JobKeeper eligibility: test case opens the door to claims

Content Summary

Elinor Kasapidis, Senior Manager of Tax Policy, CPA Australia | January 2021

This article was current at the time of publication.

The Administrative Appeals Tribunal (AAT) has found that a taxpayer had, and was entitled to, an Australian business number (ABN) in March 2020 and therefore qualified for JobKeeper payments.

The 21 December 2020 decision is considered a test case for JobKeeper eligibility. The tribunal found in favour of the taxpayer on all grounds including that taxpayer, Jeremy Apted, had and was entitled to an ABN on 12 March 2020.

The Australian Business Register (ABR) was subsequently updated to reflect the tribunal finding that the applicant was entitled to the JobKeeper payment for the period in question, being 30 March 2020 to 27 September 2020.

It noted: "We are satisfied the applicant is the kind of person who was intended to benefit from the JobKeeper scheme.

"While his business was small and his income irregular, he still satisfies all of the eligibility criteria in Section 11(1) [of the Income Tax Assessment Act 1997]. There is nothing to be achieved by denying him access to the payments in order to make a point about the desirability of obtaining an ABN."

After noting that the discretion in Section 11(6) of the rules is not limited by reference to explicit criteria, the decision concluded by suggesting that, “it is likely most applicants in Mr. Apted’s position will not require the commissioner [of taxation] to consider exercising the discretion in s 11(6).

"Those cases will be dealt with most expeditiously by requiring the applicant to engage with the established ABN registration process.

"If the applicant can satisfy the registrar in the ordinary way that the applicant was carrying on an enterprise at the relevant time, the registrar can issue an ABN.

"Provided the ABN has a date of effect that predates 12 March 2020, the integrity rule will be satisfied. But cases may yet arise where the ABN registration process does not provide a satisfactory answer. In those cases, the exercise of discretion will become an issue."

IGTO report finds new small businesses eligible

On the same day, the Inspector-General of Taxation and Taxation Ombudsman (IGTO) Karen Payne released a report focusing on the ATO's administration of JobKeeper and cash flow boost payments for new businesses.

Payne found that:

  • New small businesses can demonstrate they are eligible for economic support measures other than by lodging a business activity statement (BAS) with the Australian Taxation Office (ATO) before 12 March 2020.
  • The ATO has agreed to review some of its earlier decisions. This includes taxation complaints raised with the IGTO, as well as objections and appeal cases which raise JobKeeper and temporary cash flow boost eligibility disputes for new small businesses.
  • The ATO has not identified or contacted all potentially affected taxpayers so for those who have not been contacted but think they may be affected, the IGTO advises they in the first instance engage directly with the ATO.

What should practitioners do now?

  • Identify affected clients denied JobKeeper on the basis that they did not satisfy the eligibility criteria but where the commissioner’s discretion was not exercised, although there may have been valid grounds to do so. This may include establishing that the applicant was carrying on an enterprise at the relevant time or had made a taxable supply in the relevant tax period.
  • Review the AAT decision and IGTO report to determine relevant facts and circumstances. Consider seeking legal advice as necessary.
  • Contact the ATO when you think there are valid grounds for the commissioner’s decision to be reviewed.

CPA Australia is seeking clarity from the ATO regarding the “informal review” process referenced by the IGTO in her report and will provide further details as they become available.