“If we don’t hear anything within 14 days we will advise you that the entity will not receive further payments under this entitlement,” the tax office email said.
“If you have made an honest mistake you may not have to repay amounts you have already received.”
One sole trader who suffered an almost 100 per cent drop in income said he and his partner were never asked to supply either of the two pieces of information at the time of application.
The application form only asked whether revenue had dropped and whether the business traded in the previous year.
“We were sweating bullets when we saw the email and [my partner was] convinced that, through no fault of her own, she had put the family $10,000 in debt,” he said.
On Tuesday morning, the couple, who have two children, asked the ATO to urgently resolve the matter and provided a profit/loss statement to prove their company was eligible.
“Basically we’ve been banking on JobKeeper until September. School fees have gone back up and the mortgage is on hold until August,” he said.
“It’s a bit of a perfect storm coming together, which will have a terrible effect on some families. We’re lucky to have one person with secure employment, at the moment anyway.”
Ken Phillips, a small business advocate who runs non-profit group Self Employed Australia, said it made sense the business was not able to satisfy the two requirements, indicating many of the 8000 letters could have been sent to small businesses in a similar situation.
Many of these businesses who have never lodged a tax return may be in the process of doing so as the new financial year begins. However, tax returns are due by October 31 and businesses targeted by the letters may not submit their return within the two-week cut-off period they have been given to prove their eligibility.
Mr Phillips last week gave evidence to the federal parliamentary tax and revenue committee on what he believes to be problems with the ATO’s enforcement of the $70 billion JobKeeper scheme, which is set to wind up in September but is expected to be refined to target hard-hit industries.
“We’re running a high risk of a robo-debt type situation re-emerging. The ATO did 530,000 automated audits that raised further money, but where was the checking?” he said.
“This is the same situation, they’re automated audits of the JobKeeper. They’ve got configurations and the computer spits it out. Its assumptions.
“If they get something wrong and don’t back it up with manual checking, we’ve got an out-of-control system.”
A tax office spokeswoman denied Mr Phillips claims, saying each sole traders’ ABN start date, business activity statement and tax return were manually reviewed before sending correspondence.
The purpose of the letters, the spokeswoman said, was to seek information from businesses which the ATO may not be aware of to support payments.
“We undertake manual checks within the identified groups to assure that the rules and criteria give us confidence that, on the information that the ATO has, we are writing to the correct clients and that the communication best suits their apparent circumstances,” the spokeswoman said.
“As the letter states, if an entity believes they meet the entitlement criteria they should phone the ATO,” she said.
“The ATO will work with individuals to avoid and overcome honest mistakes and we will be reasonable and flexible where there have been honest mistakes.”
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Paul is a reporter for The Age.