Tax shortcuts for working from home deductions, JobKeeper payments, and more. The Australian government is doing a good job of supporting the country through this unprecedented time of crisis but how will these actions affect audit activity for the rest of 2020?
In the short term the Australian Taxation Office (ATO) is going to be watching taxpayers and businesses very closely to ensure that they do not:
- Abuse the JobKeeper payment and related programs
- Submit a claim that is not eligible or over claim on eligible deductions
The Australian government has made it clear in a fact sheet that the ATO will be conducting compliance and audit activities to ensure the JobKeeper payment is passed on to employees, including by utilising existing reporting such as Single Touch Payroll (STP).
Employer Obligations Audits (by claim type), continue to be our most frequent claim type that we have seen in the past 12 months. The ATO has a plethora of data-matching tools to check that the JobKeeper payment will not be abused. Perhaps the most powerful tool will be utilising existing reporting such as STP. If an employer is not correctly allocating the JobKeeper payment, has incorrectly declared how many employees they are applying for, or have not correctly nominated the employees then expect the ATO to be knocking on their door.
The JobKeeper payment runs for 6 months to 30 September 2020 for eligible business participants at present. Based on the experience that the Accountancy Insurance claims team have in ATO audit activity; the audits and reviews may well continue for anywhere between the next 12 months and maybe even up to 2 years after the JobKeeper payment end date.
Audits in respect of any government benefits or entitlements have always been an exclusion in most Tax Audit Insurance policies. The logic behind this is that a Tax Audit insurance policy covers Tax Audits in respect of validating, substantiating, justifying or supporting whether or not you owe more taxes or duties than you declared in a lodged return. Government benefits and entitlements, on the other hand represent discretionary incentives being offered up by governments to encourage certain behaviour. They are not compulsory and not everyone is entitled to these, and the process involves an application process, and then a possible audit of the eligibility, entitlement, purpose or use of that benefit or entitlement.
Accountancy Insurance has been working with our underwriter, Vero Insurance, over recent weeks to try and see what we can do about all of this within the offering, to support accountants and their clients through this.
We are pleased to announce that we have now put in place an endorsement to our policy which includes JobKeeper payment audits and reviews.
This new inclusion only covers JobKeeper payments. All audits and reviews of other Covid-19 support packages are not covered unless they form part of an audit of a lodged return (i.e. BAS audit, Payroll Tax audit etc.). It only covers JobKeeper post payment audits and reviews so any issues or queries with the JobKeeper payment application process are not covered.
With the data rich STP system in place, the ability for the ATO to be able to flag and query possible over or under payments of JobKeeper payments is quite high. We would expect mismatches with JobKeeper payment employee enrolments and STP to be a big driver of audit activity. This will also include mismatches that have occurred because of flaws in the algorithm of the data analysis.
If we just focus on the JobKeeper payment as the most involved of the government’s Covid-19 support packages, as early as this week, we were still trying to get full clarity of how we calculate a downturn in turnover. There are still lots of scenarios around eligible employees and how to record the various payments, as well as how to handle associated payroll entitlements like leave and superannuation guarantee, etc. With the speed at which all of this is progressing we can understand that there were and are still going to be some stresses for all parties concerned in rolling this out.
The question of; “Is it perfect?” has an obvious answer of no.
But I feel if we rephrased that question to be; “Is it a really good initiative that is going to encounter some implementation problems, but are we better for it, than not?”, then the answer would be a resounding yes.
For further information, existing policy holders should contact your Account Manager and all general enquiries can be made to the team at Accountancy Insurance to find out more.
What will happen to taxpayers that submit a claim that is not eligible or those who over claim?
In summary, taxpayers are at risk of attracting the attention of the ATO by either claiming deductions that aren’t eligible or by over claiming their working from home expenses. News.com.au recently published a report stating that home schooling expenses cannot be claimed as tax deductions. The ATO have openly acknowledged that they expect a significant spike in individual work related expense deductions this year which means they will be reviewing a large number of these claims very closely to ensure that they meet the necessary criteria.
Make no mistake the ATO will be watching very carefully to ensure that there is no exploitation going on following all of the government support packages and programs being implemented or as a result of the work-behaviour changes resulting from Covid-19.