Every accountant and tax agent should be cognisant that the cash flow boost legislation contains integrity measures. For example, in subparagraph 5(1)(g) of the Boosting Cash Flow for Employers (Coronavirus Economic Response Package) Act 2020, it is stated: “Neither the entity nor any associate or agent of the entity has entered into or carried out a scheme or part of a scheme for the sole or dominant purpose of achieving any of the following:
- making the entity entitled to the cash flow boost for the period;
- increasing the amount of the cash flow boost to which the entity is entitled (disregarding this paragraph) for the period.”
For its part, the ATO says it is very aware of schemes that may be used to artificially create or inflate an entitlement to the cash flow boost. These include artificial:
- business restructures that attempt to create eligibility for the cash flow boost
- arrangements to split a business which exceeds the $50 million aggregate turnover threshold, in order to create eligibility for both parts of the business
- re-characterisation of payments into salary and wages.
The ATO says it has put in place strong integrity measures which have been designed to protect against these types of schemes. It says businesses involved in these schemes may:
- have their entitlement to the credit cancelled
- be required to repay the amount received, along with interest or penalties.
In addition, the ATO states that an adviser who helps a client to make arrangements to artificially create an entitlement for the cash flow boost:
- may have promoted a tax exploitation scheme
- could become subject to a civil penalty under its Promoter penalty laws.
What the ATO is doing
The ATO has stated that it will be actively reviewing entitlements to the cash flow boost. Its digital reporting systems, including Single Touch Payroll, can identify how many employees each business has.
“If we identify that you have entered into a scheme to artificially create or inflate entitlements to the cash flow boost you will either:
- not receive any cash flow boost
- be required to repay any overpaid amounts.”
Taxpayers and advisers who have entered into these types of arrangements will be subject to increased scrutiny, it says, and compliance action will certainly be considered.
The ATO advises that registered tax agents who advise taxpayers to inappropriately claim the cash flow boost may also be referred to the Tax Practitioners Board, which will consider whether there has been a breach of the Tax Agent Services Act 2009.
Promoter penalty laws, under Division 290 of Schedule 1 to the Taxation Administration Act 1953, may also apply to promoters of these schemes. Penalties may include:
- civil penalties of up to 5,000 penalty units for individuals
- 25,000 penalty units for bodies corporate
- impositions of up to twice the amount of consideration received or receivable.
Note that the ATO says concerned taxpayers as well as practitioners can make a tip-off to provide information about:
- a concerning cash flow boost arrangement
- promoters of these arrangements.
It says any information provided will be confidential.