ATO compliance approach to COVID-19 stimulus measures

June 25, 2020

The ATO is increasing its response to fraud and schemes designed to take advantage of the government’s COVID-19 stimulus packages. This includes JobKeeper payments, early release of superannuation and boosting cash flow for employers. Severe penalties will be applied to tax avoidance schemes or those found to be breaking the law.

The ATO’s compliance efforts for JobKeeper payments are focused on ensuring that entities meet the criteria for business income, are claiming for eligible employees and not manipulating their turnover to satisfy the decline in turnover test, as warned in Practical Compliance Guideline PCG 2020/4.

Early release of super
Individuals also risk additional taxes and penalties if they access the COVID-19 early release of super concession and do not meet eligibility criteria, or are artificially arranging their affairs in order to meet the criteria. The ATO has advised that it has seen some examples of people doing the wrong thing.

The ATO has stopped applications and prevented super money from being released or reviewed the circumstances after an application has been processed. Where appropriate, the ATO may apply the Pt IVA general anti-avoidance rule for income tax if a taxpayer (or a representative) enters into a scheme mainly for the purpose of obtaining a tax benefit. Other behaviours that attract the ATO’s attention include applying when there is no change to a taxpayer’s regular salary and wage, or employment information, making false statements or fraudulent attempts to meet the eligibility criteria, and withdrawing and recontributing super for a tax advantage. This can also impact their eligibility for a super co-contribution.

Cash flow boost
Employers who have entered a scheme in order to gain access to the cash flow boost, or maximise their payments, are also on the ATO’s radar. These are schemes designed to artificially restructure a business, change the character of payments to salary or wages, inflate reported withholding amounts, resurrect dormant entities or phoenixing, or make false statements or fraudulent attempts to create an entitlement.