More than 6500 applications for JobKeeper have been rejected by the Australian Taxation Office since the program commenced, either due to ineligibility or fraud, and thousands more Australians could have their payments docked.
As the federal government undertakes a review of its $70 billion JobKeeper wage subsidy, the ATO told ABC News 3000 staff would do ongoing reviews of JobKeeper applications.
These “compliance verification” reviews were also happening in relation to other COVID-19 related stimulus measures.
If deliberate manipulation is detected, it could result in payments being docked, hefty fines and even jail time.
About 3.3 million Australians are accessing the $1500 fortnightly wage subsidy.
As of June 4, the ATO had delivered almost $13 billion in JobKeeper payments to 872,482 businesses, which covers about 3.3 million employees.
“At any particular time, we are reviewing between 2 and 3 per cent of JobKeeper applications,” a ATO spokeswoman said
“We will identify those who are intentionally defrauding the system and we will use the full force of the law [to punish them].”
She said the 6500 applications rejected were for a range of reasons, from people making genuine errors to fraudulent behaviour.
The ATO has also written to 8000 businesses warning them they might have to repay JobKeeper money because they failed to provide adequate paperwork demonstrating eligibility.
“We are unable to pay businesses that do not meet the requirements of the law,” the spokeswoman said, but noted the letter suggests that if a business owner believes they meet the entitlement criteria they should phone the ATO.
“The ATO will work with business owners to avoid and overcome honest mistakes,” she said.
The Australian Federal Police was also leading ongoing criminal investigations into “suspected fraudulent activity impacting the government’s COVID-19 stimulus package”.
“The matters are priority operations of the Serious Financial Crime Taskforce, which the ATO leads,” the ATO spokeswoman said.
“These investigations are ongoing and so we cannot any further comment, at this stage.”
ATO audits could mean more JobKeeper payments docked
The federal government has said it will report on the JobKeeper review as part of Treasurer Josh Frydenberg’s economic update on July 23.
Currently, to access the payment, employers and sole traders need to declare each month that they meet eligibility criteria.
The fortnightly wage subsidy is paid to employees if a business with turnover of $1 billion or less has has had a 30 per cent fall in turnover.
Employers with more than $1 billion turnover need to demonstrate a 50 per cent fall and ACNC-registered charities need to show a 15 per cent fall.
ATO Deputy Commissioner Will Day said that with so many Australians impacted by COVID-19, the ATO’s priority was to ensure payments got to those who need them.
He said the ATO was watching out for dodgy claims and entities manipulating their turnover to satisfy the decline in turnover test.
“The agency has already seen some examples of fraud and fraudulent attempts or people developing schemes to try to steal money from the community,” Mr Day said.
Tax Institute senior tax counsel Bob Deutsch said while 6500 appeared to be a low figure in the context of 3.3 million employees accessing the payment, it was still early days.
He said because Australia’s system relied on self-assessment, the ATO would be unable to immediately detect cases where there was deliberate manipulation of turnover to fall within the criteria. But this could be borne out in future reviews and audits.
“If there are people really playing games, they’d be doing it in such a fashion that it wouldn’t be immediately detected by the ATO,” Mr Deutsch said.
“If they’ve manipulated the figures by deferring invoices to a later month – that wouldn’t get picked up by an application by the ATO – it would only get picked up subsequently by an audit.
“No doubt that [ATO audits] will happen in the next six to 12 months.”
Early super access scheme applications also under watch
The ATO has also seen evidence of attempted rorting of the Morrison government’s COVID-19 early release of super scheme.
The scheme had allowed eligible members to withdraw $10,000 last financial year and people will be able to withdraw another $10,000 in the 2021 financial year.
At the end of June, more than $17 billion worth of superannuation money had been paid out to 2.3 million Australians.
To be eligible, people must have had their working hours reduced by 20 per cent or more, or be sole traders whose turnover has fallen by at least 20 per cent.
Early on, the ATO did not always conduct income checks before approving withdrawals, allowing fraudsters to steal some Australians’ superannuation through the scheme.
Mr Day said the ATO had also received intelligence about “a number of dodgy schemes, including the withdrawal of money from superannuation and re-contributing it to get a tax deduction”.
“If someone recommends something like this that seems too good to be true, well, it probably is,” Mr Day said.
“It’s important to carefully check eligibility requirements before applying for any of the measures.”
An ATO spokeswoman said they were reviewing those applications and could not provide data on how many were deemed ineligible of fraudulent.
Self-employed lobby worried audits will bring ‘mayhem’
Self Employed Australia’s executive director Ken Phillips told a federal parliamentary tax and revenue committee hearing last week that he was worried innocent sole traders could be caught up in the ATO audits.
“I am predicting a blow-up of enormous proportions here that is going to cause mayhem, particularly through the small business community,” he said.
“The ATO have said that they’ll be taking JobKeeper away for people who manipulate the turnover.
“We are predicting that there is going to be considerable strife in this area with the ATO’s audits.”
Mr Phillips said the issue was each stimulus measure area the ATO was targeting was open to wide interpretation, and if the agency declared someone was a fraudster that person’s ability to have independent appeal was almost non-existent.
Under another federal government COVID-19 stimulus measure, eligible not-for-profits and small businesses can receive a tax-free, cash payment of between $20,000 and $100,000.
Mr Phillips said there will have been “a vast number of people – probably several hundred thousand – who will have received the cash flow boost but, under the legislation, should not have received it”.
“If that’s the way it pans out, that’s fine, but I believe that these people are then going to get audited and we’re going to have a whole lot of trouble in this area,” he said.
Mr Phillips told ABC News the ATO did 530,000 automated audits in 2018-19 that raised further money, but none of these audits could be checked, which made it like another ‘robo-debt’ debacle situation.
“The scale of automatically-generated audits coming out of the ATO, is mind-boggling,” Mr Phillips said.