25 Mar 2021 Cases
JobKeeper: Apted appeal
Commissioner of Taxation v Apted  FCAFC 45
Allsop CJ, Logan and Thawley JJ
24 March 2021
This case involves a determination of whether the taxpayer met the requirement in the JobKeeper legislation to have an ABN on 12 March 2020, in circumstances where the Registrar of the Australian Business Register (ABR) decided to reactivate a previously cancelled Australian Business Number (ABN) after 12 March 2020 and backdated the reactivation to have effect on or before 12 March 2020.
The taxpayer, Mr Apted, carried on a business as a sole trader providing property and real estate services. On 28 August 2018, he cancelled his GST registration, and advised the Registrar of the ABR that he wished to cancel his ABN registration with effect from 4 June 2018. At the time, he intended to retire.
Following a discussion with former colleagues and work associates in June 2019, the taxpayer decided to recommence business activities in the second half of 2019. He did not then apply to have his ABN reinstated or reactivated as he was under the (false) impression that he was only required to have an ABN if he was to be registered for GST. As he did not anticipate making more than $75,000 per year, he did not think he was required to be registered for GST. He said that he did not appreciate that, in the absence of an ABN, his clients would be required to withhold amounts at the rate of 47% from his fees and remit them to the Commissioner. He said the misapprehension arose because he did not obtain proper advice from a tax adviser, although he pointed out that none of his clients withheld any amounts from his fees in the absence of an ABN.
On 31 March 2020, the taxpayer applied online to have his ABN reinstated. His ABN was reinstated on the ABR with a date of effect of 31 March 2020 (the day after the JobKeeper program commenced). On 20 April 2020, he applied for JobKeeper. On 6 May 2020, the Commissioner responded, informing the taxpayer that he was ineligible for JobKeeper payments because he did not have an ABN on 12 March 2020.
On 8 May 2020, the taxpayer applied for the Commissioner’s discretion to allow him additional time to apply for an ABN. The Commissioner replied on 22 May 2020 refusing to exercise the discretion. The letter from the Commissioner noted that the taxpayer had the right to lodge an objection to the decision to refuse to exercise the discretion, but this reference to appeal rights did not distinguish between the element of the decision about whether the taxpayer had an ABN on 12 March 2020 and the ‘later time’ discretion (see ‘Relevant legislative provision’ below).
On 10 June 2020, the taxpayer requested for the Registrar of the ABR (i.e. the Commissioner of Taxation) to amend the reactivation of his ABN so that its reactivation was effective from 1 July 2019. The ABR was then adjusted to show that the taxpayer’s ABN was reactivated with a date of effect of 1 July 2019. Also on 10 June 2020, the taxpayer lodged an objection to the Commissioner’s decision on 22 May 2020 to refuse to exercise the discretion. In his objection, the taxpayer stated that: ‘I would like to reiterate that my business was active prior to 12 March 2020 and the ABN records have been corrected to show the status as being active from 1 July 2019’.
On 14 July 2020, the Commissioner disallowed the taxpayer’s objection. On 22 July 2020, the taxpayer applied to the Tribunal for review of the objection decision.
Relevant legislative provision
To be eligible for JobKeeper payments on the basis of business participation (not paid employees), an entity has to satisfy an integrity rule in s 11(6) of the JobKeeper Rules:
An entity is not entitled to a jobkeeper payment under this section unless the entity had an ABN on 12 March 2020 (or a later time allowed by the Commissioner), and the requirement in subsection (7) or (8) is satisfied.
In Apted and Federal Commissioner of Taxation  AATA 5139, 21 December 2020, the Tribunal found that:
a. The applicant did have an ABN on 12 March 2020 for the purposes of the Rules as a consequence of the decision by the Registrar of the ABR to determine the ABN took effect on 1 July 2019;
b. the exercise of the Commissioner’s discretion referred to in s 11(6) of the JobKeeper Rules forms part of the reviewable decision that falls to be considered by the Tribunal in the event it was decided the taxpayer did not have an ABN on 12 March 2020; and
c. if it was accepted the taxpayer did not have an active ABN as of 12 March 2020, then the discretion should be exercised in favour of the taxpayer.
The Commissioner appealed the Tribunal’s decision to the Full Federal Court.
Full Federal Court decision
In a unanimous decision, the Full Federal Court found that the Tribunal erred when it found that the taxpayer had an ABN on 12 March 2020, but went on to dismiss the Commissioner’s appeal.
The three issues on appeal before the Full Federal Court were whether:
- the taxpayer had an ABN on 12 March 2020;
- the ‘later time’ discretion in s 11(6) formed part of the reviewable decision (i.e. whether the Tribunal had jurisdiction to exercise the discretion); and
- the Tribunal erred in exercising the discretion to allow a ‘later time’.
On the first issue, in a separate judgment, Thawley J found that the question whether a person ‘had an ABN on 12 March 2020’ within the meaning of s 11(6) is resolved by reference to whether or not, if the ABR had been examined on that day, it would have shown that the relevant entity had an ABN. The Full Federal Court rejected the taxpayer’s submission that ‘having an ABN’ on 12 March 2020 should be taken to include later obtaining an ABN with a ‘date of effect’ covering 12 March 2020. The reference to ‘having an ABN’ on 12 March 2020 was a reference to the particular state of affairs as revealed by the ABR on that day. It followed that the Tribunal erred by concluding the taxpayer had an ABN on ‘that day’.
On the second issue, however, the Full Federal Court found that the legislature intended that a decision under s 11(6) of the JobKeeper Rules not to exercise the ‘later time’ discretion was a reviewable decision which fell within s 13(2)(a) of the Coronavirus Economic Response Package (Payments and Benefits) Act 2000 as ‘a decision that the entity is not entitled to a Coronavirus economic response payment for a period’.
On the third issue, the Full Federal Court found that no jurisdictional error was made by the Tribunal when it exercised the discretion in the taxpayer’s favour. Thawley J rejected the Commissioner’s contention that the Tribunal reached an erroneous conclusion by taking into account that:
- the taxpayer’s failure to re-activate his ABN was due to ‘oversight’;
- the taxpayer ‘is the kind of person who was intended to benefit from the JobKeeper scheme’, when, according to the Commissioner, he was not; and
- ‘there is nothing to be achieved by denying him access to the payments in order to make a point about the desirability of obtaining an ABN’.
Thawley J found that each of these matters was relevant, and the Tribunal did not take into account irrelevant material. The taxpayer’s lack of ABN registration on 12 March 2020 was not a proper basis on which to refuse the discretion.
Comment by Robyn Jacobson, CTA, Senior Advocate, The Tax Institute
The ‘12 March 2020 ABN requirement’ for JobKeeper exists only for eligibility based on business participation and not paid employees. The ATO is taking a similar position in regard to eligibility for the cash flow boost given the same ‘12 March 2020 ABN requirement’ exists for eligibility for all entities for the cash flow boost. The Full Federal Court’s decision has not changed the need for entities to satisfy all other eligibility conditions.
This decision is not inconsistent with our understanding of the law. Aside from the exercise of the discretion in this case, the ATO appears to have administered JobKeeper in accordance with its legislative intent.
We consider that it is unlikely that either the ATO or the taxpayer would make an application seeking special leave by the High Court to appeal this decision. The ATO has won its primary contention that the 12 March 2020 test is a ‘point in time’ test, not an ‘as at’ test, and the discretion was exercised in favour of the taxpayer so he is entitled to JobKeeper payments. However for completeness, the window for seeking special leave remains open.
We will update our blog on our website to provide guidance should additional information from the ATO come to hand.