ATO “lifeline” for businesses voluntarily paying back JobKeeper money

Tax & Super Australia (TSA) welcomes the ATO helping to clarify circumstances for when JobKeeper repayments voluntarily made by a company are tax deductible — an issue first raised by TSA earlier this year. However, it says confirming the tax treatment in legislation would go further to remove ambiguity on the matter.

As reported in the media in January, some businesses, including larger businesses with high profiles, are opting to pay back to the ATO some or all of the JobKeeper payments they had received because their businesses had fared better than expected during the pandemic and returned strong profits.

At the time, TSA commended companies repaying JobKeeper if those companies determined the money was in excess of their needs. However, TSA’s tax counsel John Jeffreys also told media that the ATO or Treasurer needed confirm if these repayments are tax deductible or not. At the time, Mr Jeffreys said: “The ATO or the Treasurer should urgently clarify that such amounts are fully tax deductible — this would be in keeping with the good spirit in which the repayments have been made.”

In early March, the ATO provided some clarification on the tax treatment of voluntary JobKeeper repayments.

Commenting in the media this week, Mr Jeffreys said that although this information helps, the ATO hasn’t categorically clarified if JobKeeper repayments are tax deductible or not.

“The ATO has offered somewhat of a lifeline to businesses by saying they can deduct the repayment, so long as their reasons for making the repayment is in line with the two points given on the ATO’s website.” (These points say that: ‘… a deduction may be available if the payment is made to prevent reduction in business, or publicise and promote your business in the short-term’.)

“It could be interpreted that the ATO isn’t giving a total red or a green light for deductions, but perhaps an amber light. If you do run the amber light, the ATO is probably not likely to chase you,” Mr Jeffreys said. 

“The only way to clear the ambiguity on the issue of if JobKeeper repayments are tax deductible, is for it to be confirmed in legislation.”

“However, the ATO has, correctly, made it clear that voluntary repayments of JobKeeper amounts cannot be netted off against JobKeeper amounts received and treated as assessable income.”

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