On 15 Nov 2021, the Federal Court held that retrospective amendments, to the JobKeeper Rules, applied to deny 8 Australian resident companies that were sovereign entities, the right to receive JobKeeper payments. Despite the fact that legislative instruments cannot have adverse retrospective application, the taxpayers had no accrued rights, to JobKeeper benefits, as at the date the Instrument was registered.

The details were as follows.

  1. From 30 March 2020, the companies paid wages in anticipation that they would be subsidised under the JobKeeper scheme, initially on the basis of the Prime Minister’s statement on 30 March 2020 announcing the scheme and then, from 10 April until 1 May 2020, on the basis of self‑assessed eligibility under the JobKeeper Rules (which were registered on 9 April 2020).
  2. As originally made, the JobKeeper Rules allowed sovereign entities that were Australian tax residents to claim JobKeeper payments.
  3. However, the rules were amended, to exclude such entities, by a Legislative Instrument that was registered on 1 May 2020.
  4. As a result, the 8 companies were no longer eligible to receive JobKeeper payments.
  5. The Amending Instrument commenced on 1 May 2020, but the specific amendment, affecting the 8 companies was expressed to apply “in relation to JobKeeper fortnights beginning on or after 30 March 2020”.

The 8 companies contended they were entitled to the JobKeeper payments for the first 2 fortnights (30 March-12 April and 13-26 April) as the Amending Instrument operated retrospectively, thereby bringing s12(2) of the Legislation Act 2003 (Cth) into play. If a legislative instrument operates retrospectively, s12(2) preserves rights that exist at a time the instrument is registered.

Section 12(2) provides as follows:

(2)  However, if a legislative instrument or notifiable instrument, or a provision of such an instrument, commences before the instrument is registered, the instrument or provision does not apply in relation to a person (other than the Commonwealth or an authority of the Commonwealth) to the extent that as a result of that commencement:

(a)   the person’s rights as at the time the instrument is registered would be affected so as to disadvantage the person; or

(b)   liabilities would be imposed on the person in respect of anything done or omitted to be done before the instrument is registered.

The Federal Court agreed that the Amending Instrument operated retrospectively, but the problem for the 8 companies was that they had no accrued rights, as at the relevant date (1 May 2020). The Court held that an entity was not entitled to JobKeeper payments unless and until each of the 7 separate criteria in s6 of the JobKeeper Rules had been fulfilled as at that date. That was not the case here, as none of the 8 companies had complied with the requirement to give to the ATO information about their entitlement for the relevant JobKeeper fortnight, including details of the relevant employees.

(Airport Handling Services Australia Pty Ltd v CofT [2021] FCA 1405, Federal Court, O’Callaghan J, 15 November 2021) [LTN 222, 17/11/21]

[Tax Month – November 2021Previous 2021] 18.11.21

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