Jassar & Manesh Pty Ltd as trustee for the Jassar & Manesh Unit Trust and Commissioner of Taxation (Taxation)
[2023] AATA 3502
•30 October 2023
Jassar & Manesh Pty Ltd as trustee for the Jassar & Manesh Unit Trust and Commissioner of Taxation (Taxation) [2023] AATA 3502 (30 October 2023)
Division: SMALL BUSINESS TAXATION DIVISION
File Number(s): 2021/9831-9832
Re:Jassar & Manesh Pty Ltd as trustee for the Jassar & Manesh Unit Trust
APPLICANT
AndCommissioner of Taxation
RESPONDENT
DECISION
Tribunal:Senior Member R Olding
Date:30 October 2023
Place:Brisbane
The decision under review is varied such that administrative penalties are remitted to nil and is otherwise affirmed.
...................................[SGD]...................................
Senior Member R Olding
CATCHWORDS
TAXATION – CORONAVIRUS ECONOMIC RESPONSE PACKAGE – JOBKEEPER – discretion to determine that an entity is not liable to repay an overpaid amount – considerations relevant to exercise of discretion – determination not made
LEGISLATION
Coronavirus Economic Response Package (Payments and Benefits) Act 2020 (Cth), ss 7, 9(4).
Coronavirus Economic Response Package (Payments and Benefits) Rules 2020 (Cth), s 7(1)(b).
Taxation Administration Act 1953 (Cth), s 14ZZK.
CASES
Jassar Manesh Pty Ltd as trustee for the Jassar Manesh Consultants Unit Trust and Commissioner of Taxation [2023] AATA 3499 (30 October 2023).
REASONS FOR DECISION
Senior Member R Olding
30 October 2023
WHAT IS THIS CASE ABOUT?
The applicant was paid $353,700 in JobKeeper payments. Of that amount, the Commissioner of Taxation determined it was not entitled to a total of $287,400.
The amount of $287,400 includes JobKeeper payments totalling $77,000 for employees for whom the Commissioner maintains the applicant did not satisfy the “wage condition”. The Commissioner says these employees were paid less than the fortnightly JobKeeper payment of $1,500. The applicant maintains the wages of these employees, which were otherwise paid by bank transfer, were topped up in cash to $1,500 per fortnight.
Aside from this amount of $77,000, the applicant accepts it over-claimed and was overpaid the JobKeeper payments. The applicant seeks an exercise of the statutory discretion to determine it is not liable to repay the overpaid amount.
The Commissioner also assessed penalties in respect of the alleged overpayments, but now accepts these penalties should be wholly remitted.
This matter was managed together, and heard sequentially, with another application (2021/8116-8117) for review of an objection to a JobKeeper decision by the same applicant company in its capacity as trustee of a different trust, the Jassar Manesh Consultants Unit Trust.
STATUTORY FRAMEWORK – THE JOBKEEPER SCHEME
The Coronavirus Economic Response Package (Payments and Benefits) Act 2020 (Cth), (“CERP Act”), s 7 provided for the making of rules governing schemes for payments to be made by the Australian Government in response to the Coronavirus pandemic.
The JobKeeper scheme established under rules made under the CERP Act provided for eligible employers to be paid a fortnightly subsidy for wages paid to eligible employees. Broadly speaking, the scheme provided for employers to be paid a fortnightly amount of $1,500 in respect of each eligible employee. It was a requirement that the employer had paid at least $1,500 to the employee, by way of wages including Pay As You Go (“PAYG”) deductions, for the fortnight.
The eligibility rules in respect of employees are contained in the Coronavirus Economic Response Package (Payments and Benefits) Rules 2020 (Cth) (“CERP Rules”), s 6. So far as relevant for this matter, the eligibility requirements included that the employee was an Australian resident (as defined).
The “wage condition” already mentioned required the sum of the amounts paid in respect of the employee for the fortnight, by way of wages and PAYG deductions, to equal or exceed the JobKeeper payment of $1,500.
There is also a threshold requirement that the employer suffered a substantial decline in turnover.[1] The Commissioner accepts that the applicant satisfied this requirement.
[1] CERP Rules, s 7(1)(b).
In addition to employees, JobKeeper could be paid in respect of an individual who was “eligible business participant” for an entity. Where, as here, the entity is a trust, it was a requirement that the individual was an adult beneficiary of the trust.
Overpayments
If JobKeeper payments were made in circumstances where the employer was not entitled to the payments, the employer is required to repay the overpaid amount.
However, under s 9(4) the Commissioner has a discretion not to require repayment of an overpaid amount. Section 9(4) provides for the discretion in these terms:
The Commissioner may make a written determination that the entity is not liable to repay an amount under subsection (2), in which case the entity is not liable to repay the amount.
In my reasons for decision in the associated matter (2021/8116-8117), I concluded:[2]
(a)A separate exercise of the discretion is required in respect of each overpayment, rather than a global decision covering the total amount overpaid across various fortnights.
(b)The Commissioner, and the Tribunal on review, must determine whether, having regard to all relevant circumstances, it is appropriate to exercise the discretion not to require repayment of the overpaid amounts.
(c)Relevant circumstances will include but are not limited to:
(i)the applicant’s explanation for claiming amounts to which it was not entitled and the plausibility of the stated reason;
(ii)whether the applicant retaining the overpaid amounts would be consistent with the fundamental nature of the JobKeeper scheme as a wage subsidy designed to encourage employers to retain existing employees; and, where it is able to be determined:
(iii)whether the applicant retained any personal benefit as a result of over-claiming JobKeeper payments.
[2] Jassar & Manesh Pty Ltd as trustee for the Jassar Manesh Consultants Unit Trust and Commissioner of Taxation [2023] AATA 3499.
THE OVERPAYMENTS
The alleged overpayments fall into four categories:
Category of overpayment
Summary of reason for overpayments
Total amount overpaid
$Applicant’s position
Wage condition
not satisfied.Five (5) employees not paid $1,500 for each relevant fortnight.
77,700
Applicant maintains the wage condition was satisfied because wages were topped up in cash.
Residency requirement not satisfied.
Eight (8) employees not eligible employees.
168,300
Applicant accepts these amounts were overpaid.
Duplicated claims.
JobKeeper claimed twice for two employees.
33,000
Applicant accepts these amounts were overpaid.
Eligible business participant condition not satisfied.
JobKeeper claimed for Mr Jassar who was not an eligible business participant because he was not an adult beneficiary of the Jassar & Manesh Unit Trust.
8,400
Applicant accepts these amounts were overpaid.
TOTAL:
$287,400
DECISION UNDER REVIEW AND ISSUES TO BE DECIDED
The Commissioner determined that the applicant had been overpaid JobKeeper payments totalling $287,400; declined to determine that the applicant is not liable to repay the overpaid amounts or a part thereof; and assessed administrative penalties in respect of the alleged overpayments.
The applicant objected against those determinations. It is the Commissioner’s decision wholly disallowing the objection that is before the Tribunal for review.
The applicant has the burden of proving the determinations should not have been made or should have been made differently: Taxation Administration Act 1953 (Cth), s 14ZZK(b)(ii). The standard of proof is the balance of probabilities.
As noted above, the applicant accepts that three of the four categories of overpayments occurred. The Commissioner now accepts the administrative penalties should be wholly remitted.[3]
[3] Respondent’s Statement of Facts Issues and Contentions dated 10 March 2023, [16(d)].
Accordingly, the issues to be determined are whether the applicant has discharged the burden of proving that:
(a)The wages of the five employees in respect of whom the Commissioner maintains the wage condition was not satisfied were topped up in cash in the relevant fortnight.
(b)A determination should be made that the applicant is not liable to repay each amount overpaid.
HAS THE APPLICANT DISCHARGED THE BURDEN OF PROVING THE WAGES CONDITION WAS SATISFIED FOR ANY OF THE FIVE EMPLOYEES FOR ANY JOBKEEPER FORTNIGHT?
Mr Yadwinder Singh and Mr Deepinder Jassar are directors of the applicant company. Mr Jassar is primarily responsible for the business conducted by the company in its capacity as trustee of the Jassar & Manesh Unit Trust and gave evidence in the current matter. Mr Singh did not.
In his affidavit dated 23 January 2023, Mr Jassar deposed:
11. The JobKeeper wage condition required the business to pass on the full amount of JobKeeper payments received from the ATO to the employees. This is what occurred, and I say that all Jobkeeper amounts were duly passed on to the employees as required by the Jobkeeper rules.
12. The payment of the Jobkeeper amounts to employees were by a mix of bank deposit and cash payments. The cash payments were taken from the daily takings and was on average about $400 per day. At the time, business was very difficult, and I was very worried and suffering from high levels of anxiety and stress. The employees were paid the full amount of JobKeeper nevertheless, in good faith, such that the business would be reimbursed by Jobkeeper payments at a point in the future.
I accept Mr Jassar’s evidence that at the time business was very difficult and he was worried and suffering high levels of anxiety and stress. The paucity of evidence and the circumstances in which it came to be provided make it rather more difficult to accept that the cash payments to the five employees were made.
The five employees in respect of whom the applicant says it topped up their wages in cash are: Amrijot Singh, Balakrishnan Jayakumar, Billy Martin, Harneet Kaur and Sant Prakash Singh.
Mr Jassar annexed to his affidavit:
(a)a letter dated 1 February 2021 said to have been signed by Balakrishnan Jayakumar confirming receipt of “JobKeeper amounts” (which Mr Jassar deposed totalled $19,500); and
(b)a combined letter, which is undated, said to have been signed by various employees – including Amritjot Singh, Billy Martin, Harneet Kaur and Sant Prakash Singh – each confirming receipt of “JobKeeper amounts” totalling $27,900.
The Balakrishnan Jayakumar letter is on “Jassar & Manesh” letterhead and purports to confirm the signatory’s former employment with the applicant and then states:
I confirm that I have received all my dues including my salary, leave entitlements, jobkeeper allowance and all other entitlements that were due to me. Some of these payments were taken by me from the business in the form of cash. My last day of work with this organisation was on 27th Sep 2020.
This letter appears to have been witnessed by three people. Neither Balakrishnan Jayakumar nor any of the witnesses were called to give evidence. The assertions in the letter were not confirmed by the signatory or able to be tested in cross-examination. Notably, the letter is in quite general terms; it does not specify the individual cash amounts paid or the date or form in which or by whom they were paid. In those circumstances, I take the letter into account but give it limited weight.
The combined letter is also on Jassar & Manesh letterhead. It is signed by Mr Jassar but not witnessed. The letter opens with:
This is to confirm the following employees have been wages into their bank accounts and in cash from 1st April 2020 to December 2020. Each employee in this letter has confirmed that they have received the following amounts –
followed by a table listing the names of 11 employees and, opposite each listed employee’s name, the total amount said to have been paid to each employee and a signature.
The amount appearing against each of the other four employees in respect of whom the Commissioner maintains the wage condition is not satisfied is $27,900.
Again, none of these employees gave evidence, so the assertions in the letter could not be tested in cross-examination. That is particularly surprising in respect of Ms Harneet Kaur who is Mr Jassar’s wife. All the more so against the context that the Commissioner had, some months before the hearing in his Statement of Facts Issues and Contentions dated 20 February 2023, set out this and other features identified as alleged deficiencies in the applicant’s evidence and that the applicant is legally represented. There was ample opportunity for the applicant to have Ms Kaur give evidence, but she did not do so, and no explanation was offered for Ms Kaur not giving evidence of receiving the alleged cash payments.
Similarly, the Commissioner’s Statement of Facts Issues and Contentions pointed out the absence of a contemporaneous record of the cash payments. Given the significance of whether the contested cash payments were made, it would be surprising indeed if the applicant’s legal advisers had not asked Mr Jassar whether the applicant maintained a contemporaneous record of the cash payments. No such record was produced or referred to in evidence until Mr Jassar for the first time in cross examination mentioned a “little notebook” said to record the cash payments.[4]
[4] Hearing transcript, P-90, line 6.
Mr Jassar did maintain that the cash top up amounts were recorded in payslips, copies of which were produced to the Commissioner and put in evidence. However, there were some unsatisfactory aspects of this evidence.
The amounts that the employees received by way of bank transfers were paid weekly. For these amounts, the applicant issued weekly payslips recording the gross pay, PAYG deductions, superannuation contributions, the net amount transferred to their bank accounts and year-to-date data in the usual way. These payslips did not record the cash payments that were said to have been made.
However, Mr Jassar gave evidence that the cash amounts were paid, not weekly like the bank transfers, but fortnightly in accordance with the JobKeeper payment scheme. The applicant put into evidence copies of printed payslips for these cash amounts. Notably, neither PAYG deductions nor superannuation contributions appear on these payslips. The applicant accepts that PAYG deductions were not paid to the Tax Office and superannuation contributions were not made in respect of the amounts said to have been paid in cash. The applicant offered no explanation for this.
Mr Jassar said that he gave these payslips to the applicant’s internal bookkeeper to include in the applicant’s payroll records. However, these amounts were not included in the single touch payroll amounts disclosed to the Commissioner.
Further, these payslips for amounts said to have been paid in cash were not produced in a timely fashion. As early as 24 February 2021, the Commissioner raised with the applicant’s accountant that the wage condition was not satisfied for these five employees. The Commissioner’s letter of 24 June 2021 advising the outcome of his review also referred to the absence of evidence of the cash payments. Copies of the payslips for the cash amounts were not included with or referred to in the applicant’s notice of objection, dated 6 August 2021, to the JobKeeper decisions. They were first produced by the applicant to the Commissioner on 15 October 2021.
Mr Jassar was not able to offer an explanation for this delay. The applicant’s external accountant, Mr Williams, who lodged the JobKeeper claims, communicated with the Tax Office in relation to the review and lodged the objection, may have been able to cast light on the reason this apparently crucial evidence was not produced earlier. However, Mr Williams did not give evidence, nor was any reason offered for why he did not do so. Likewise, the internal bookkeeper who provided information to Mr Williams may have been able to assist but the bookkeeper did not give evidence either.
Mr Jassar’s evidence regarding the cash payments also seemed to evolve over the course of the hearing. In his affidavit extracted above, Mr Jassar referred to cash amounts averaging about $400 per day. Mr Brennan, who appeared for the Commissioner, took Mr Jassar to cash payslips for seven employees dated 12 May 2020, relating to the fortnight 27 April to 10 May 2020, amounting in total to some thousands of dollars.
Mr Jassar gave evidence on the first day of the hearing that the payments for the fortnight would have been made on 12 May 2020 and the payslips were printed out on that date. The amounts were paid in cash, Mr Jassar said, because the banks were closed due to the pandemic and it was not feasible to bank takings each day. The applicant’s closing submissions indicate this practice of paying wages in cash was requested by the employees who did not want to wait until the end of the pay period and that the applicant obliged to assist the staff in that regard.
However, on the second day of the hearing, Mr Jassar said that, while the payslips indicated each payment was made on 12 May 2020 as he had stated the previous day, if there was not enough money in the safe to pay the amount he would “make a note” and pay the remaining amount on the following day. The amount on the payslip did not reflect the amount actually paid on the date of the payslip in those cases. In this evidence, Mr Jassar said:[5]
I can’t give like five, six grand a day to my staff in the one time, but it’s recorded on the same day.
[5] Hearing transcript, P-92, lines 31-32.
On Mr Jassar’s account, he was personally handing over cash, amounting at times to over $1,000, to individual employees. However, he did not, he says, ask the employee to sign a copy of the payslip said to have been provided to them or any other record to acknowledge their receipt of these significant amounts of cash.
The Commissioner submitted that I should make a positive finding that Mr Jassar’s evidence regarding the top up payments said to have been made in cash is untruthful. I do not make that finding. However, in view of the unexplained shortcomings in the evidence set out above, I am not persuaded on the balance of probabilities that the payments were made. It follows that the applicant has not discharged the burden of proving the cash top up payments were made.
Accordingly, the amount of $77,700 relating to the five employees in respect of whom the Commissioner asserts the wage condition was not satisfied must be taken to have been overpaid. I will therefore treat the applicant’s submission that the Tribunal should determine the applicant is not liable to repay overpaid amounts as relating, in aggregate, to the whole of the amount of $287,400.
HAS THE APPLICANT DISCHARGED THE BURDEN OF PROVING A DETERMINATION SHOULD BE MADE THAT THE APPLICANT IS NOT LIABLE TO REPAY ALL OR PART OF ANY AMOUNT OVERPAID?
Some observations regarding the conduct and context of the case
In accordance with usual Tribunal practice, the parties exchanged Statements of Facts, Issues and Contentions before the hearing. The applicant did not respond to criticisms of alleged deficiencies in the applicant’s evidence set out in the Commissioner’s Statement of Facts, Issues and Contentions by filing further evidence.
At the hearing, after opening submissions and the close of evidence, and at the request of the parties, I made directions for the filing of written submissions. I also indicated to the parties that, if they so desired, the Tribunal would return for further oral closing submissions.
The directions provided for the applicant to file its closing submissions first, followed by the respondent. Although again the respondent’s submissions made various criticisms of alleged deficiencies in the applicant’s case, the applicant expressly elected not to take up the opportunity, provided in the directions, to file submissions in reply and did not take up the opportunity offered by the Tribunal to supplement written submissions with further oral submissions.
The context in which the burden of proving a favourable exercise of the discretion not to require repayment of the overpaid amounts falls upon the applicant is that the applicant company in this application seeks a decision not to require repayment of $287,400 which it wrongly claimed and received from the Commonwealth. The overpayments included JobKeeper payments relating to various employees over multiple fortnights including double claiming for two employees in two fortnights.
The amounts which the applicant wrongly claimed and received and seeks to retain are substantial. The total amount for which such a decision is sought is $287,400. Even the least favourable of the alternative decisions put forward by the applicant would have the applicant retaining $154,417.20 which it wrongly claimed contrary to the CERP Rules.
The decision sought is a departure from the usual position that overpayments must be repaid. Given the substantial amounts involved and the burden the applicant bears in the proceeding, the relative dearth of evidence supporting the applicant’s case was surprising.
For instance, the applicant’s case significantly hinges on a submission that the overpayments resulted from innocent errors and that retention of the overpaid amounts would be consistent with the objects of the JobKeeper scheme. In that regard, the applicant specifically relies on an assertion that it employed an internal bookkeeper and an external accountant to assist in the conduct of its affairs.
It seems the applicant relied upon internal staff in maintaining relevant records and assembling JobKeeper claims. The bookkeeper did not give evidence, nor was any explanation for his absence offered.
Similarly, submissions regarding the financial impact of the applicant being required to repay the overpaid amounts were unsupported by authoritative financial data or testimony. Not surprisingly, such material as was filed by the applicant, such as unsigned draft financial statements, could not be explained by Mr Jassar. Again, the external accountant was not called to give evidence.
I do not draw particular inferences from the absence of these witnesses as to the evidence they may have given. However, the applicant’s task of persuading the Tribunal that it should not be liable to repay the overpaid amounts is more challenging when the circumstances in which they arose have not been fully explained.
I elaborate on these issues in the discussion of the applicant’s submissions below.
Consideration of the applicant’s submitted reasons for exercise of the discretion.
The applicant put forward seven reasons why it submitted the Tribunal should exercise the discretion in its favour. The seven reasons are:[6]
[6] Applicant’s outline of submissions dated 15 June 2023, [16].
(a)the Taxpayer’s use of the JobKeeper payments was consistent with the JobKeeper program’s objectives in that any employees who left during the period did so of their own volition or, in limited circumstances, for cause;
(b)the Taxpayer passed on the amounts received to the Taxpayer’s employees;
(c)the Taxpayer’s passing on the Jobkeeper payments was both:
(i) in advance of its receipt of payments from the Commissioner; and
(ii) in excess of amounts received from the Commissioner,
such that the Taxpayer was out of pocket, to the employees’ collective benefit, both in actual funds expended in and the time value of funds expended;
(d)the Taxpayer’s financial position is that it would not have survived the pandemic period without the Jobkeeper payments and it will not now survive if obliged to repay the Relevant Amount, with obvious consequences for staff, customer [customers], and businesses engaged with the Taxpayer and the regional economy of Cairns;
(e)although misunderstood, the Taxpayer’s understanding of the application process was that the Commissioner applied an audit procedure before paying the amounts such than any ineligibility would have been detected and prevented the payments being made;
(f)the Taxpayer used internal bookkeepers (Daurav Batra) (sic) and an external accountant to properly assist in the conduct of its affairs; and
(g)any errors were unintentional.
I address the applicant’s seven submissions below before turning to evaluate, against the background of my responses to the seven submissions, each of the alternative decisions proposed by the applicant. It is convenient to consider submissions (a), (b) and (c), and submissions (e), (f) and (g) together.
Applicant’s submissions (a)-(c)
The Applicant submits that:
(a)the Taxpayer’s use of the JobKeeper payments was consistent with the JobKeeper program’s objectives in that any employees who left during the period did so of their own volition or, in limited circumstances, for cause;
(b)the Taxpayer passed on the amounts received to the Taxpayer’s employees;
(c)the Taxpayer’s passing on the Jobkeeper payments was both:
(i) in advance of its receipt of payments from the Commissioner; and
(ii) in excess of amounts received from the Commissioner,
such that the Taxpayer was out of pocket, to the employees’ collective benefit, both in actual funds expended in and the time value of funds expended;
It was not an objective of the JobKeeper scheme that employers would be subsidised in excess of the wages paid to an employee for a fortnight.[7] It may be that the applicant’s receipt of overpaid amounts for these employees assisted it in retaining other employees. However, it could not be said that receiving amounts greater than $1,500 per employee per fortnight for employees, or where those amounts exceeded the wages paid to the employee, is consistent with the objective of the JobKeeper scheme. The applicant’s overclaiming effectively cross-subsidised wages of other employees and other business expenses.
[7] The objects of the JobKeeper scheme are addressed in more detail in Jassar & Manesh Pty Ltd as trustee for the Jassar Manesh Consultants Unit Trust and Commissioner of Taxation [2023] AATA 3499.
Applicant’s submission (d)
The Applicant submits that:
(d)the Taxpayer’s financial position is that it would not have survived the pandemic period without the Jobkeeper payments and it will not now survive if obliged to repay the Relevant Amount, with obvious consequences for staff, customer [customers], and businesses engaged with the Taxpayer and the regional economy of Cairns;
Mr Jassar asserted in his affidavit filed in the proceedings that:
If the Jobkeeper payments are required to be repaid, the business will not survive and will need to shut down all the employees will be terminated which will also adversely impact the local communities of Cairns and Trinity Beach who rely on the supermarket.
There is no evidence in support of Mr Jassar’s contention regarding the impact closing down the business would have on the local communities of Cairns and Trinity Beach. It is to be expected that there are other supermarkets serving these communities. In any case, there is nothing in the evidence to suggest that other competitors would not fill any service gaps caused by the applicant closing down business. I give little weight to this evidence.
There is no evidence on which an accurate assessment of the applicant’s current ability to repay any or all of the overpaid amounts could be made beyond the applicant’s assertion. The applicant produced financial statements for the 2021/22 financial year which are unsigned and uncertified by the applicant or its accountant.
Further, there are aspects of the financial statements that would call for an explanation Mr Jassar was unable to provide. For example, the trustee appears to have paid down a loan to unitholders of $500,000 during the financial year. Additionally, the trustee was paid a consulting fee of $76,000. Mr Jassar was unable to cast any light on these matters.
In any case, the financial statements produced do not provide a current picture of the applicant’s financial position. It is surprising that an applicant seeking to have a debt of almost $300,000 waived and that apparently considers its financial position to be relevant to that decision, would not put on evidence upon which the Tribunal could make a realistic assessment of the true financial position.
Applicant’s submissions (e)-(g)
The Applicant submits that:
(e)although misunderstood, the Taxpayer’s understanding of the application process was that the Commissioner applied an audit procedure before paying the amounts such than any ineligibility would have been detected and prevented the payments being made;
(f)the Taxpayer used internal bookkeepers (Daurav Batra) (sic) and an external accountant to properly assist in the conduct of its affairs; and
(g)any errors were unintentional.
The assertion in paragraph (e) is supported by Mr Jassar’s affidavit evidence. The difficulty with that evidence is that, even if accepted, it does not explain why the applicant came to make the errors it made. It does not, for example, explain how double claiming occurred in two fortnights.
Overall, this issue suffers from the dearth of evidence alluded to earlier. It may be that the internal bookkeeper could have cast light on how the applicant came to claim very substantial amounts to which it was not entitled. The Tribunal did not have the benefit of such an explanation. Nor are there facts on which any relevant favourable inference could be drawn.
The applicant’s mere assertion that “any errors were unintentional” is also unsatisfactory. It was not able to be tested by evidence from the bookkeeper who apparently prepared the claims.
The applicant also submitted the following consideration “weighs heavily in favour of exercising the discretion”:
Contextually it is also relevant that the Relevant Amount is 81% of the amount paid, showing that the Taxpayer did not claim Jobkeeper when ineligible to do so, but that a minority of the claimed (sic) – in complex systems with details (sic) rules - are subject to dispute.
Self-evidently, that “the Taxpayer did not claim Jobkeeper when ineligible to do so” is incorrect. Additionally, I am unable to see how over 80% of an amount claimed being ineligible “weighs heavily” in favour of the exercise of the discretion. If anything, it would support an inference that the applicant was negligent in the preparation of its claims or indifferent to whether they were valid claims.
I accept that there was a degree of complexity in the eligibility rules. However, there is no evidence that Mr Jassar read the rules or engaged with them in any substantial way. It is to be expected that the applicant’s external accountant and bookkeeper would have been across the rules and advised Mr Jassar but there is no way of knowing in the absence of evidence from either of those gentlemen.
Consideration of the applicant’s alternative submissions regarding amounts to not be required to be repaid
The applicant put forward cascading alternative amounts it submits should not be required to be repaid, as follows:
(a)$287,400 i.e. the applicant would not be liable to repay any part of the overpaid amount.
(b)$254,079.56 i.e. the applicant would only be liable to repay $33,320.44. This amount relates to the five employees in respect of whom I am not satisfied the wage condition was satisfied. It is calculated as the total of the amounts by which the JobKeeper payments to those employees exceeds the wages paid to them by bank transfer (plus PAYG deductions).
(c)$177,074.81 i.e. the applicant would only be liable to repay $110,325.19. This amount is calculated as the total amount over the entire period by which, on a per employee basis, the JobKeeper payments exceeded wages paid to the employees by bank transfer.
(d)$151,417.20 i.e. the applicant would only be liable to repay $135,982.80. This amount is calculated as the amount calculated on a per employee and per fortnight basis by which JobKeeper payments exceeded wages paid to the employees by bank transfer.
These are considered in turn below.
Proposition (a): Applicant not liable to repay $287,400
Under this proposition, no part of the overpaid amount would be liable to be repaid. The applicant submitted this is appropriate on the basis that the total wages paid to all employees during the relevant period exceeded the total amount of JobKeeper payments received and it would be harsh to refuse to exercise the discretion.
Acceptance of this proposition would, in my view, be inconsistent with the subject matter and scope of the JobKeeper scheme which, as noted, was a scheme to subsidise the wages of existing employees to encourage their retention by employers until the pandemic crisis passed. To the extent that double claims were made, that is certainly not consistent with the objects of the scheme.
Nor do I see this as a case where the applicant could be said to have not benefitted from the overpayments. The amounts received were not set aside for payment to employees but rather formed part of the applicant’s operating funds. The applicant self-evidently benefitted to the extent of some $287,440. That its funding was enhanced by the wrongful claiming and receipt of these amounts, and that expenditure made from the applicant’s funds included wages paid from operating funds, does not detract from that conclusion.
Additionally, I consider it would be an improper exercise of the discretion, or at least one which on the merits I would not be prepared to make, for liability for the whole of the overpaid amount to be waived in circumstances where the applicant has not provided the Tribunal with a full picture of the circumstances giving rise to the overpayments.
In those circumstances, I am not persuaded that the applicant should be relieved from the obligation to repay the whole of the amount of $287,400 which it claimed contrary to the JobKeeper rules.
Proposition (b): Applicant not liable to repay $254,079.56
Under this proposition, only the amount of $33,320.44 - relating to five employees for whom JobKeeper payments were made but whose wages I have not accepted were topped up with cash payments – would be liable to be repaid. The balance would not be repaid, apparently for the reason put forward for alternative (a) above.
The reasons set out in relation to the applicant’s proposition (a) apply in relation to this proposition.
Proposition (c): Applicant not liable to repay $177,074.81
Under this proposition, only $110,325.19 would be required to be repaid.
Rather than calculating wages and JobKeeper paid on a global basis for all employees over the relevant period, this calculation is said to be derived by reference to the total wages and JobKeeper paid on a per employee basis over the relevant period. The excess of total JobKeeper payments over total wages paid, calculated on a per employee basis but for the whole of the relevant period, is $110,325.19.
This proposition would effectively result in wages paid to individual employees being subsidised to a greater extent than $1,500 per fortnight, in contrast to the limited support available to other businesses that complied with the JobKeeper rules.
For these reasons, and those indicated in respect of proposition (a), I am not persuaded that a decision to not require repayment of $177,074.81 is appropriate.
Proposition (d): Applicant not liable to repay $387,359.69
Under this proposition, the amount required to be repaid would be $135,982.80.
The calculation of this amount is similar to the calculation under proposition (c) except that it is made on a per employee and per fortnight basis. The amount of $135,982.80 is the excess of JobKeeper received over wages paid each fortnight to each employee.
I acknowledge the case for this proposition is stronger since it would not have the applicant retaining amounts where the employees had not received an equivalent amount in the relevant fortnight. However, as with all of the propositions, on the evidence before the Tribunal I am unable to make proper assessment of the circumstances leading to the overpayment. Even under this proposition, the applicant asks to be relieved from repayment of a substantial amount but has not provided a proper explanation of how the wrongful claims came to be made. As already noted, the internal bookkeeper and the external accountant, who may have been able to cast light on this, did not give evidence.
In respect of all of the alternatives put forward, I consider it would not be an appropriate exercise of the s 9(4) power to determine that large overclaimed amounts need not be repaid in the absence of a proper explanation for how the overpayments occurred. For this and the other reasons outlined above, on the evidence before me I am not persuaded the applicant has discharged the burden of proving a decision that any part of the overpaid amount should not be required to be repaid should be made.
DISPOSITION OF THIS MATTER
As indicated above, the Commissioner disallowed the amount of $287,400 claimed by the applicant and assessed administrative penalties; and disallowed in full the applicant’s objection against those decisions.
For the reasons indicated, so far as it relates to the overpayment and the refusal to exercise the s 9(4) discretion, the objection decision should be affirmed. The decision should be varied to give effect to the Commissioner’s concession that the administrative penalties should be remitted in full.
I certify that the preceding 90 (ninety) paragraphs are a true copy of the reasons for the decision herein of Senior Member R Olding
..........................[SGD]..........................
Associate
Dated: 30 October 2023
Date(s) of hearing: 23 May 2023 Date final submissions received: 29 June 2023 Counsel for the Applicant: Mr M Bennett Solicitors for the Applicant: CharterLaw Legal Counsel for the Respondent: Mr V Brennan Solicitors for the Respondent: ATO Litigation & Legal Services
Key Legal Topics
Areas of Law
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Tax Law
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Statutory Interpretation
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Equity & Trusts
Legal Concepts
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Statutory Construction
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Remedies
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Appeal
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Procedural Fairness
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