Tax treatment of JobKeeper payments handed back to ATO
The ATO has clarified the tax treatment of JobKeeper payments handed back to the Government.
As we wrote about in last month's client update, many Australian companies are looking or in the process of returning JobKeeper payments following a better than expected 2020.
The ATO has issued a clarification about how it will treat tax from these organisations after the Super Retail Group, Dominos Pizza and Toyota collectively returned more than $20 million in JobKeeper payments after reporting exceptional trading results.
What will happen to returned payments?
Where a business has handed back JobKeeper despite qualifying for the payments, the ATO states that:
- JobKeeper payments returned to the Government are still included in assessable income, and
- The returned payments may be deductible in limited circumstances if the repayment is to achieve the business's objectives. For example, if the media exposure from the returned payment generates goodwill for the business or publicises the business, or the repayment prevents a downturn in business activity.
The message is that if a business is returning JobKeeper payments voluntarily, make the decision public. If no one knows about the repayment then it is unlikely to be deductible.
If the business decides to hand back JobKeeper despite being entitled to the payments, special arrangements will need to be put in place with the ATO as the repayments are treated differently and require a special payment reference number.
We note that if the business and its employees qualified for the first tranche of JobKeeper payments, there is no obligation to return the money if trading conditions were better than the estimate provided to the ATO.
Does this impact your business?
If your business is considering returning part or all of its JobKeeper payments, speak to your accountant to ensure that it remains within the guidelines above. Contact the team on 02 9957 4033 or via our contac form.
This article is provided for information purposes only and correct at the time of publication. It should not be used in place of advice from your accountant. Please contact us on 02 9957 4033 to discuss your specific circumstances.