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Summary
- The Australian Taxation Office (ATO) has warned companies against using the stimulus and measures included in the 2020-21 budget to take tax rebate and pay higher dividends and executive bonuses.
- The second commissioner for client engagement, Jeremy Hirschhorn urged companies not to engage in any “artificial mechanisms” to exploit over $30 billion of business tax concessions.
- The Morrison government is delivering lower taxes for businesses and households as a measure to boost the economy and revitalise the job market.
- Mr Hirschhorn suggested that companies should “follow the tax law but should also follow the spirit of the law” to avoid bad “optics”.
The Australian Taxation Office (ATO) has warned companies against using loopholes to exploit tax concessions. While delivering a speech on Thursday, the second commissioner for client engagement, Jeremy Hirschhorn warned the companies against using the JobKeeper wage subsidies to pay dividends and bonuses.
Mr Hirschhorn urged companies to avoid entering into any “artificial mechanisms” to take advantage of over $30 billion of business tax concessions, including instant expensing and loss carry-back provisions.
Moreover, the second commissioner suggested the companies to use concessions to make investments instead of buying assets that are actually of no use in the business.
Image Source: © Kalkine Group 2020
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JobMaker Plan
The JobMaker plan is a crucial element of the Economic Recovery Plan for Australia and includes a $74 billion stimulus to support a stronger economic recovery. The ultimate goal of the plan is to support the domestic economy and drive recovery in employment.
- Reduced Taxes
The Morrison government is delivering lower taxes for businesses and households as a measure to boost the economy and revitalise the job market with decisions taken in the 2020-21 budget providing more than $50 billion in tax relief.
- The $50 billion tax relief includes around $9 billion in tax relief in 2020-21 and an additional $32 billion tax relief in 2021-22.
- Under the plan, the government decided to support the business investment through full expensing (temporary) and loss carry-back measures, which are estimated to boost GDP by ~ $6 billion in 2020-21 and $19 billion in 2021-22.
- Moreover, the reduced tax burden is anticipated by the department to create around 100,000 jobs by the end of 2021-22.
Follow the Spirit of Law and Avoid Bad Optics - Jeremy Hirschhorn
Adding to his comments at the Senate estimates hearing, Mr Hirschhorn suggested that companies should “follow the tax law but should also follow the spirit of the law” to avoid bad “optics” such as announcing that there has been no material impact on the business due to COVID-19 outbreak while collecting millions in the stimulus.
- The two stimulus measures in the budget 2020-21 allow companies to write off the full value of any assets and claw back tax already paid against losses to June 2022.
- Therefore, Mr Hirschhorn suggested the companies to remain cautious on using any artificial mechanisms for invading tax and taking the government stimulus.
- Also, Mr Hirschhorn suggested the companies to invest in new plants and other business-related processes to claim a tax offset and use that money to reinvest in the business and jobs.
Likewise, the second commissioner for client engagement also warned businesses against artificially shifting profits and losses to access the loss carry back to support executive bonuses and increased dividends.
Concluding the speech, Mr Hirschhorn suggested that there will be serious and quick backlashes against companies exploiting the spirit of stimulus measures.
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