ATO ramps up focus on COVID-19 compliance issues
The ATO will undertake a data-matching program to help identify anyone looking to exploit the COVID-19 measures including early access to super.
In a public statement, the ATO stated that it is committed to maintaining the integrity of various measures implemented by the Australian government in response to COVID-19 and that it will be using a data-matching program to help confirm eligibility and identify any false or misleading declarations.
The ATO said the data-matching program will examine JobKeeper payments to employees, sole traders or other individuals; temporary early access to superannuation; and temporary cash-flow boosts for employers.
The JobKeeper payment was introduced to help businesses significantly impacted by COVID-19 to cover the costs of their employees’ wages so those employees can retain their jobs and continue to earn income. Temporary early access to superannuation allows individuals affected by COVID-19 to access up to $10,000 of their superannuation in 2019–20 and a further $10,000 in 2020–21.
The program, the ATO said, will help it identify and address taxation risks including identity theft or misleading information included in applications to falsely obtain JobKeeper payments or temporary early access to superannuation.
The ATO said it has seen various examples of individuals deliberately misusing the COVID-19 early release of super.
“In some cases, we have stopped applications and prevented super money from being released. In other cases, we review circumstances after an application has been processed to ensure the integrity of the program,” it said.
The Tax Office said it has a variety of sources that allow it to check for claims that were made incorrectly which include Single Touch Payroll (STP), income tax returns, information reported by super funds and third-party data from agencies such as Services Australia and Home Affairs.
“Through STP, we have real-time information as to whether people are employed and how much they are being paid. Our compliance approach is based on ensuring that people have not exploited the measure,” it said.
Some of the behaviours attracting the attention of the ATO for the early release of super measure include individuals applying when there is no change to their employment or wage, artificially arranging their affairs to meet the eligibility criteria, and making false statements or fraudulent attempts to meet the eligibility criteria.
The ATO also stated that it would be paying close attention to those withdrawing and re-contributing to super for a tax advantage.
“We are investigating some cases and may consider it appropriate to apply the general anti-avoidance rule for income tax (known as Part IVA) in relation to a COVID-19 early release of super arrangement if you (or a representative) enter into a scheme mainly for the purpose of obtaining a tax benefit,” the Tax Office said.
The ATO warned superannuation members that withdrawing their super early, re-contributing that amount back into their super fund and then claiming a personal super contribution deduction, can result in a range of tax outcomes.
Depending on an individual’s circumstances, the Tax Office warned that this practice could also result in tax and superannuation implications including excess contributions tax, contributions tax, impacting their eligibility for a super co-contribution and Division 293 tax.
It also warned that where individuals enter a scheme mainly for the purpose of obtaining a tax benefit, the ATO may look to application Part IVA.
“Schemes under COVID-19 early release of super that attract our attention include artificially arranging your affairs to meet the eligibility criteria, withdrawing and re-contributing super to claim a tax deduction, and contributing an amount of super to claim a deduction and then withdrawing that amount,” it outlined.
“Where Part IVA applies to a scheme, the tax benefit obtained may be cancelled. In addition, administrative penalties and interest charges can also apply.”
The ATO said it is important that individuals ensure they comply with the eligibility rules to access their super early and their broader obligations under the taxation legislation.
“We understand that these are uncertain times and people’s circumstances change, so it is important that you keep records demonstrating your eligibility in case we need to see them,” it said.
Miranda Brownlee is the deputy editor of SMSF Adviser, which is the leading source of news, strategy and educational content for professionals working in the SMSF sector.
Since joining the team in 2014, Miranda has been responsible for breaking some of the biggest superannuation stories in Australia, and has reported extensively on technical strategy and legislative updates. Miranda has also directed SMSF Adviser's print publication for several years.
Miranda also has broad business and financial services reporting experience, having written for titles including Investor Daily, ifa and Accountants Daily.