Tax agents need more clarity on COVID-19 relief to help businesses survive and avoid rorts

Tax agents and accountants are struggling to confidently advise financially desperate businesses if they are eligible for the Government’s COVID-19 stimulus package because of a lack of clarity around the measures, says Tax & Super Australia (TSA).

TSA also warned that a perception among parts of the business community that business relief — particularly the business cash flow boost and JobKeeper payment — was “money up for grabs” could risk many falling foul of anti-avoidance provisions.

TSA members raised uncertainty about the rules for the stimulus measures during a two-hour free webinar, which more than 400 tax agents and accountants attended.  TSA held the webinar on April 2 to meet demand for more clarity on the business stimulus package. Prior to the webinar, members submitted more than 200 questions about how the stimulus package would work in practice. A total of 680 practitioners have now accessed the webinar recording.

Members reported that their business clients were most confused about eligibility for the cash flow boost, which allows a business to access “payments” as credits through lodging activity statements.

TSA senior tax counsel John Jeffreys said that, as it stands, the cash flow boost is only available in respect of (broadly) employment related withholdings. Yet Mr Jeffreys said that this has the potential to be rorted by unscrupulous people.

“In particular, we consider there is a strong risk of falling foul of the anti-avoidance provision if someone who has not been paid salary or wages for a long period is now put on wages,” he said.

“We are also being asked about the situation where owners of a business (through trusts or otherwise) don’t pay themselves a wage. Instead they take trust distributions, receive dividends or simply draw on the profits of the business. Are they eligible under the cash flow boost legislation? The answer currently is, no they are not, unless the Government changes the provisions.”

Mr Jeffreys noted that a business tempted to manipulate the cash flow boost should understand that anti-avoidance provisions apply. “The ATO and the Tax Practitioners Board (TPB) are very aware that there are schemes being entered into to take advantage of this generous Government handout. They will expect the measures to be used fairly and correctly.”

The JobKeeper payment is also at risk of being rorted.  TSA has heard reports of blatant fraud where businesses are being encouraged to take cash only payments so they can more easily manipulate their books to show a 30% loss of business, which is a component of JobKeeper eligibility.

Until there is more definitive guidance, businesses should revert to the simple “look in the mirror test”, Mr Jeffreys said. “Look yourself in the mirror and ask yourself if you are now doing something different with your business and tax affairs for the sole or dominant purpose of obtaining the cash flow boost or another measure. If the answer is ‘yes’, then don’t do it.”

TSA expects the ATO to provide more clarity around the rules soon and is waiting on the JobKeeper legislation due this week. “Our members are under intense pressure to confidently advise business owners, many of who are in despair and on the brink of financial ruin.”

“Of course, we know that the ATO is also under immense pressure to implement these measures and is also dealing with thousands of other business and tax queries stemming from the impacts of COVID-19.”

“TSA believes, and many of our members agree, that the ATO is doing a solid job handling these pressures. We congratulate the ATO on helping businesses at this extremely challenging time.”

TSA has created a COVID-19 Essentials page that provides crucial information and practical updates to help members, businesses and the broader tax community to navigate their way through the stimulus packages. Visit the COVID-19 Essentials page.

For a PDF of the above, click here.

For further comment, please contact TSA senior tax counsel John Jeffreys:
Mobile: 0416 250 461

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