Full Federal Court sheds light on JobKeeper eligibility

An entity is not entitled to a 'JobKeeper' payment unless the entity had an ABN on 12 March 2020 or a later time allowed by the Commissioner[1]

The Commissioner's discretion to allow a later time for an entity to have an ABN was considered in the recent Full Federal Court decision Commissioner of Taxation v Apted [2021] FCAFC 45 (Apted). This article outlines the outcome of the case and what it means.

When might the Commissioner exercise its discretion to allow a later time for an entity to have an ABN?

Where the Commissioner has been provided with evidence that an active business was being carried on before 12 March 2020, the Commissioner may exercise its discretion to allow an entity to register an ABN or provide \notice of assessable income at a later date.

In this context, the JobKeeper payments for eligible business participants are ordinarily to be directed to businesses that the Commissioner is satisfied was active as at 12 March 2020. In these situations it is relevant to the Commissioner to understand why the business did not hold an ABN or report supplies or income to the Commissioner by 12 March 2020.

Facts of the Apted case

In Apted, the respondent was a registered valuer who first registered for an ABN as a sole trader in 2012. In 2018, the respondent cancelled its ABN registration. On 31 March 2020, the respondent applied to the Registrar of the Australian Business Register (ABR) to reactivate the respondent's ABN. The respondent's ABN was reactivated with a date of effect of 31 March 2020.

The respondent applied for JobKeeper payments but was ineligible because:

• it did not have an ABN on 12 March 2020; and
• the Commissioner refused to exercise its discretion under s 11(6) of the CERP Rules and did not agree to apply a later date by which the respondent had to have an ABN.

Following this, the respondent applied that the reactivation of its ABN be amended to 1 July 2019 and the Registrar of the ABR adjusted the date of effect of the respondent’s ABN to 1 July 2019.

This meant that the respondent's ABN had an effective date of 1 July 2019, but also had not had an ABN on the register - had a person checked - on 12 March 2020.

The respondent then objected to the Commissioner's decision that the respondent was ineligible for JobKeeper payments. The respondent objected under Part IVC of the Taxation Administration Act 1953 (TAA) at the Administrative Appeals Tribunal (Tribunal).

In response, the Commissioner maintained its view that:

• the respondent did not have an ABN on 12 March 2020; and
• its discretion to allow an entity to register an ABN at a later date is not reviewable under Part IVC of the TAA, and also that the Commissioner had considered the application of the discretion to allow the respondent to register its ABN at a later date , but had refused to grant it.

The Tribunal agreed with the Commissioner that the respondent did not have an ABN on 12 March 2020. However, the Tribunal exercised the Commissioner's discretion to allow the respondent to register for an ABN at a later date.

The Commissioner appealed the Tribunal's decision and the Court considered:

1. whether the respondent had 'an ABN on 12 March 2020'; and
2. whether the Commissioner's decision not to exercise the discretion to allow a later time for the respondent to have an ABN was reviewable by the Tribunal.

Point-in-time test

The key takeaway from the case was that the Court accepted the Commissioner's argument that the rules establish a 'point-in-time test'. The question of whether a person 'had an ABN on 12 March 2020' within the meaning of subsection 11(6) of the CERP Rules is resolved by reference to whether or not, if the ABR had been examined that day, it would have shown that the relevant entity had an ABN.

Accordingly, even though the respondent's ABN had an effective date of 1 July 2019, the respondent did not meet the threshold of the 'point-in-time' test as on 12 March 2020 as the respondent did not have an ABN.

The Court decision reversed the Tribunal's decision and confirms that the requirement to hold an ABN on 12 March 2020 under subsection 11(6) of the CERP Rules is not satisfied where an ABN that is reactivated or applied for after 12 March 2020 is given a retrospective date of effect by the Registrar of the ABR that is on or before 12 March 2020.

The Commissioner's discretion

The Court held that although the respondent did not satisfy the point-in-time test, the respondent could still claim JobKeeper because:

• the Commissioner's decision not to exercise its discretion was a reviewable decision;
• the Tribunal had jurisdiction to exercise the Commissioner's discretion under s 43(1) of the Administrative Appeals Tribunal Act 1975;
• the Tribunal did not err in exercising the Commissioner's discretion to allow the respondent to register for an ABN at a later date; and
• the Commissioner's discretion is broad, confined only by statutory purpose and context.

Australian Taxation Office's (ATO) view of Apted

In the ATO's Decision Impact Statement[2] in relation to Apted, the ATO accepted the Court's view:

• regarding the ability for the discretion to allow a later time for having an ABN under s 11(6) of the CERP Rules to be reviewed as part of a review of a decision on entitlement to JobKeeper payments under Part IVC of the TAA; and
• that the discretion under s 11(6) of the CERP Rules to allow a later time to have an ABN is broad (so, for instance, it's not restricted to the limited circumstances envisaged in the extrinsic material to the CERP Act and CERP Rules). So the Commissioner can exercise a discretion under ss 11(7) and (8) of the CERP Rules to allow a later time to provide notice of assessable business income and taxable supplies; and
• the exercise of the discretion is informed by the 'integrity rule' contained in s 11(6) of the CERP Rules. The integrity rule requires an entity to hold an ABN on 12 March 2020 and also that income associated with the entity carrying on a business was reported to the Commissioner by 12 March 2020.

More information from Maddocks

For more information, contact Maddocks on (03) 9258 3555 and ask to speak to a member of the Revenue Practice Group.

More Cleardocs information on related topics

You can read earlier ClearLaw articles on a range of topics, such as:

• Making member contributions from JobKeeper into your super
• Superannuation Contributions - A Guide
• Superannuation Contributions and Income Tax - for Self-Managed Superannuation Funds
• Understanding - Contributions, Contributions Caps and Reserves

Order related document packages

• SMSF Pension Commutation
• SMSF Pension Pack
• Superannuation Trust (SMSF)
• Update to SMSF
• Company Registration
• ABN Registration - Company

[1] This rule is contained in section 11(6) of the Coronavirus Economic Response Package (Payments and Benefits) Rules 2020 (CERP Rules)

[2] https://www.ato.gov.au/law/view/document?docid=LIT/ICD/QUD11of2021/00001