ATO to review rejected JobKeeper cases where a request for discretion was lodged but denied
19 May 2021
Following the recent Commissioner of Taxation v Apted case, the Australian Tax Office (ATO) will be reviewing cases where eligible business participants did not qualify for the JobKeeper incentive or eligible employers did not qualify for the cashflow boost because the Commissioner made a decision not to exercise his discretion to allow further time for an entity to hold an Australian Business Number (ABN) or to provide notice to the Commissioner of assessable income or supplies.
One of the conditions for eligible business participants such as sole traders, trusts, companies or partnerships to claim JobKeeper was they must have had an ABN as at 12 March 2020.
The test to determine whether this requirement has been met focuses solely on the temporal date of 12 March 2020 (i.e. whether the business had an actual ABN as at 12 March 2020). Therefore, if a business applied for an ABN after 12 March 2020 but had a retrospective date of effect before 12 March 2020, the test would not be satisfied. In these cases, the only way the taxpayer can qualify for JobKeeper would be if the Commissioner exercised his discretion to allow a later time to have an ABN.
In the recent _Apted_case, the taxpayer who was a registered valuer, obtained an ABN as a sole trader in 2012 but retired in 2018 and cancelled his ABN. However, from September 2019 he started providing valuation services again but only reactivated his ABN on 31 March 2020 (after 12 March 2020) but with a retrospective date of effect of 1 July 2019 (before 12 March 2020).
Because the taxpayer only reactivated his ABN on 31 March 2020 and did not have an actual ABN existing as at 12 March 2020, the ATO denied the taxpayer’s application for JobKeeper and also declined to exercise its discretion to allow the taxpayer a later time to have an ABN.
However, the Full Federal Court held that because the discretion was a wide discretion it should have been exercised and the taxpayer allowed to claim JobKeeper because:
The taxpayer’s failure to reactivate his ABN was due to oversight;
The taxpayer is the kind of person who was intended to benefit from the JobKeeper scheme; and
There is nothing to be achieved by denying the taxpayer access to the JobKeeper payments to make a point about the desirability of obtaining an ABN.
According to the ATO, the discretion to allow the cashflow boost in cases where the small or medium business entity did not hold an ABN on 12 March 2020, is also a wide discretion. However, the discretions to determine ABN eligibility at a point in time or defer the lodgement due dates for tax returns or business activity statements are much narrower discretions and, consequently, not exercised often.
The ATO has said it will automatically review cases where a request for discretion was lodged but denied. However, it’s important for all eligible business participants that did not qualify for JobKeeper, or eligible employers that did not qualify for the cashflow boost because they did not meet the 12 March 2020 conditions but were carrying on a business on that date, to have their situation reassessed.