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Jobkeeper Overpayments

Now that JobKeeper is over, the only concern I hear from practitioners is about the possibility of having to pay it back. Many of us estimated a projected loss well over 30% back in March 2020 but that loss never came and they wonder whether the Commissioner is going to come after this.

Well, the Commissioner has released a fact sheet and I think you can breathe easy. 

In this fact sheet the Commissioner states that if an overpayment is identified, one of the following will occur:

  • we decide the overpayment does not have to be repaid (typically if you made an honest mistake)
  • we decide the overpayment needs to be repaid by you.
  • we decide that another entity that directly or indirectly benefited from the overpayment is also liable to repay the overpayment – when another entity is also liable, we may pursue      
    • the entire repayment from you
    • the entire repayment from the other entity, or
    • payments from you and the other entity until the overpayment is repaid in full.

He says there are many situations when you wont have to repay it! Particularly if there was an honest mistake, you fully passed on the benefit of the JobKeeper payment to the relevant employee and the mistake was made early on when there was limited guidance.

Have a look at this example from the Commissioner…

Example 2 – Employer makes honest mistake regarding employee’s eligibility

Jo is an Australian tax resident, has one job and is on a partner visa which makes her ineligible for JobKeeper payments. Jo is still working and earning $2,800 per fortnight from MedCo, a company with many employees. After registering for JobKeeper, MedCo gives each of its employees, including Jo an employee nomination notice.

Jo returns it to them on 1 May 2020. Jo continues to receive her salary of $2,800 gross from MedCo, who are then reimbursed $1,500 for JobKeeper fortnights 1 to 4 for wages paid to Jo. We identify the mistake and bring it to MedCo’s attention after the payment for fortnights 3 and 4.

As MedCo relied on Jo’s nomination notice, it will have made an honest mistake in claiming JobKeeper for Jo. We will not require repayment of the overpayment for fortnights 1 to 4.

MedCo will not receive any future JobKeeper payments for Jo.

Even if the error was identified after fortnight 4, unless there were other factors weighing against the exercise of the discretion, we would not pursue recovery from MedCo. This is because MedCo reasonably relied on Jo’s employee nomination notice and made an honest mistake about whether her visa made her ineligible to receive JobKeeper.

The Commissioner also states he will not impose administrative penalties for JobKeeper overpayments that were the result of a mistake. However, administrative penalties will apply if there is evidence of deliberate actions to get JobKeeper payments that an entity would not have otherwise been entitled to.

Example 4 – Information within the knowledge or control of the employer

Tony began employment with XYZ Pty Ltd after 1 July 2020, making him ineligible for JobKeeper payments. Tony is still working and earning $2,800 per fortnight. XYZ Pty Ltd gives Tony a nomination notice as they have given them to all staff despite him not meeting employee eligibility requirements.

Tony returns the nomination notice to XYZ Pty Ltd on 1 September 2020. Tony receives a $2,800 before tax payment from XYZ Pty Ltd per fortnight and the employer receives $1,500 for Tony for fortnights 10 to 13.

We will not waive the requirement to repay as information pertaining to Tony’s ineligibility was within the knowledge or control of XYZ Pty Ltd.

It was not reasonable for XYZ Pty Ltd to not know that Tony was not an eligible employee as they held information about his employment status as at 1 July 2020.

Finally, any General Interest Charge up to 28 September 2020 will be remitted.

Only if your estimated 30% drop was not based on honest assumptions, then there will be nothing to pay back.

By Ken Mansell

As a stay at home Dad most of the week this is my way of pretending I am still the tax counsel of ASX and SEC listed companies, working at big 4 firms, working at the Federal Treasury, on the Henry Review and at Parliament House for the previous government.

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