ATO takes aim at JobKeeper rorters

The Australian Taxation Office’s (ATO) second commissioner, Jeremy Hirschhorn, has warned companies receiving JobKeeper not to pay executive bonuses or increase dividends:

“There was nothing explicit in the rules for the stimulus measures that required companies to stop paying executive bonuses or from increasing dividends to shareholders, but there was a quick backlash for those companies seen to be exploiting the spirit of the measures,” ATO second commissioner Jeremy Hirschhorn said.

He told finance chiefs at The Australian Financial Review CFO Live conference on Thursday that they needed to “follow the tax law, but also follow the spirit of the law”.

“The quid pro quo in the community’s mind is that large corporates, in particular but not limited to those who accessed these schemes, will pay their share and improve their approach to tax,” Mr Hirschhorn said.

This toothless threat is akin to shutting the gate long after the horse has already bolted.

When JobKeeper was first announced in April, MB warned the scheme would be rorted by employers and used to prop up company profits. This was an obvious outcome. So why didn’t the ATO make a statement then?

Waiting until October is next to useless given a huge number of companies have already rorted the scheme by paying executives massive bonuses:

JobKeeper also drove company profits into the stratosphere in the June quarter, despite the nation-wide lockdown, while wages tanked:

This even shocked the Business Council of Australia’s Jennifer Westacott, who stated the following in early September:

“You hear of restaurants making a 75% increase in profits when they haven’t been open. That doesn’t make any sense.”

Westacott said “companies should not be paying executive bonuses if they are receiving jobkeeper” because “it wasn’t designed for that, it was designed to keep people working”…

“If I were those companies, I would exercise some very careful judgement about these. Certainly on executive bonuses, I think that companies should not do that.”

The ATO’s wet lettuce concern and finger waving – more than 6 months after JobKeeper was established – will be laughed off by businesses, some of whom have already made out like bandits.

Unconventional Economist
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Comments

  1. They write laws. Companies follow those laws with handouts.
    ATO gets angry at companies following laws

    I get it. Don’t take Govt handouts if you don’t need them. But many companies complied, not knowing what would happen in March/April.

    Now they’re supposed to just give the money back because the ATO deems it not in line with the ‘spirit of the law’?

    What’s more, JK was written such that you could claim the first round if you could show it was likely revenue would drop by 30%. It didn’t even need to happen.

    So loosely written.

    • The ATO is getting angry at people exploiting a monumentally sh!t gubbermint program. As usual you can drive a coach and horses through all the loopholes.

      “Ooooooh, you naughty people!”

      • Haven’t heard much about the Cranston case lately, I guess they’re glad for all the distractions. But then I don’t follow the news closely, so I might be missing something. (Like where that 140 odd mil went).

  2. There is no such thing as “spirit of the law”. It is up to Parliament to make better laws.

    That said, this is clearly a pre-emptive shot at those claiming JK 2.0. – “we are watching you a lot more closely this time”.

    • billygoatMEMBER

      It’s the vibe …Aussie tax law borrows from 80’s movie The Castle:)
      Great to see 2 women on that list of mostly blokes..female corruption matters

  3. Jumping jack flash

    “This toothless threat is akin to shutting the gate long after the horse has already bolted.”

    This.

    The panic button was pressed, and then after it was pressed everyone then started thinking about whether it actually needed to be pressed, and all the while everyone was getting all the benefits that flowed from the result of the panic button being pressed.

    Now they’re saying “Oi, guys, its un-Australian to take advantage of the panic button being pressed when it clearly didn’t need to be pressed for as hard and as long as it was, and we’ll wag our finger and say ‘shame, shame on you’, if we suspect you of taking advantage of our glorious leader’s knee-jerk reaction.”

    Pffft!

    Riiiiiiight.

    Why didn’t they just reimplement Rudd’s $900 cheques? Simple, and effective. It would have worked really, really well. They could have even upped it to $1000 and then say they went harder than he did.

    No super access, no jobkeeper, jobseeker, dolehider, whatever. Just $1000 in the pocket to spend. We could even spend it online while we were huddled in our houses in March.

  4. All this kerfuffle on rorters is just for optics. As intended, JobKeeper worked perfectly as BonusKeeper for Scomo’s mates.

    • Jumping jack flash

      Of course.

      Also, early access to 20K of super per person (potentially 40K per household) will put a rocket under new mortgage lending 6 months past the closing date. Probably leading up to March next year and then trailing off later. (For all those many, many people who accessed it who didn’t actually need to of course.)

      Couple this with the abolition of responsible lending.

      Its what they don’t say that really counts in the New Economy

  5. The ATO has always relied on “Voluntary Compliance” with the tax laws by the majority, through a near baseless fear of enforcement action being taken against them. It was always thus, but never more so than now. The ATO has a fraction of the staff it had 20 years ago, and no staff with audit or investigations experience. I laugh when I read about a “crackdown” on this or that, it’s all bluff.

    • They have things called computers now. It must be trivially easy to see what wages and salary a company has paid compared to a year earlier, look at jobkeeper payments and compare it to the GST flows etc.

  6. Even with laws, people don’t care. Just look at early super withdrawal program. Millions accessed it despite clear warnings from ATO that wages had to be significantly affected.

    Then there’s the Interest freeze offered by banks to people in real financial hurdles. Hundreds of thousands of mom and pop investors exploited it to freeze their loans. These people are suppose to typical goodie goodie law abiding citizens.

    Government panicked and unleashed too much fiat into the economy on such a short timescale. This is going to skew everything. People are going to blow it all and then things are going to be real dire in wave2/3 of this pandemic.