JobKeeper eligibility loophole will tempt sole traders into rorts, accountants warn
There appears to be a large loophole in the assessment of who is eligible for the extended JobKeeper payment, and tax experts worry it is going to be exploited by hundreds of thousands of Australians.
In order to receive the full $1,200 per week in wage support, sole traders will need to show the Tax Office they are working more than 20 hours per week from Monday September 28.
“What you’re pointing out is a tempting opportunity,” Chartered Accountants tax lead Michael Croker said.
Chartered Accountants represents 120,000 number crunchers around the country.
But the profession is already expressing concerns about exactly how small businesses, particularly sole traders, will tally up their hours of work each week.
“The Treasurer announced that for sole traders that they needed to be ‘actively engaged in the business’ for 20 hours or more per week to get the higher rate,” Mr Croker explained, noting that they would otherwise only be eligible for the part-time rate of $750.
“Now, you could be washing the dishes at night and thinking about your business at the same time — that’s a very loose test.”
It might be a very loose test, but Newcastle-based hairdressing salon owner Sandy Chong said it also reflected reality.
“If you own a business, you work 24/7,” she told PM.
“There is no small business owner who leaves their business at the door when they close the door.
“They go home and they actually work on their business all of the time.
“And so I can understand that you would be washing up and you would be thinking about what it is that you need to do, how can I be resourceful at this time, and what is it that I need to do to make my business survive.
“So thinking about your business when you wash up? Yep, that’s definitely working.”
‘Always some who will manipulate the system’
The CEO of the Council of Small Business, Peter Strong, has also come to the defence of his members.
“Lots of small business people go on holidays and still work more than 20 hours per week, just by the nature of what they’re in,” he added.
But there is evidence some businesses are already gaming the JobKeeper wage subsidy scheme.
As a member of the Australian hairdressing council, Sandy Chong talks to businesses right across the country.
“For the majority of businesses that are getting JobKeeper, they’ve been really appreciative, and it’s really helped their cashflow,” she observed.
“Unfortunately there’s always some who will manipulate the system, and it does appear to be happening in some small businesses and sole traders around the country.”
She told PM some retailers were intentionally closing their doors for a couple of days to push down their turnover and meet the JobKeeper cut-off of a 30 per cent or greater fall in revenue.
“What that does of course is to reduce their income, and they’re trying to be eligible for JobKeeper until March,” she explained.
“And it’s pretty unfair when you’ve got a lot of the country trying to do the right thing.”
‘The temptation exists for everybody’
Mr Strong concedes most of the pandemic economic policies, including JobKeeper 2.0, require a degree of honesty for those applying for assistance and are open to rorting.
“What we expect to see is common sense prevail around this,” he argued.
“I think to a degree we shouldn’t make a mountain out of a molehill here.
“We’re about the economy and jobs, not about compliance and regulation.”
PM asked Mr Strong if he accepted that the design of JobKeeper 2.0 would tempt millions of Australians to rort the tax system.
“The temptation exists for everybody, whether you’re a normal taxpayer or a business owner to do these things, but in the business community, most people are quite scared of the Tax Office,” he responded.
That fear may be justified.
The ATO has established the JobKeeper Integrity Unit with the sole purpose of making sure JobKeeper goes to those who genuinely need it.
It has also, PM understands, worked with the designers of the single-touch payroll system to see if an effective way of accurately monitoring hours worked can be developed.
As to what the Tax Office can do right now to prevent rorting, PM asked the ATO for a response but did not hear back before deadline.
However, as Chartered Accountants’ Michael Croker pointed out, even if businesses do receive cash they are not entitled to, given the extraordinary pressure on all business right now, the policy is still bound to do its job anyway.
“That is the purpose of JobKeeper — to get the money out into the community and to support desirable consumer spending behaviour,” he argued.
That is, of course, assuming businesses do actually use the money.
Ms Chong fears many businesses will game the system only to stash the cash.
“Even with my own business, we’ve done quite well with JobKeeper,” she noted.
“It certainly has built up our cashflow, but we still keep that cashflow in the bank just in case we do need it.
“Because, you know, the hard thing with the pandemic is that we’re just not sure what tomorrow will bring.
“And so there are some businesses that have done really well, but they’re holding onto that cashflow just in case.”