Is your business ready for a JobKeeper audit?
SMEs continue to benefit from the Governments JobKeeper payments. However, many may not have considered the tax liability implications or associated costs they might face in the event of an audit.
When the Federal Government rolled out the $130 billion JobKeeper wage subsidy scheme on 30 March 2020, it was a much-needed lifeline for thousands of Australian businesses hit hard by the impacts of COVID-19.
However, with this economic intervention introduced so quickly to provide relief, some details such as eligibility were left slightly unclear, and potential loopholes were identified by those looking to take advantage of the system.
The Government has made it clear that those businesses receiving payments should be prepared for the possibility of being audited by the Australian Tax Office (ATO). This is to ensure there is compliance with eligibility criteria and that payments are given to employees in the way in which they were intended, including utilising existing systems such as Single Touch Payroll (STP).
Any discrepancies in JobKeeper payments and STP are likely to be queried by the ATO whether there were malicious intentions or not. In serious cases, where further investigation is required, JobKeeper payments can be withheld from a business for an extended time.
In the instance of fraud, the ATO can also make a business repay the amount they received in JobKeeper support on top of the existing criminal or administrative penalties that may be required.
Therefore, accurate record keeping will prove to be critical for all businesses receiving JobKeeper payments. Having the right insurance cover in place can also help your business avoid the added financial pressure of an audit in an already difficult time.
What is Tax Audit Insurance, and do I need it?
If the ATO suspects a discrepancy between your declared and actual financial position, you may be required to substantiate these details by providing business financial records.
Tax Audit Insurance can cover your business for the costs incurred in the event an audit (compliance or return you have previously lodged) is required by the ATO or Commonwealth, State or Territory department. This usually includes the costs of using an accountant or tax agent to respond to an audit notice and any other professional fees incurred.
Typically, the cover excludes legal fees, any fines or penalties by the ATO and audits concerning Government benefits or entitlements due to their discretionary nature. This is because the audits are more about eligibility for use of the benefits rather than validating taxes owed or declared.
However, in the current climate, some Tax Audit policies can include JobKeeper payment audits and reviews. All other COVID-19 support packages are not covered at this stage.
In general, Tax Audit cover could be considered by all businesses, as any business can be subject to an audit by the ATO for several reasons, regardless of whether you are receiving JobKeeper payments or not. However, it is especially relevant to businesses who are receiving Jobkeeper payments.
It is worth speaking to your insurance broker about how Tax Audit Insurance can help alleviate the financial pressure on your business in the event of an audit in the coming months.
How Coverforce can help
At Coverforce, we understand SMEs and the risks they face each day. That's why our expert team of insurance brokers will take the time to assess your business' individual risk management requirements and exposures and deliver comprehensive insurance solutions tailored to your specific needs.
For more information about how this type of cover can help your business, please don't hesitate to contact your local Coverforce office or call 1 3000 COVER and speak with one of our expert brokers.
The information provided in this article is of a general nature only and has been prepared without taking into account your individual objectives, financial situation or needs. If you require advice that is tailored to your specific business or individual circumstances, please contact Coverforce directly.
REFERENCES
- https://www.atb.net.au/jobkeeper-payments-will-be-under-scrutiny-by-the-ato/#:~:text=Increased%20audits%20on%20the%20way&text=The%20
JobKeeper%20payment%20runs%20for,JobKeeper%20payments%20is%20quite%20high - https://cdn2.hubspot.net/hubfs/2597761/DUAL%20Australia/AUS%20Assets/AUS%20Documents
/AUS%20FAQ%20and%20Fact%20Sheets/DUAL%20Australia%20Tax%20Audit%20FAQ%2009.19.pdf?
__hstc=136095406.48ff054d2c7206bc65d4cf671d91fd00.1602040807318.1602040807318.1602
040807318.1&__hssc=136095406.1.1604458055860&__hsfp=3044015229&hsCtaTracking=7b25d72a-496f-4785-990a-3531712a0404%7C0e49ecd4-6855-48a9-acd6-b1e5f955ec5f - https://www.accountantsdaily.com.au/sponsored-features/14298-jobkeeper-payment-audits-and-reviews-are-covered-by-audit-shield
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