The Inspector-General and Taxation Ombudsman (IGTO) reports in its November IGot News that its office has received an influx of complaints from a number of small businesses (as well as their representatives in the accounting and tax profession) around their eligibility for JobKeeper and Boosting Cash Flow payments.
Ombudsman Karen Payne says the IGTO office has supplied information on these issues to the relevant authorities. One of the concerns raised was essentially whether genuinely active new small businesses were being found by the ATO to be ineligible for JobKeeper and the Boosting Cash Flow measure because they lodge their BAS quarterly rather than monthly.
Both COVID-19 support measures include specific integrity rules to prevent entities being established or revived for the sole or dominant purpose of receiving these COVID-19 economic payments. The concerns, as the IGTO understands them, were that new small businesses would automatically register to lodge their BAS quarterly (rather than monthly) and therefore did not report their first sale until the first quarter of 2020 – that is after 12 March 2020.
The IGTO says an entity does not need to have received consideration in the same tax period for a taxable supply to satisfy the integrity rules – it only needs to have made the taxable supply for consideration; and a “taxable supply” can be made in a tax period where the taxpayer acquires a financial supply – for example opening a bank account, entering a bank loan, providing a guarantee or mortgaging real property (all examples of input-taxed financial supplies).
Accordingly, where a new business has “acquired” one or more of these financial supplies as part of the steps undertaken to commence an enterprise, and did so in tax periods that ended on or before 12 March 2020, then a business may be eligible (where the Commissioner exercises discretion pursuant to PS LA 2020/1 and the other eligibility criteria are met).
The IGOT says this clarification means that many new entities that were in the process of setting up and establishing their business may have made taxable supplies in tax periods ending before 12 March 2020 (and may be eligible) even though they made their first sale after December 2019.
The ATO has agreed to revisit the cases raised by the IGTO’s investigations. The ATO has also separately identified or undertaken to review other cases that may have been deemed ineligible by virtue of not reporting a sale or supply (by way of BAS lodgement) on or before 12 March 2020.