKeeper payments. Or, where adjustments have been made to enable another entity or subcontractor to meet the decline in turnover test.
Industries or businesses that have not experienced adverse trading conditions and those that appear to have increased staff numbers are likely to be looked at closely. In its guidance, the ATO sets out a series of examples that are likely to attract their attention. These include:
1. Increase in Staff
Where the business reports that the number of staff has increased beyond levels that were previously required to run the business prior to 1 March 2020.
2. Deferring Supplies
In industries unlikely to be adversely impacted by the pandemic, the business agrees with its customers to defer making supplies, resulting in the company’s projected GST turnover declining to the level required to meet the turnover test.
3. Bringing Forward Supplies
In industries unlikely to be adversely impacted by the pandemic, the business brought forward supplies to be able to meet the decline in turnover test in the following month or quarter.
4. Asset Restructures
The example given by the ATO is a company that leases assets to third parties. The leasing business is generally unaffected by the pandemic. However, the business restructures and transfers the assets of the business to a new company. It then withholds the payment of dividends from the new company to the business resulting in a decline in turnover of the business.
5. Management Fee Manipulation
Where inter-entity management fees are charged, the timing of the fee is changed to meet the decline in turnover test.
6. Reduction in Payments to Subcontractors
Where a business has reduced or deferred payments to subcontractors to enable them to meet the decline in turnover test. The ATO has stated that they will review the business and the subcontractors.
7. Reduction in Cost of Supplies to Customers
In this scenario, the business and its customers agree to reduce, waive or defer payments to enable the business to meet the decline in turnover test. JobKeeper is then used to fund the reduction in payments. In effect, JobKeeper is paying for payment reduction.
What Happens if You Got it Wrong?
If your structure or the way you have accessed JobKeeper is on the ATO target list, this does not mean that there is a problem.
Eligibility to JobKeeper is generally based on an estimate of the negative impact of the pandemic on an individual business’s turnover. Some will experience a greater decline than estimated while others will fall short of the required 30%, 50% or 15%. There is no clawback if you got it wrong as long as you can prove the basis for your eligibility going into the scheme.
For those that, in hindsight, did not meet the decline in turnover test, you need to ensure you have your paperwork ready to prove your position if the ATO requests it. You will need to show how you calculated the decline in turnover test and how you came to your assessment of your expected decline, for example, a trend of cancelled orders or trade conditions at that time.
Managing your JobKeeper Compliance
Monthly declarations of your current and projected GST turnover are due within fourteen days of the end of each relevant month.
It’s important to ensure that you have paid eligible JobKeeper staff at least $1,500 during each JobKeeper fortnight. If you pay employees less frequently than fortnightly, the payment can be allocated between fortnights in a reasonable manner. For example, if you pay your employees on a monthly pay cycle, your employees must have received the monthly equivalent of $1,500 per fortnight.
Need JobKeeper Compliance Advice?
Please view our list of account keeping resources that may be beneficial for individuals and businesses during this time. If you require assistance with your JobKeeper compliance or have any questions, please contact the SRJWW office online or on (07) 3490 9988.