On 7 June 2021, the AAT held that a company, that claimed it had paid $107,500 in wages to a director for one week, instead of the usual $100 a week, has been denied payment of the cash flow boost. This was to get the $50k maximum benefit.
See below for further details.
The facts were that for over 5 years, the applicant company consistently reported in its activity statements wages paid to a director (an accountant and registered tax agent) of $100 a week. However, in its March 2020 activity statement, the company reported that it had paid the director wages of $108,700, comprising 12 weekly amounts of $100 and one week’s wage of $107,500 in respect of a week in March 2020.
The AAT agreed with the ATO that the company was not entitled to the first cash flow boost (maximum $50,000), which the government had announced in early March 2020.
- Firstly, the AAT was not persuaded that the company had actually paid those wages in the March 2020 quarter.
- Secondly, the AAT was satisfied that the company had entered into a scheme with the sole or dominant purpose of obtaining the cash flow boost. The director was unable to offer a credible alternative explanation for the decision to depart from the established pattern of minimal wage payments and have the company pay him over $100,000 in wages for a single week shortly after the announcement of the cash flow boost.
The relevant act and contested criteria
The benefit was paid under the following Act, and the two criteria, contested by the Commissioner, were that the wage had been paid at all, and if it had, that there was no relevant scheme (see extract from the Tribunal’s reasons below).
- The Boosting Cash Flow for Employers (Coronavirus Economic Response Package) Act 2020 (Cth) (“BCF Act”) contains, in s 5, various requirements a claimant must satisfy to be entitled to the first CFB provided for by that Act. Only two criteria are in contention in this matter. In the order addressed at the hearing of the review, they are:
(a) neither the entity nor any associate or agent of the entity has entered into or carried out a scheme or part of a scheme for the sole or dominant purpose of achieving any of the following:
(i) making the entity entitled to the cash flow boost for the period;
(ii) increasing the amount of the cash flow boost to which the entity is entitled (disregarding this paragraph) for the period.
(BCF Act, s 5(1)(g))
(b) the entity makes a payment in the period and must withhold an amount from the payment under Subdivision 12-B, 12-C or 12-D in Schedule 1 to the Taxation Administration Act 1953 (regardless of whether the entity withholds the amount);
(BCF Act, s 5(1)((a)(i))
(VNBM v CofT [2021] AATA 1626, AAT, Olding SM, 7 June 2021.)