‘Incompetent’: Frydenberg attacked over jobkeeper after profit warnings from ATO revealed
Labor has attacked Josh Frydenberg over the handling of jobkeeper, after it emerged the federal treasurer was warned last year that 950 businesses on the scheme had made revenues during the pandemic that were “significantly” different from their projections.
The Australian Tax Office also warned Frydenberg in July 2020 that big businesses and tax agents were “amending” prior sales records to potentially help them qualify for wage subsidies during the pandemic. It wasn’t until October that the eligibility criteria was tightened.
The revelation is contained in a ministerial submission from the ATO’s deputy commissioner, James O’Halloran. It was produced under freedom of information and first reported in the Australian Financial Review.
A further September 2020 submission shows small businesses mistakenly thought actual declines were needed to qualify, a finding which suggests some may have not claimed the payment despite being eligible.
The shadow treasurer, Jim Chalmers, on Tuesday seized on the report as further evidence of “incompetent implementation”, as the treasurer “was warned that big multinational corporations were behaving in suspicious ways” in claiming jobkeeper.
The $90bn jobkeeper subsidy has come under increasing scrutiny, particularly over the government’s failure to legislate a clawback mechanism to recoup wage subsidies from companies that went on to increase revenues.
Labor and the Senate crossbench are seeking greater transparency around companies with annual turnover of more than $10m and received jobkeeper, after a string of eligible companies were shamed into paying subsidies back after increasing sales.
The ATO submission reveals it was monitoring alleged “turnover manipulation” to qualify for the scheme, which was later revamped to require businesses to suffer an actual decline in turnover to receive funding.
In the first phase, jobkeeper applicants could qualify based on a projected 30% reduction in revenue compared to the same month, or quarter, a year earlier, with 50% downturns required for big businesses and “significant global entities”.
The ATO wrote that in early compliance work it found “a number of jobkeeper applicants have shown a fall in sales in the application month, but with subsequent months showing substantial increases”.
The tax office identified 40 tax agents “who appear to have engaged in concerning behaviour” including adjusting revenues in comparison periods or reporting a decline in turnover in the month of the claim before a “sharp recovery in a subsequent period”.
It said 948 businesses had “actual turnover … significantly divergent from the projected decline”.
After contacting significant global entities attempting to claim the payment based on a 30% turnover decline, some “volunteered to repay” the money, while others qualified “notwithstanding their mistake” because they demonstrated they had suffered a 50% decline.
In its September 2020 submission, the ATO found “many entities were severely impacted by Covid -19 in the early months, but have rebounded quickly in the later months”.
“We have also identified many instances where entities made reasonable projections but actual decline did not eventuate.”
It also found a “strong indication that small businesses believe they need an actual decline in turnover rather than a projection”.
Neither of the memos were marked as requiring further action.
Frydenberg has said the treasury did not recommend changes in the first six months of the program.
He has also defended the jobkeeper program, claiming that businesses may not have claimed wage subsidies if they could be later forced to pay them back.
“Treasury analysis has shown that 99% of the businesses that did not experience the anticipated fall in turnover were small businesses, with an average of just four employees,” he said on Tuesday.
“Jobkeeper was a key part of the government’s economic plan to save jobs and keep businesses in business during the pandemic.”
Data from the independent Parliamentary Budget Office reveals that $8.4bn was paid to 195,000 businesses that increased their turnover from July to September 2020 compared with the same quarter the year before, on top of $4.6bn to entities that were better off from April to June.
According to research by Ownership Matters, 34 of Australia’s largest companies claimed jobkeeper wage subsidies in the second half of 2020 despite actually improving their earnings on pre-pandemic levels, pocketing a total of $284m.
In September, the ATO revealed it had reviewed the eligibility of 1,600 entities for jobkeeper, including 480 large businesses, and found 95% were eligible.
The ATO told a Senate inquiry it had stopped more than $767m being paid through eligibility checks during the scheme.
“We have identified $470m in overpayments of which we have recovered $194m and are pursuing $89m, with $6m in dispute; and have determined not to pursue $180m,” it said.
Frydenberg on Tuesday afternoon released a statement saying he was in isolation after a staff member tested positive for Covid. The treasurer said he had received a negative result but was remaining in isolation until further notice.