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Good news for small businesses people who missed out on economic stimulus




Small business people who had their applications for COVID-19 economic stimulus JobKeeper (JK) and Cash Flow Boost (CFB) rejected by the ATO may get their cash after a landmark court decision has forced the ATO to broaden its application of rules that knocked some business people out of contention.

Jeremy Apted, a property valuer, took ATO to task over its narrow definition of the laws around granting JK and CFB and won. COSBOA welcomes the news. It is a win for common sense and great news for many small businesses that missed out. The court was critical of the ATO not using its “commissioner’s discretion,” a power designed to keep matters out of court.

The ATO will now actively review all similar cases that were rejected and write to the business people directly with advice regarding their applications. The ATO has committed to being proactive and responsive.

Last year COSBOA appealed to the ATO to look more broadly at the issue of exercising the commissioner’s discretion and estimated about 9000 business people had been impacted. Based on COSBOA’s estimations the reject review will increase the program’s cost to government by a sliver, but it will mean everything to affected businesses.

For such a huge and positive initiative, it seemed grossly unfair that some business missed out, through no fault of their own, but from a very strict application and interpretation of the rules.

COSBOA and many other organisations representing small businesses advocated for a broader exercise of discretion, especially in other cases where there is a clear case of a business operating (having a taxable supply) and meeting the intent of the economic stimulus (a 30% decline in revenue) but due to an oversight or extenuating circumstances, had failed to meet the strict times required for submitting a Business Activity Statement (BAS) or possessing an Australian Business Number (ABN).

Both JK and CFB were designed to help businesses survive COVID-19. JK supported around 3.5 million workers in 900,000 businesses in the first six months of operation and will cost the Government upwards of 100 Billion over two years of operation. Early government analysis up to 30 November 2020 indicates 806,635 employers received CFB totalling $34.31 billion. The average credit to a business was $21,105. Of this, $25.66b was a credit against tax and $8.65b was a cash refund. The ATO calculates the businesses participating provided 8.62 million jobs to 6.53 million people and 81% of recipients were small businesses.

JK and CFB programs were implemented quickly early in 2020 as an urgent response to a major economic crisis. The speed of deployment was a critical factor in the success of this program, but it also gave rise to a series of inevitable issues.

The problems encountered mainly concerned the eligibility criteria, with sole traders excluded from some initiatives. Some of these cases went to the Administrative Appeals Tribunal (AAT). While some larger businesses were handing out dividends to shareholders and debating whether to return millions of dollars, thousands of smaller businesses were unable to access stimulus intended to help. They not only faced difficult cashflow issues but were also stuck in arguments, appeals and producing proof to justify their circumstances to the ATO. All of which were rejected.

Sadly, some of the business that experienced this problem have closed or suffered significant downturns in income and the resulting stress on mental health, families, and community. Others did eventually get their economic stimulus and it helped them. Those that are still waiting will be contacted by the ATO as it works through the case load.

COSBOA understands the dilemna the ATO faced. It had to administer the legislation to the letter of the law according to its best interpretation and at speed. The pursual of the Apted case which was decided by the Full Federal Court in late April has changed the ATO’s position for the benefit of many small businesses.

For more information about the impact of COVID-19 on small business read The Small Business Perspective – A survey and review of the events, responses and impact of COVID-19 over 12 months from leaders representing ˜800,00 Australian small businesses.

For more information from ATO about this case,read:

Decision impact statement Commissioner of Taxation v Apted (QUD 11 of 2021 )

Law administration practice statement PS LA 2020/1 Commissioner's discretion to allow further time for an entity to hold an ABN or provide notice to the Commissioner of assessable income or supplies



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