Things to consider before making changes to payroll during Coronavirus

We pride ourselves in supporting small businesses during the current COVID-19 crisis.

Helping navigate the various stimulus packages to maximise the entitled benefits businesses may receive, whilst also, at times, protecting people from themselves. Sometimes that means we will need to say no.

The Tax Practitioners Board (TPB) in partnership with the ATO yesterday released a joint statement titled Working together in response to the impacts of COVID-19. It serves as a reminder to accountants and bookkeepers of our responsibilities in the profession during this troublesome time.

Working together in response to the impacts of COVID-19

As the Australian community confronts the unprecedented COVID-19 crisis, you will have seen impacts to your clients and your own business. We know you are working hard to support your clients while dealing with the impacts to your own business.

These are trying times, and we at the Tax Practitioners Board (TPB), Australian Taxation Office (ATO) and your professional associations are committed to supporting you through this difficult period.

The Commissioner has highlighted that tax professionals have always been a vital part of Australia’s tax and super systems. Now, as we work together in response to the impacts of COVID-19, our partnership is more important than ever. We all play an essential role in helping the community respond to this crisis and supporting our clients.

As you know, the intent of the Government’s relief measures is to help the economy withstand and recover from the economic impact of COVID-19 by supporting businesses to manage cash flow challenges and retain employees.

Some advisors may be grappling with the tax consequences associated with the stimulus payments, and wondering what will attract our attention. We also know that some businesses are already making changes to their business structures and employment arrangements following the stimulus announcements.

We ask that tax agents and businesses be mindful that it is not acceptable to backdate or artificially change a business structure or employment arrangements, including changing the characterisation of payments, in order to obtain a benefit or payment that would not otherwise have been paid. The TPB and ATO will take firm and swift action should this be the case.

We understand these situations can be difficult to navigate and we encourage anyone who needs advice to seek assistance from us. If you become aware of someone doing the wrong thing, report them to the TPB or the ATO or call 1300 362 829. All reports will be treated in the strictest confidence.

As trusted guardians of the tax and super systems, we all have an important role to play in helping Australia overcome these challenges. The best way forward is for all of us to work together to ensure the Government measures are applied in accordance with their intent. We are committed to supporting you during this difficult time, and ask that you support all Australians in the conduct of your practices.

What does this all mean?

The main message here is that the ATO will not take too kindly of businesses looking to become eligible for, or to maximise benefits that they would not ordinarily be entitled to. It echos the information released as part of the Cashflow Boost for Employers

… if you have been paid more cash flow boosts than you are entitled to, you will be required to repay the excess

Schemes

You will not be eligible for cash flow boosts if you (or a representative) have entered into or carried out a scheme for the purpose of:

• becoming entitled to cash flow boosts when you would otherwise not be entitled, or
• increasing the amount of the cash flow boosts

This may include restructuring your business or the way you usually pay your workers to fall within the eligibility criteria, as well as increasing wages paid in a particular month to maximise the cash flow boost amount.

Any sudden changes to the characterisation of payments made may cause us to investigate whether the payments are in fact wages. If the payments are wages, we may consider the characterisation of past payments, including whether they should have been subject to PAYGW and whether super guarantee contributions should have been made. You may also have FBT obligations that have not yet been met.

Our position on all of this is not to make changes that might bring about scrutiny from the ATO. Don’t do things you would not have ordinarily.

And from the JobKeeper Fact Sheet from Treasury, prior to it being legislated –

The Government will include appropriate integrity rules to prevent employers from entering into artificial schemes in order to get inappropriate access to payments.There are serious consequences, including large penalties and possible imprisonment, for those trying to illegally get benefits under the scheme.

How does this change our approach with businesses?

It is clear that the Tax Office wants you to keep doing things the way it has always been done. No sudden changes. And for us, that’s our starting point recommendation as well. Remember, the ATO has massive amounts of information from your activity statements, and Single Touch Payroll reporting, to build a picture of what your business usually looks like.

The difficulty arises when is a genuine reason for a change to the characterisation of payments, that is not an attempt to scheme but is a legitimate case for the business. This could be, for example, a tax planning decision. Intention means everything.

Our position as professional accountants and business advisors is simple.

We are here to support you doing the right thing by everyone involved, and maximising the benefits you are entitled to while we navigate the intricacies of the stimulus measures put forward to us.

Our primary focus is always on supporting and protecting your best interests and your business.

Not just during these rough times but also into the future.