Why we ask questions before changing payroll during COVID-19

Our role in supporting small businesses during COVID-19 is twofold. Helping navigate the various stimulus measures to maximise the entitled benefits a business receives, while also at times protecting people from themselves. Sometimes that means saying no, and this is why

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

The key message here is that the ATO will take a very dim view of businesses looking to become eligible for, or to maximise benefits that they would not ordinarily be entitled to. It reiterates 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


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 in the JobKeeper FAQs from Treasury, prior to 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 it change our approach with business

For us it's pretty clear that the ATO wants you to keep doing what you've always done. No sudden changes. Let the chips fall where they may. And for us, that's our baseline recommendation too. Remember, the ATO has information from your activity statements, and STP reporting that builds a data driven picture of what business as usual looks like for you 📡

The grey area comes in when there is a legitimate reason to change the characterisation of payments, that isn't an attempt to scheme but is a genuine use case for a business. Intention matters

If you come to us asking us to change payroll, increase amounts being paid, or register you for PAYG-W

  1. We will ask questions to understand the scenario, and your intent
  2. We may ask for written advice justifying the changes from your tax accountant
  3. We may seek outside opinion from industry bodies
  4. We will run the ruler against all information available to us from the ATO, legislation, treasury, and industry body recommendations
  5. We suggest you clarify the scenario with the ATO, and take note of their response and the receipt ID of the call

Our position as professional bookkeepers and BAS agents is simple. We are here to support you doing the right thing, and maximising the benefits you are entitled to while navigating the complexities of the stimulus measures. Our focus is on supporting and protecting your best interests and your business, not just now but into the future.

I hope you understand 😊

The views expressed here are solely the musings and opinion of the author, and aren't to be taken as advice. If you want advice on your business, please chat with your trusted advisor

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Andrew Erkins

A passion for technology and people inspired Andrew to co-found Digit. With a background in information systems, he loves business strategy and figuring out what makes things tick (and how it could tick better)

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Looking to grow your business?

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