JobKeepers Beware – the sting could be in the long tail for those who abuse the scheme

The Government’s unprecedented $130 billion jobkeeper subsidy may seem like easy money to some. But it isn’t. There are serious penalties for those caught abusing the system and, unlike the ATO’s Robodebt fiasco, there will be little sympathy for those caught.

With the first payments under the scheme starting to flow, and reports of scams aplenty, you need to know what the obligations are, and the potential ramifications of abuse.

What you need to know – The Key Points

• The ATO will administer the scheme and is expected to have a long lasting remit to investigate abuse and illegality, using data to which it already has access and data matching technology.
• Criminal liability can arise for abuse of the scheme for both individuals and companies. Criminal penalties and fines of up to $10,500 can apply to individuals and $52,500 in the case of companies, and in serious cases potential imprisonment for fraud or deception.
• Both employees and employers are exposed because of the need for employees to nominate and declare eligibility and the employer to make the JobKeeper application.
• Tax agents have been singled out as gatekeepers to the scheme, with the ATO and the Tax Practitioners Board warning that ‘firm and swift action’ will be taken against any tax agent or business who seeks to backdate or artificially change any business structure to obtain a JobKeeper payment to which it is otherwise not entitled.
• There will be claw back of any payments to these entities, with interest, and potentially subsequent criminal investigation.
• Unlike Robodebt, there will be little sympathy for those who abuse the scheme, as the $130 billion debt underpinning the scheme is repaid for generations.

Rumours of rorts

Even before the first dollars began flowing, there were reports of scams and rorts on both the employer and employee sides of business.

Some employers are proposing to continue to pay staff at their normal rates, while retaining the balance of the JobKeeper payments in the business or retaining some of the JobKeeper payments as “administration fees”.

We have heard of one employee being told they will be put back on (if they agree), nominated and ‘taxed’ $300 per payment by the employer, giving them $1200 (just above jobseeker’s $1100) with the employer pocketing $300 themselves.

Reports of attempting to leverage the JobKeeper payments to modify the terms of employee’s contracts have been widely reported in the media.

We have also learnt about employers forcing redundancies by electing some, but not all employees to apply for JobKeeper payments. The Treasurer has recently confirmed that the ‘one in, all in rule’ means that, once an employer and eligible employees have nominated to participate in the scheme, the employer cannot pick and choose who to receive JobKeeper payments for.

On the other side of the coin there have also been reports of employees refusing to work, but demanding JobKeeper payments nonetheless.

In a joint statement recently issued by the ATO and the Tax Practitioners Board, tax agents were warned that “firm and swift action” will be taken against any tax agent or business who seeks to backdate or artificially change any business structure to obtain a JobKeeper payment it would not otherwise be entitled to.

Put most simply by the Prime Minister, rorting the JobKeeper system is “not on”.

What to expect next

$130 billion is a huge amount of money. It will take generations to pay off the debt that underpins the payments. This means:

• That examination and enforcement of the scheme will have a long tail;
• That the government will look to claw back as much as possible from people who abuse the scheme;
• As a matter of policy and principle, the government will be committed to enforcing the scheme and unearthing and prosecuting abuse;
• There will be little sympathy for those who abuse the scheme, and their employees or employers.

At the heart of the scheme is the declaration of eligibility by the employer and the employee. Individuals are directly exposed – in fact, this individual exposure is one of the key compliance measures underpinning the scheme. So you can expect that pursuit of individuals will be at the heart of enforcement and recovery strategies.

While the Robodebt scheme was deeply flawed, roundly criticised (including by us) and ultimately abandoned, aspects of its model lend themselves to enforcement of the Jobkeeper scheme.

But a similar approach could be used to identify potential breaches of the Jobkeeper scheme – utilising data matching and mathematical analysis to identify anomalies or potential inconsistencies between declared and actual income. Legal issues with such an approach are unlikely to be significant because the payments are based on point in time rather than cumulative analysis and because of the centrality of the businesses declaration.

The strong public interest in pursuing recovery and exposing illegal abuse of the scheme will empower the ATO to use broader investigative and recovery techniques than may otherwise be the case.

Conclusion

For many businesses access to the scheme may be make or break for them. The temptation for wrongdoing is strong, and in some cases, understandable. But the risks are significant, and easy money now may become much harder to handle later.

Further Notes

To receive JobKeeper payments, you must meet the following criteria:

• A reduction in GST turnover against the prior year of 30% for most businesses, 15% for some charities, and 50% if your businesses’ aggregated turnover in the current year is likely to exceed $1bn
• The employee you wish to receive JobKeeper payments for is an eligible employee who is an Australian resident or 444 Visa holder aged over 16 who is employed on a full-time or part-time basis, or who is a long term casual;
• The eligible employee submits a Nomination Notice, which confirms they are an ‘eligible employee’ at 1 March 2020, agrees to be nominated, and has not submitted a Nomination Notice with any other employer.
• You must also meet the pre-payment, and post-payment requirements set out in the Coronavirus Economic Response Package (Payments and Benefits) Act 2020 to be eligible.
• Practically speaking, you should also note that you are required to continue to pay wages from your current cashflow before being reimbursed by the government for any eligible employees.

Administration

The Coronavirus Economic Response Package (Payments and Benefits Act) 2020 is administered by the Commissioner of Taxation, and therefore operates alongside the Tax Administration Act 1953, as well as the Coronavirus Economic Response Package (Payments and Benefits) Rules 2020.

The Commissioner also has powers akin to the anti-avoidance provisions in Pt IVA of the Tax Administration Act to prevent ‘contrived schemes’ obtaining JobKeeper payments unlawfully.

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