Why are some businesses returning JobKeeper to the ATO?
Super Retail Group – owner of the Supercheap Auto, Rebel, BCF and Macpac brands – handed back $1.7 million in JobKeeper payments in January after releasing a trading update showing sales growth of 23% to December 2020. Toyota announced that it will return $18 million in JobKeeper payments after a record fourth quarter. And, Domino’s Pizza has also handed back $792,000 of JobKeeper payments.
Toyota, Super Retail Group, and Domino’s were not obliged to hand back JobKeeper. Under the rules at the time, the companies qualified to access the payment.
However, Toyota CEO Matthew Callachor said:
“Like most businesses, Toyota faced an extremely uncertain future when the COVID-19 health crisis developed into an economic crisis …We claimed JobKeeper payments to help support the job security of almost 1,400 Toyota employees around Australia ….In the end, we were very fortunate to weather the storm better than most, so our management and board decided that returning JobKeeper payments was the right thing to do as a responsible corporate citizen.”
Domino’s Group CEO and Managing Director, Don Meij said:
“We appreciate the availability and support of JobKeeper during a period of significant uncertainty. That period has passed, the assistance package has served its purpose, and we return it to Australian taxpayers with our thanks.”
Companies that received JobKeeper and subsequently paid dividends to shareholders and executive bonuses have come under scrutiny.
The first phase of JobKeeper did not require business to prove that they had actually suffered a downturn in revenue, just have evidence turnover was likely to drop in a particular month or quarter.
For many businesses, early trends indicated that the pandemic would have a devastating impact on revenue. Many also took action and prevented the trend entrenching by actioning plans to protect their workforce and revenue. The fact that business improved, does not impact on initial JobKeeper eligibility. In the first phase of JobKeeper, employers were not obliged to stop JobKeeper payments if trends improved.
Speaking at the Senate Select Committee on COVID-19, ATO Deputy Commissioner Jeremey Hirschhorn stated that the ATO rejected some $180 million in JobKeeper claims pre-issuance. Approximately, $340 million in overpayments have been identified. Of these, $50 million were honest mistakes and will not be clawed back where the payment had been passed on to the employee.
Where the ATO determines that JobKeeper overpayments need to be repaid, they will contact you and let you know the amount and how the repayment should be made. Administrative penalties generally will not apply unless there is evidence of a deliberate attempt to manipulate the circumstances to gain the payment.
Taxpayers can object to the ATO’s JobKeeper overpayment assessment. If you are contacted by the ATO, please contact us immediately for assistance and we will work with the ATO on your behalf.
Tax treatment of JobKeeper payments handed back to ATO
The ATO has clarified the tax treatment of JobKeeper payments handed back to the Government. The clarification comes after the Super Retail Group, Dominos Pizza and Toyota collectively returned more than $20 million in JobKeeper payments after reporting exceptional trading results.
Where a business has handed back JobKeeper despite qualifying for the payments, the ATO states that:
- JobKeeper payments returned to the Government are still included in assessable income, and
- The returned payments may be deductible in limited circumstances if the repayment is to a achieve the business’s objectives. For example, if the media exposure from the returned payment generates goodwill for the business or publicises the business, or the repayment prevents a downturn in business activity.
The message is, if you are returning JobKeeper payments voluntarily, make the decision public. If no one knows about the repayment then it is unlikely to be deductible. If your business decides to hand back JobKeeper despite being entitled to the payments, special arrangements will need to be put in place with the ATO as the repayments are treated differently and require a special payment reference number.
We note that if your business and your employees qualified for the first tranche of JobKeeper payments, you are under no obligation to return the money if trading conditions were better than the estimate you provided to the ATO.
Please contact us if you have any questions regarding JobKeeper.