First reports of ATO audits lands one small business in debt

Imagine going through all the rigmarole to apply for JobKeeper when COVID-19 restrictions were rife, only to find your application rejected months later by Tax Office auditors?

That is what has now happened to one small business owner who took a DIY approach to their JobKeeper application.

The worst part is that they now have a $30,000 debt with the tax office and will not be allowed to recover any JobKeeper payments already paid to their employees.

Because of this, the business is possibly facing bankruptcy.

From the outset of the JobKeeper payment subsidy being made available to eligible Australian employers, the ATO has continually cautioned applicants to keep contemporaneous documentation of their calculations and advice to avoid inevitable audit scrutiny.

While the ATO always declared taking an ‘understanding and sympathetic’ approach when reviewing JobKeeper turnover projections, recipients have been urged to document their application and estimates as much as possible to cover all bases when the ATO comes knocking.

Be assured that the ATO will come knocking. The ATO COVID-19 Taskforce reaffirmed their approach in its Law Companion Ruling 2020/1.

“In terms of our attitude to compliance, this program is about helping Australians who are experiencing financial difficulty and it is not drawn at the hard line in terms of 30 per cent where I go out and investigate the person who is sitting at 29.95 per cent,” the Taskforce Chair said. “The focus is on people who will be deliberately rorting the system.”

Not that the small business owner set out to deceive the tax office. However their misunderstanding or misinterpretation of the rigorous eligibility and reporting requirements caused them to come unstuck, particularly when the rules around the JobKeeper were constantly changing during the first release of the scheme.

Coherent and cogent documentation is the best defence should the ATO start asking you for information. It is being able to produce a piece of paper or record that explains and therefore satisfies an auditor’s demand for proof.

A mistake that many taxpayers make is downgrading the ATO’s seriousness around JobKeeper audits. Thinking ‘I’ll worry about it when it happens’ is compounded by the passing of time which blurs our recollection of events because so much has happened in the interim, so make sure you check that all your pays are correct and on time.*

Had the business owner sought professional advice from a creditable bookkeeping professional, the outcome could’ve been completely different.

From builders to pharmacies, medical clinics to dental practices, Notch Above Bookkeeping has your business bookkeeping covered. If you have questions in relation to eligibility and reporting requirements for the JobKeeper Payment scheme, read more on the ATO’s website or call our team on 1300 015 130 for specific advice regarding your business.

* If JobKeeper is being processed by Notch Above Bookkeeping on behalf of your business, then be assured this is in hand.