Case Study on Successful dealing with the Job Keeper Audit from ATO

The Australian Taxation Office scaled up its attention on an audit from the start of the year, along with the debt collection. The initial focus is on the job keeper audit. During the job keeper audit, the Australian Taxation Office will ask the taxpayer to provide evidence to prove that they are eligible for the job keeper; they will look at the areas including 

  1. Whether the sales had decreased by 30%
  2. Whether the taxpayer had made taxable supply before the stipulated date of March 2020
  3. The visa condition of the employees, as to whether the employees are full time or are eligible casual employees. 

After the job keeper audit, if the Australian Taxation Office ascertained you are not eligible, there are three outcomes.

  1. Repay the overpayment, and no administrative penalty applies
  2. Repay the overpayment and the administrative fine if ATO alleges there are misleading or intended to defraud the Commonwealth department.
  3. No need to repay the overpayment if ATO ascertains the taxpayer has made an honest mistake.

If the Australian Taxation Office ascertains you are eligible, all is good, and you can keep and keep receiving the job keeper payment until the end date.

Recently, ATO reviewed one client for the eligibility of the Jobkeeper Payment. The taxpayer is in the education sector and experienced very tough trading condition during the early onset of the COVID 19 from February 2020. When the ATO announced the Jobkeeper payment scheme, they approached us and wanted us to apply for the Jobkeeper payment. At the time, there is strong evidence that their sale had decreased by30%. However, we noticed that they had not lodged their prior year’s tax return, and as a result, we are unsure whether they are eligible. We told them they might not qualify; however, they said they had asked other accountants and other accountants said the condition is just the 30% decrease, and the visa condition, and the ABN. We helped the client apply, and in the enrollment form, there was no question about the lodgement status as well, hence even we thought the lodgement status is not a decisive factor. After that, they got their job keeper payment, and they used that fund to keep the business afloat.

In the few days past the 2021 new year, while I was on holiday with my family, I received a phone call from the Australian Taxation Office and asked to see evidence for the taxpayer when applying for the job keeper. They mentioned that they had noticed that the taxpayer had not lodged the prior year’s tax returns.

As a leading responsible and professional accountant in Inner West Sydney, I cut my holiday short, went to the office, and provided all the required information to the tax office. I used the negotiation skillset to negotiate with the Australian Taxation Office. The findings from the ATO were that the client is not eligible, and there is an overpayment, which the client needs to repay; however, there is no administrative penalty. The Australian Taxation Office commented in the letter on the complexity of the Job keeper Payment and that the error came from a genuine misunderstanding of the tax law.

Once we received the letter, we presented it to the taxpayer; we also outlined the possible objection; I read the decision letter thoroughly and found there are two areas of mistakes in the letter. I then approached two leading tax law firms in Sydney, asking them whether they would want to assist with the objection. Both of them turned us down, citing the complexity of the Job Keeper audit and that the client is quite lucky not to have the administrative penalty. 

To help the taxpayer, I also had approached the tax ombudsman Karen Payne and went to one of the technical meetings she held; I also discussed the aspect of job keeper audit and the areas of direction.

As a caring accountant and a professional accountant and tax agent in Sydney, we decided to initiate the objection ourselves; I researched the aspect of the taxation law of job keeper and quantified the areas of mistakes from the ATO. We then start the objection to ATO, emphasizing the content in the decision letter. It states the taxpayer’s error is a genuine misunderstanding of the tax law and the two areas of mistakes that the ATO had made. 

Finally, it came back with a favorable outcome; the Australian Taxation Office has decided that the client had made a genuine, honest mistake. Even though they are not eligible, they can keep the overpayment of nearly $20,000, and that the ATO also acknowledge the errors in the initial decision letter. 

Happy clients, happy John, it is so good to see a smile on the client’s face, and all of the students in that business. 

If you have been audited by ATO with tax audit, please come and see John, as the leading professional and experienced accountant and tax agent in Inner West Sydney and Adelaide, John will be able to help you to jump the hurdle and reach an optimal outcome with the ATO.