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Senate Select Committee on COVID-19
30/07/2020
Australian Government’s response to the COVID-19 pandemic

GEALE, Mr Jeremy, Chair, COVID-19 Response Committee, Australian Taxation Office

HIRSCHHORN, Mr Jeremy, Second Commissioner, Client Engagement Group, Australian Taxation Office

JENKINS, Ms Deborah, Acting Second Commissioner, Law Design and Practice, Australian Taxation Office

Evidence was taken via teleconference—

CHAIR: The committee will now resume its hearing into the Australian government's response to the COVID-19 pandemic. I welcome officers of the Australian Taxation Office via videoconference. I understand none of you have an opening statement to make. Is that correct?

Mr Hirschhorn : We do not have a formal opening statement to make, other than to pass on the apologies of the commissioner, who, due to another engagement, could not appear today. He has expressed his confidence that we will be able to answer your questions. It has been a very busy period since we last saw you.

CHAIR: Yes.

Senator PATRICK: Chair, can I ask what the engagement is that the commissioner is involved in that would prevent him from appearing before the committee. Has that been provided to us?

Mr Hirschhorn : I would say that the invitation for our appearance today did not specify the commissioner, so I don't think he realised that he was being specifically invited to appear. Can I say it's not a frivolous engagement, but I'd prefer, if possible, not to answer on Hansard.

CHAIR: Mr Hirschhorn, that's fine. We were advised that the commissioner wasn't going to be able to attend. The government has agreed with members of this committee that extra sessions of the COVID committee will be held in the absence of parliament sitting, so there is an expectation that the ATO will be called again during that period. That's over the next two weeks. We're just finalising the program now, and it would be desirable, I think, if at that point in time the commissioner would be able to attend the hearing. We certainly didn't insist on his attendance today, Senator Patrick, so my apologies if that's caught you off guard. We were advised he was unable to attend and we accepted that, but we were mindful that we would be recalling them, hopefully on a date and time when the commissioner could attend.

Senator PATRICK: Thank you, Chair. I was just emphasising the importance of these hearings.

CHAIR: Yes, absolutely. Effectively, as the parliament has been cancelled, this will be the main parliamentary scrutiny mechanism for the COVID-19 response that everyone's working on, so it is extremely important, and we look forward to seeing Commissioner Jordan at the next appearance.

I'll just kick off with some questions and then hand the call around as I've been doing, if that's okay with colleagues. Mr Hirschhorn, I will just follow up on some data the committee requested. We requested some information about JobKeeper, and we appreciate the answers to questions on notice that we have received, but we haven't been able to receive the information on the employee level data based on their postcode. You've given it to us on state, age and gender basis, but will there be a time when the postcode information will be available?

Mr Hirschhorn : As I understand it, the reason why that has not been answered is that that's actually a hard task to do, because we have to do a big matching of different databases. If the committee would find it useful, we can certainly explore how long that will take.

CHAIR: Yes, okay.

Mr Hirschhorn : It's not been provided because it's quite a hard task, because you're matching two different large databases.

CHAIR: Okay.

Mr Geale : Perhaps I can just add to that as well. There are other data searches which we have done. It's also the accuracy of that data, because people don't always record their personal address in their records. It might be the address of the tax agent. If you have a tax agent in Sydney with a thousand clients, you may well get a thousand clients being clustered in that spot in Sydney. So, even if we could produce that data, the accuracy of it would have to be taken into account.

CHAIR: Okay. If it is something that's too difficult to do, perhaps that can be the answer, explaining why. But we'll see what you come back with in response.

Mr Hirschhorn : Yes.

CHAIR: In terms of the changes that have been made to JobKeeper—we're talking from JobKeeper 1.0 to JobKeeper 2.0—when did the ATO become aware of the changes that are being made at the end of September?

Mr Hirschhorn : When did we become aware? Certainly we were aware there was a JobKeeper review going on, and we've been in discussions with Treasury throughout as to the progress of JobKeeper 1.0 and the JobKeeper review. You asked questions about a potential JobKeeper 2.0. I couldn't tell you the first time we were involved. I think we've been involved probably throughout, from relatively close to the start.

CHAIR: Yes, that was certainly Treasury's evidence just before. It's more about the final scheme, JobKeeper 2.0, as it is now announced by the government. When did you become aware of that? Presumably you're not sitting in the cabinet room. How and when did you become aware?

Mr Hirschhorn : The absolute final scheme as—

CHAIR: Yes, as announced.

Mr Hirschhorn : Again I'll take that on notice, but probably Treasury would have contacted us with what was passed, and I would hope that that was shortly after the decisions were made.

CHAIR: But prior to the announcement?

Mr Hirschhorn : We can come back to you on that. I suspect that we would have been told the key decisions or, in Treasury language, the key parameters, before it was announced—but the final package, in a formal sense, only after it would have been announced.

CHAIR: Well, could you come back to us with perhaps a date around that? That would be useful. In terms of the changes that are going to be required for the new turnover tests, do you have the systems in place to implement those?

Mr Hirschhorn : At the moment we do not have the systems in place, because as the measure is developed—it is also to pass parliament. But we are confident that we will have the systems in place in time for the second round of JobKeeper.

CHAIR: Okay, so perhaps you could just explain that to me a little bit more. You're confident. What's it going to entail?

Mr Hirschhorn : It will entail several elements. One is around the fact that people will have to reapply, so we will have to design a new application process asking for the relevant information. With a bit more time, this time around, we will hopefully be able to build more features into that application form. That application form will have to cope with the fact that there are two tiers of payments, as an example. It will probably ask more questions about what turnover test people are actually using. We'll also be looking for opportunities to pre-fill information if we already have it to hand so that people don't have to re-find information that they've already provided to us. So, we'll have to build that. We will have to build systems or modify the existing JobKeeper systems so that we can actually receive that information and convert it into new payments. That's, again, a non-trivial system build.

At the same time there will be significant resources spent in terms of community education and guidance, because new questions will arise, although we anticipate not to the same extent as with JobKeeper 1, because people have become relatively familiar with the concepts. But there are new concepts, so there will be a reasonable amount of guidance that we will have to produce. And probably our third stream—from the top of my head—is that we'll be working with what we call the DSPs, or digital service providers, which are payroll-type companies, so that they can update their systems to feed into our systems, particularly around the two-tier test so that people can have the two-tier mechanism in their own software which automatically feeds into our systems. So, there's a fair bit of work to be done.

CHAIR: Yes, it sounds like a fair bit of work. What's your time line for design, build and implementation of those? I know where the end point is—at the end of September—but—

Mr Hirschhorn : The design has started. In the different groups within the office the design work is starting now. We're a little bit constrained in external consultation that we can do at the moment, until it is law.

CHAIR: So, you have to wait for the parliament to sit to pass the legislation for you to actually get past a certain point? Is that what you're saying?

Mr Hirschhorn : Not for our system build, but as a general proposition we feel constrained in talking about measures before they are legislated—so, speaking externally, outside the tax office, outside the Public Service—because we do not want to be seen to be advocating for or against on policy things. So, we're constrained.

CHAIR: Understood.

Mr Hirschhorn : But hopefully it will pass quickly, so this will be a theoretical thing.

CHAIR: The parliament will have to meet first; yes. Okay, so you're in the design. The consultation and discussion externally is a bit more tricky, because there's no legislation in place. How long do you imagine the design is going to take, and what's the cost? Have you got any idea of what budget you're going to require to do this, and is it included in the extra appropriation for JobKeeper 2.0?

Ms Jenkins : They are working through the details at the moment. The final costing will actually depend on the final design. As part of the work that the teams are doing, we have been working closely with Treasury on the final design. In a scheme like this, one of the largest parts of the cost is from an IT perspective. So they are part of the team. The other cost—Mr Hirschhorn will let you know this—is actually the people to work through, whether it's providing advice and guidance or assistance; we're also following that up. We can come back to you with some details in terms of the final numbers.

CHAIR: Surely you must have a bit of an idea? Are you saying you need to bring in extra staff to take on different responsibilities for the work? Plus you've got a capital component there, presumably on infrastructure, and there will be no doubt external advice to assist; am I correct?

Mr Hirschhorn : Yes. I think the system build will be a mixture of internal and external resources.

CHAIR: And we're trying to do it in a very compressed time frame, so that all adds dollars to the budget, I would imagine. Do you have a ballpark figure of what resources you're going to need for implementing the government's decision?

Mr Hirschhorn : We do not have one to hand at this stage; that's still a matter of discussion with Treasury and the Department of Finance. I'm not sure if we have a number to date.

CHAIR: Do you know when it's going to be finalised? Considering you're in the design stage now, you're going to have to get cracking and put tenders pretty quickly, presumably, when you've got a hard deadline like 27 September.

Ms Jenkins : I don't know, but you're absolutely right; it would be sooner rather than later that we would have that number for you.

CHAIR: What work can you get started on without any of that being determined? What authority do you have to start progressing this? Say the parliament doesn't sit until the end of August; what can you do in the meantime without a budget and without legal authority?

Ms Jenkins : The work that we have been doing is, as we talked about earlier, just related to the design of it. We have our colleagues from various areas of the ATO working with Treasury on what it might look like and what it might cost. Those are the things we have been able to do at this stage. We have the Treasury fact sheet that's in the public domain; that broadly sets out the design, including the two tiers. So we have the broad design in the public domain, and we have been working through that.

CHAIR: It sounds like you're developing up a bit of a work plan to get going. There are a number of parameters that the government has already determined such as the turnover test, the fact that it will be done each quarter and some other guidance saying that the ATO will extend the payment time to allow businesses to reconcile their BASs and confirm eligibility, and things like that. So there are some decisions already made. When will you be able to set out some more detail on some of that and how it's going to operate?

Ms Jenkins : I can give you an update. The final costing will be finalised next week; we are working on that at the present time.

CHAIR: That's for the entire budget, is it?

Ms Jenkins : I believe it is the final costing, yes.

CHAIR: So you're hoping to have that finalised next week. Are you hoping to have that agreed to next week, or is that your bit finished and then it goes off to Finance and Treasury for other discussions?

Ms Jenkins : That's right. We are working on the final costing, to be done by next week, and doing the final numbers now, and then that needs to go off. It will be agreed with Finance.

CHAIR: So that's the end of the first week of August—so we'd be at 7 August next week. Then you have essentially seven weeks to design, build, provide guidance, implement and have it all run by 27th.

Ms Jenkins : That's correct. I think the benefit is that we have done a lot of the hard work in terms of the advice and guidance. What we will need to do is update that for the changes, but a lot of the groundwork has been done. The various stewardship groups and other things that we've been communicating with—we're keeping them up to date. So I think this time we're able to do a lot more work building on those foundations.

Mr Hirschhorn : It's a tight time frame, but it's actually relatively luxurious compared to round 1.

CHAIR: Yes, but you're implementing a more complex program, aren't you. It's not a flat rate going out the door to those that are eligible.

Mr Hirschhorn : Yes, it is more complex, but we do have that base of JobKeeper 1. It's an important base in terms of our systems but also in terms of community understanding and community systems.

CHAIR: What do you see as the most complex part of the new scheme, which you're going to have to get around by providing guidance or designing the infrastructure?

Mr Hirschhorn : I would say that moving to a two-tiered test is a significant development both in terms of our systems and in terms of employers categorising employees and telling us about those categories. That will be the trickiest bit from a systems perspective. In terms of where there will be calls for guidance, my suspicion would be that most calls for guidance will come around turnover tests and alternative turnover tests.

CHAIR: Yes, that's right. That's what the Treasury and the government are saying—working out alternative tests. Presumably getting feedback from businesses about how that might operate would be part of the work?

Mr Hirschhorn : Yes.

CHAIR: I've got some questions about whether you are able to implement a test of 20 hours a week and whether you're confident you'll be able to enforce this. But, for some of those decisions, we're a bit ahead of you there; you haven't got to that point yet.

Mr Hirschhorn : That is true. Could I come back to your earlier question about when we found out the final designs from government or Treasury.

CHAIR: Yes.

Mr Hirschhorn : We received the final fact sheets from Treasury on the morning of the announcement.

CHAIR: Is that normal for you guys to find out that late? Is that standard practice for the implementing arm of government?

Mr Hirschhorn : It's relatively standard practice. We get our input early and find out the answer. I don't think there's much time between decisions and announcements on some of these measures. It's not like there's been a big window.

Senator SIEWERT: Can I go to the eligibility of participants in the JobKeeper scheme. Was eligibility checked prior to payments being made?

Mr Hirschhorn : You're talking about people who have made their application, so businesses have made their application through the system. Some elements of eligibility were checked at the time the person applied, and, once somebody's application was successful, we paid pretty much immediately.

Senator SIEWERT: Was that prior to any of the elements being checked or prior to some of them being checked?

Mr Hirschhorn : I might go back. It was designed as a self-assessment system, so people had to self-assess their own eligibility. In our form process we had embedded some checks on some aspects of eligibility and some sensibleness checks for if strange things were happening. Other elements of eligibility were harder, in a sense—again, in the compressed time frame, things were harder to build into the online application process, so we relied on self-assessment and checked afterwards. That's a long way of saying some elements of eligibility were checked at the time of making the application, and other elements of eligibility were only checked afterwards.

Senator SIEWERT: Are you able to provide further detail, on notice, on what the preliminary checks were and what the subsequent checks were? Or have you got that?

Mr Hirschhorn : We can certainly answer on notice. To give a sense, you had to have an ABN, so that's a factor. There were some factors which were in the form and others which were not. It's probably better if I come back on notice.

Senator SIEWERT: That would be appreciated, thank you.

Mr Hirschhorn : Generally, there were what we describe as some of the signs of life eligibility criteria, such as that you had lodged a return disclosing business income—

Ms Jenkins : In the 2018-19 year.

Mr Hirschhorn : in the 2018-19 year, for example. We had not automated that, so that was something we could only check afterwards.

Senator SIEWERT: How many recipients do you believe have received payments but were in fact ineligible?

Mr Hirschhorn : As I say, on some of this stuff I put a caveat that it may not be exhaustive, but there was a round were we wrote to about 8,000 businesses saying that according to our records they do not meet one or other of the features of eligibility, and asking them to contact us if they believe that they do meet those conditions of eligibility.

Senator SIEWERT: Have any of those recipients gotten back to you? How many have gotten back to you and how many are confirmed as ineligible?

Mr Hirschhorn : I think about 50 per cent have gotten back to us. Just give me a moment, Senator, and I might see if I've got some more specific data. Not all did get back to us. Sorry, Senator, maybe if I can temporarily take that on notice and, while we're going, see if I can come back to it if I can find that information.

Senator SIEWERT: If you could. What quantum of money would those 8,000 businesses have been paid?

Mr Hirschhorn : If I can do some very round numbers, as I understand it, it's about 0.1 per cent of applicants and about 0.1 per cent of the value, and it was generally for the first month or two. We're paying out about $10 billion a month, so it will be less than $100 million.

Senator SIEWERT: Are you asking businesses to pay this money back?

Mr Hirschhorn : Our general stance is that if it's an honest mistake—there are certain mistakes you can make, and we would categorise some of these eligibility mistakes as honest mistakes because the law is complex, particularly for newly formed businesses. That's where a lot of the angst is—around newly formed businesses who met a couple of all tests but not all the tests. Where it's an honest mistake, we are just turning off JobKeeper for future months. We are not seeking to claw back the JobKeeper that they have received.

Senator SIEWERT: So reports we were hearing about businesses being contacted and having to pay money back—and I'm particularly concerned about smaller and newly formed businesses—are they not correct?

Mr Hirschhorn : We have asked for money back from some. I think that concern in the community was more the fear that we would claw it back whereas the actuality of most of these eligibility cases is that we view those as honest mistakes that we have not sought to claw back.

Senator SIEWERT: You may need to take this on notice but how much have you clawed back?

Mr Hirschhorn : I can take that on notice. I would say, interestingly enough, there are different reasons. There is the eligibility and honest mistake element. There are bits where, for example, we identified multiple claims for the one employee and things like that, so that's where money will come back, potentially. We can try to get you some information on the trigger or reason for asking for a claw back. Some businesses have realised they have made mistakes, have voluntarily disclosed and have refunded money.

Senator SIEWERT: For the 50 per cent that haven't got back to you, what is the status of those payments and what do you intend to do into the future?

Mr Hirschhorn : For most of those who have got not back to us around this eligibility point, the first thing is we will stop them getting any more JobKeeper until they come back to us.

Senator SIEWERT: When does that occur?

Mr Hirschhorn : That occurs pretty much straight away, so they have been chopped off from JobKeeper.

Senator SIEWERT: Of those 8,000, the 50 per cent that haven't got back to you, I take it that means they have been chopped off?

Mr Hirschhorn : They have been chopped off. Of the 8,000, another 2,000 have also been found to be ineligible. Of the 8,000, about 6,000 have been chopped off.

Senator SIEWERT: How many employees does that 8,000 cover?

Mr Hirschhorn : I'd have to take that on notice. Sorry, my briefing focus is on the number of employers. They are generally newer businesses, so I expect they are generally smaller claims than average but I'd have to take that question on notice.

Senator SIEWERT: As the new phase is rolled out, will there be checks before any new entities come on board?

Mr Hirschhorn : Part of our design process is to design any this into the form, into the application process so we don't get a situation where somebody applies, gets money, and then we say, 'Are you eligible? You don't look eligible to us'. We're going to try to design as much as possible of that into the application process.

Senator SIEWERT: I move on to a couple of other areas while I've got time.

CHAIR: Quickly, if you will.

Senator SIEWERT: Going to the cash flow for SMEs, how many businesses and what's the value of the cash flow support that's been provided in the form of wages withheld for tax?

Mr Hirschhorn : Cash flow boost has two rounds. There is round 1 for the first quarter and then there's round 2 for the second quarter. Round 2 is designed to be a mirror image of the first round, so whatever you got in round 1, you'll get in round 2; you don't have to requalify. Round 1 is about 750,000 businesses and the payments to date are a little bit under $16 billion. You would expect that would be replicated, so those 750,000 businesses will get another $16 billion over the next few months, so $32 billion all up. To date, we've already paid out $2 billion of that second round.

Ms Jenkins : Maybe if I could just add to that to build on what Mr Hirschhorn has said. The actual amount that they get credited is a credit, so it isn't necessarily an amount that is paid out. It is a credit against their activity statement for that period. Obviously, if they were in a refund position, that credit would give them a larger refund. If they were in a payable position, that credit could either reduce that payable or reduce it until it becomes a refund. I just wanted to make that clear. It's slightly different from the JobKeeper payment, which is obviously a wage subsidy.

Senator SIEWERT: Thanks, that's useful. But the overall value when it finishes at the end of September will be $32 billion. Is that correct?

Mr Hirschhorn : Yes. Again, in order of magnitude, it's going to based on what we got so far in round 1. It will be $31 billion or $32 billion.

Senator SIEWERT: What happens to students' debts if the deflation figures continue? Are they reduced?

Mr Hirschhorn : I must confess that you have thought about an issue that we in this room have not turned our minds to—how deflation would work on the HELP scheme—but we could take that on notice.

Senator SIEWERT: That would be very much appreciated. There would be a lot of people who are very interested in this topic.

CHAIR: Senator Lambie.

Senator LAMBIE: Thank you, Chair. How are you guys going to help businesses reapply for the extended JobKeeper payment and do you have a plan to get through all the applications that will come at once?

Mr Hirschhorn : We're currently designing the new application form that businesses will have to reapply through. It will be an online process that they will access using their myGovID credential, which is the same as happened in JobKeeper round 1. There will be no paper; it will be a digital experience through an authenticated channel. We are looking to pre-fill as much as possible. We expect that most businesses eligible in JobKeeper phase 2 will have been claiming under JobKeeper phase 1. So, for most applicants, we'll be able to use data they provided us in phase 1 to make that application process as easy as possible. We'll also be working with digital service providers—payroll software companies—so that companies can do things like disclose who is eligible and which tier of eligibility they are on through their ordinary payroll system and not have to fill in a new thing in a tax form. There are about 900,000 applicants for phase 1 of JobKeeper. We know that that will go down because of the tighter or new tests.

Your other question was about how the system will cope with receiving all those applications. If all the applications came in on the first day—that is unlikely; our experience is that people apply throughout the month—that sort of volume is easy for our systems to cope with.

Senator LAMBIE: So you're not going to have any humans involved in the handling of this stuff.

Mr Hirschhorn : No. As with JobKeeper phase 1, the application process will be entirely digital. In phase 1, about two per cent of applications are diverted and a human looks at those because they've triggered some red flags in our system. That sort of process will continue: there'll be some diverted off to red flags. But we are hoping to design away some of those things so that—going to Senator Siewert's earlier questions—more and more of those requirements are embedded in the digital process.

Senator LAMBIE: Okay. Moving on, who's keeping an eye on JobKeeper and on whether or not the rules are being followed and the system isn't being ripped off? Do you have a checking group on top of this? What's the go? Is there an investigative group or something?

Mr Hirschhorn : Yes. I'll put aside some of the Fair Work elements of JobKeeper; they're obviously done by other agencies. But, in terms of the pure payment side of JobKeeper, that is with us. One of our deputy commissioners, James O'Halloran, has been taken away from his ordinary duties to head up our JobKeeper response. We currently have about 3,000 people who are looking across the three stimulus measures of JobKeeper, cash flow boost and early release of super, as well as some other stimulus type measures. Of those, close to half are looking at JobKeeper.

Senator LAMBIE: Okay. How many people have actually been caught or identified as taking money out of their super without actually being eligible under the scheme? Who's controlling that side of it?

Mr Hirschhorn : On the early-release-of-super measure, that responsibility sits, again, with the tax office. If people have applied for super and they are not eligible, there are a range of consequences which we administer, and that can be a range of things. It can be penalties. It can be withdrawing a declaration. We have to give them a declaration which says, 'You get to take the super out tax free.' We can withdraw that declaration, and then the super that they've taken out is taxable. So that sits with us. Again, it's a self-assessment system. The self-assessment system, which is our approach to this, relies on the basis that most Australians are honest and, in the case of the early-release-of-super system, it is actually also their money. But we are now doing some checking. We have information from other sources—for example, Single Touch Payroll data—which suggests that people did not meet the criteria. We're starting now to do a sort of pilot, contacting people where it looks like they did not meet the criteria and asking about their circumstances, and that helps us to work out—

Senator LAMBIE: How do you make them pay this money back under their super? How are you going to actually pull this together? How are you going to make them pay back their super or make them get taxed on their super? What a cluster this is! How is this going to operate here?

Mr Hirschhorn : There are a range of outcomes. We will not be forcing people to put money back in their super. We cannot force people to put money back in their super.

Senator LAMBIE: Ha, ha! So they can go and withdraw money and there are no penalties? Is that what you're telling me?

Mr Hirschhorn : No, I'm not.

Senator LAMBIE: Is there anything that you can actually do if they get their super out, or is it, 'Too bad, so sad'?

Mr Hirschhorn : There are a range of consequences. Again, where we think somebody has made an honest mistake as to their eligibility, and particularly where they voluntarily disclose that to us, we are unlikely to impose significant consequences.

CHAIR: Senator Lambie—sorry, Mr Hirschhorn. You can finish.

Mr Hirschhorn : The next phase is if we withdraw our declaration, so they will have to pay tax on their superannuation at their marginal tax rate, and that is a reasonably significant consequence for many. In the worst cases, we can impose penalties for misleading statements, and that is up to $12,600, which is a very significant penalty when you have withdrawn $10,000 of your own money from super. So there are a range of consequences, but again we moderate those consequences depending on the deliberateness of the action.

Senator LAMBIE: Just quickly, those consequences haven't been tried and tested, though, have they? This is just advice you're getting from the Attorney-General. That's where you've got your advice from about what's going to happen to these people, and you're dragging them through the legal system.

Mr Hirschhorn : No, these are provisions in the tax law, which we administer all the time.

CHAIR: Mr Hirschhorn, thank you. I'll hand to Senator Patrick.

Senator PATRICK: Mr Hirschhorn, in relation to the decline in turnover test for JobKeeper, I'm wondering whether or not the commissioner either has tabled or is planning to table any legislative instruments that give an alternative test?

Mr Hirschhorn : I assume your question is asking about JobKeeper phase 2.0?

Senator PATRICK: No, I'm talking about phase 1.

Mr Hirschhorn : In phase 1, we have issued a range of alternative turnover tests. I might pass to my colleague Ms Jenkins to talk through those.

Senator PATRICK: Can I go to a specific one, and maybe Ms Jenkins can help. I gave an example with Treasury before of a South Australian business that has a proper tax ruling that permits them to operate only with input taxed sales; they deal in long-term residential retail. Because they don't have a GST turnover per se, but they are a legitimate business and they have been employing people, they have been excluded from any support. Do any of those legislative instruments go to legitimate businesses that have been affected in circumstances where their only input taxed sales are with the companies?

Ms Jenkins : There's the basic test, which I think is what you're referring to, which is the GST turnover test, and you're absolutely right—input taxed supply such as residential property is excluded from that. So what you're saying is, under the basic test, the person you are talking about doesn't apply. The range of alternative tests that have come out do not include anything that would bring those people back into the system. The alternative test covered things like startup businesses, businesses that were impacted by drought, businesses that, for example, have been bought or sold in the period—things like that. So the alternative test that we set out did not bring the businesses of the nature you described back into the system.

Mr Hirschhorn : Senator, if I might add that I think our discretion there is about what the comparable period is for working out the decline in turnover. Our discretion is not as to what turnover is. So, under the law, our discretion is curtailed to the relevant comparable period, not to actually what the turnover is.

Senator PATRICK: I don't see that restriction in the terms of the act. Is that because 'turnover' has some other secondary reference in the legislation?

Ms Jenkins : The term 'turnover' in the legislation—actually, I think in the rules—has been defined to be as it is if you were a GST registered business, and the usual turnover tests were that you would exclude input taxed supply; that was in the particular legislation. That was meant to be applying for everyone. The common question I often get is: what about if I'm not registered for GST? The rules actually say you treat them as if you were registered for GST. So, as Mr Hirschhorn said, the alternative tests were designed to be put into the legislation where there wasn't a comparable period, and that's the idea of those examples that I've provided.

Senator PATRICK: Okay—satisfied there's not an appropriate relevant comparison period. So this could be a hole in the legislation that might require some potential amendments. How many of these businesses would be affected—businesses that only deal with input taxed sales? They're legitimate businesses—I don't think anyone questions that—and it didn't seem to me like Treasury were trying to exclude anyone; they architected the program to be able to respond quickly, with integrity. There's always scope for amendments, but is that anything that has been recommended by the tax department to Treasury, moving forward on JobKeeper 2.0?

Ms Jenkins : What I can say is that this issue you raised was recognised in the development of JobKeeper in its early days—what you called JobKeeper 1.0. We did raise this with Treasury, and at that time they were aware that a business that had nothing other than input-taxed supplies, as you described, would miss out. I think Ms Wilkinson described today that a lot of these businesses have a combination of input-taxed and taxable supplies, so they would fall within it. I'm not sure that this has been discussed for the development of 2.0, but I can check that and come back to you.

Senator PATRICK: I'd greatly appreciate that.

Mr Hirschhorn : And Senator, this of course starts to stray into policy. As I sometimes say, we at ATO are just the bricklayers, not the architects. The policy agency for us is Treasury.

Senator PATRICK: Sure, but perhaps you could table some of the considerations around that particular problem, where a company only has input-taxed sales. Anything you've got on that would be helpful, and for the purpose of allowing the parliament to perhaps consider that in the context of legislation that will be brought before it, where there are opportunities to amend to deal with these sorts of holes.

Mr Hirschhorn : Yes, we'll see what information we can provide.

Senator PATRICK: Thank you very much. And finally, in relation to 2.0, as you called it, I was of the view or understanding—and you're probably better equipped than me—that much of the changes were to be made by way of changing the rules, by way of instrument rather than legislation, but that appears not to be the case, from the conversations you've been having with Senator Gallagher.

Mr Hirschhorn : If I may, please do not overly parse my comments about the difference between legislation and legislative instrument. In a sense for us it's sort of the same until there's—

Senator PATRICK: No, I understand that. But, for example, the government could proceed with a legislative instrument to change JobKeeper, and they can do so without recalling the parliament. They simply table the instrument, and of course most of them would be disallowable. My question goes to: is there a need to recall the parliament, or will these changes be made simply by legislative instrument?

Mr Hirschhorn : I think we would not be able to answer that. I think that's a question that would have to go to Treasury.

Senator PATRICK: There was an interaction that was taking place between you and the chair, and maybe it was the chair who suggested that the parliament would need to come back before these changes would be made. That's a fairly critical point—whether or not the head legislation needs to change or whether there is an ability to make these changes just by way of tabling instruments.

Mr Hirschhorn : I apologise if I've contributed—and I probably have contributed—to confusion there. From our perspective, I suppose I was trying to get to the point that until something is in the extended definition of a law it's very hard for us to do things. I had not turned my mind to whether that was going to be waiting for a legislative instrument or waiting for passage of a bill.

Ms Jenkins : But you make a good point, Senator: obviously the detail of JobKeeper 1 is contained in the rules rather than in the act.

Senator PATRICK: It's a question of whether the head act allows for the time or the flexibility to enact 2.0 in the instrument. I note that the Prime Minister doesn't seem keen to have a parliament sit for much of his prime ministerial period. But anyway, I'll leave it at that.

CHAIR: Perhaps that's a question we can place on notice. We probably should have asked Treasury about that this morning, but it's worth following up.

Senator KENEALLY: I'd like to go back to the issues Senator Lambie was exploring in relation to early access to super. I note that after your last appearance at this committee the early-access program was temporarily suspended, for two days, and there was an updated communication saying that the ATO was strengthening compliance for the self-assessed early super release scheme. Since issuing that communication, how many investigations has the ATO undertaken in relation to non-compliant applications for early access to super?

Mr Hirschhorn : I split our work in relation to early release of super into two components, the first being around attempted fraud on the scheme and the second being on people claiming their own money but perhaps not meeting the eligibility rules. They're, in a sense, two very different things.

Senator KENEALLY: I'm sorry, could you repeat the second part? That broke up on my end.

Mr Hirschhorn : The first is people trying to take other people's super, which, of course, we are very focused on, and then there's the second question, which is around people withdrawing their own super but not meeting the technical requirements.

Senator KENEALLY: That's the part I'm asking about. Are you simply doing an audit now to determine how many people might not have done that, or have you actually undertaken investigations into those cases?

Mr Hirschhorn : The reason for my confusion is that the discussion at my last appearance was about the fraud element.

Senator KENEALLY: Yes.

Mr Hirschhorn : So this is, I think, similar ground to what Senator Lambie was asking about.

Senator KENEALLY: Yes.

Mr Hirschhorn : We obviously have information on everybody who has claimed. We have information from systems in relation to things like how much people have been paid under Single Touch Payroll or whether they are in continued employment and whatnot. That information is informative but not determinative in relation to eligibility. For example, one of the tests is based on hours; it's not based on remuneration. There are various tests on why you can be eligible. We have information which gives us hints that somebody may not be eligible, but it doesn't tell us that they're not eligible.

Senator KENEALLY: I'm trying to understand what you're doing with that information.

Mr Hirschhorn : Okay. What we are doing right now is that we have done some risk modelling. We have chosen a sample of people who look to us like they are likely to be ineligible. We are contacting them and working out their scenarios. In some cases, we ring them, and they say, 'Yes, we weren't eligible.' In other cases, they say, 'No, we were eligible; you didn't know this about me?' I'm sorry; I'm struggling to get the figures directly to hand. We're sort of doing a pilot examination. So there are a lot of people we know are okay.

Senator KENEALLY: In this pilot examination, how big is it? What percentage of it are the people who—

Mr Hirschhorn : At the moment, we are looking in the order of hundreds.

Senator KENEALLY: Hundreds?

Mr Hirschhorn : We're doing hundreds. Depending on the results of that, that will help us, in a sense, work out the level of ineligibility just generally, so we can extrapolate, but it will also tell us better information as to who's actually eligible and who's ineligible, and that will help shape a broader compliance program later on. For example, just to make it real, if we write out to 500 people and it turns out that 490 of them were eligible and only 10 were ineligible, we might say, 'Well, look, the level of ineligibility is so low it's not worth doing a big compliance program.' Conversely, we might write out to 500 people and find out that 200 were ineligible, but we've worked out a signal to clearly identify those people, and then we'll do a broader program.

Senator KENEALLY: Built into all of that—I get that, and I understand what you're doing—are you asking yourself, in doing this, how this might change the assessment? Are you thinking you might learn something that would change your assessment program as well?

Mr Hirschhorn : Yes. We think that we will learn about the level of ineligibility in the system, and we will also learn how better to detect it, and that will then inform our compliance program.

Senator KENEALLY: That's all after the fact, though. Will it also inform your assessment program? Will you—

Mr Hirschhorn : Ah—so the application process? At this stage, we do not see that as affecting our process when we approve applications. Again, it's based on self-assessment. We work on the assumption that Australians are honest. This is about getting emergency money to people. So we will never have enough information to reject quickly. We will give people their money on the basis of their say-so. We are not proposing to do a compliance program before release of money.

Senator KENEALLY: My concern, and the reason I am asking these questions—and I appreciate that this is people's money and they may feel that they are under stress and they need it—is that the broad advertising of this program, the lack of clarity about what the eligibility is and the self-assessment process may have led some Australians to inadvertently or mistakenly think that they were eligible when they weren't and that they may themselves become responsible for a tax or for a fine when they never intended to. They may be honest; they may just in fact be ill informed by the speed at which this was rolled out and hyped, and also ill informed by the fact that this is a self-assessment. There is an article on Business Insider Australia that profiles one such person; she thought the ATO would do due diligence on her application. The article says that the ATO sends out notifications to successful applicants which read: 'After careful consideration, we've determined that you are eligible.' Is that actually in the notification that the ATO sends out?

Mr Hirschhorn : I would have to take that on notice. Can I say I would be surprised, but I will take that on notice.

Senator KENEALLY: Okay. Let me ask this. Has the ATO issued any warnings to people for accessing [inaudible] when they weren't eligible?

Mr Hirschhorn : In the application form, it's clear that it's a self-assessment form.

Senator KENEALLY: Yes. Okay.

Mr Hirschhorn : That's the first thing I'd say. And we have guidance on our website which puts out the requirements. We do reject a small number of applications. That is generally when somebody has applied twice. You're only allowed to apply once in the first year and once in the second year. We are rejecting people in the second round who were temporary visa holders in the first round. So we do reject some. But we are not rejecting in the first round. So we have not been rejecting, in a sense, in relation to the employment condition. So if somebody has—

Senator KENEALLY: So really it is just self-assessment. You're not doing anything else except checking that they haven't applied previously in that financial year or that, in the second round, they're not a temporary visa holder?

Mr Hirschhorn : We are testing a few things. We have some other restrictions. But we do not check that employment test because we don't have the information.

Senator KENEALLY: But—

Mr Hirschhorn : We don't know yet whether, for example, they've been terminated—they've lost their job. We don't know at the time they apply. We might have reasonable information a month later, when the next Single Touch Payroll comes in. So that's why it's based on self-assessment.

Senator KENEALLY: Okay. The point I am trying to get to is: have you issued any fines or warnings yet to individuals for accessing their super when they are ineligible?

Mr Hirschhorn : To my knowledge, no, we have not.

Senator KENEALLY: Have you issued any declarations forcing people to pay tax on their super withdrawals because they were ineligible?

Mr Hirschhorn : To my knowledge, we have not at this stage.

Senator KENEALLY: Okay. How many staff in the ATO are working on this pilot examination?

Mr Hirschhorn : We have approximately 130 people working on the superannuation measure.

Senator KENEALLY: Thank you. You mentioned earlier that in some cases you were calling people. Is this all being done by humans, or is there some form of robodebt or a computer generated notice going out?

Mr Hirschhorn : No, this is people calling people.

Senator KENEALLY: Okay. I'm mindful that I'm probably running out of time here. I will just quickly turn to early-access super and fraud. Have those who've been victims of fraud received compensation?

Mr Hirschhorn : The fraud is on the super fund. The fraud is not on an individual.

Senator KENEALLY: Well, the individual might have a different view.

Mr Hirschhorn : It's in the name of the individual, but the fraud itself is stealing money from the superannuation fund.

Senator KENEALLY: Okay. If you're Joe Smith and someone has claimed your identity and taken money out of your superannuation account fraudulently, who makes sure that Joe Smith gets his money back in his super account?

Mr Hirschhorn : At the first level, the fraud is not on Joe Smith; the fraud is on the super fund.

Senator KENEALLY: Are you saying that Joe Smith's balance doesn't change?

Mr Hirschhorn : The way the super fund might initially account for his balance has changed. But, at the first level, the super fund is the one who's had the fraud committed on it, and the practice is that the super funds are ensuring that the individual is not disadvantaged.

Senator KENEALLY: You're saying the super fund has to ensure that the individual is not disadvantaged. So Joe Smith gets his balance restored through the super fund?

Mr Hirschhorn : That is correct, and that is what is happening in practice. Then the super fund may look to see if others should contribute to that loss.

Senator KENEALLY: Who would those others be?

Mr Hirschhorn : The first level is that, if they can catch the fraudster, that is, of course, the first person who should be making good.

Senator KENEALLY: Sure.

Mr Hirschhorn : In some cases that will be the case, because some of this fraud is not sophisticated fraud. It might be the housemate or somebody who's taken it from the letterbox. The second is that the super fund may choose to just absorb the loss. Super funds, like all financial institutions, have fraud committed on them at different times.

Senator KENEALLY: Can I ask you this, Mr Hirschhorn, which is where I'm trying to go: doesn't the ATO direct the fund to pay out?

Mr Hirschhorn : The ATO does not direct the fund to pay out. The ATO advises that there is a declaration that the claimant has a condition of release. Under this scheme, the super fund is intended and required to do its own checks before it releases any money, so the super fund is not some sort of blind executor of ATO wishes. The super fund is told that the ATO considers that the application means that their condition of release has been met. The super fund then has the obligation to check using its normal controls on paying out money.

Senator KENEALLY: How many days does the super fund get to do that?

Mr Hirschhorn : APRA's guidance is that the super fund, on average, should be paying out within five days.

Senator KENEALLY: Yes. Earlier we heard from Treasury that early-access super has always been there for people who are in emergency circumstances, and I accept that. That is true. But previously wasn't there a lot more time given for the super fund to determine, and a lot more paperwork required for people to demonstrate, that they did qualify for early-access super?

Mr Hirschhorn : My understanding is that, when funds considered whether to pay out money on whatever basis, a lot of the funds had very paper based and slow processes—many times much to their member's frustration. As part of the early release of superannuation scheme, there was consideration as to whether that process would be used or whether it would be a quicker and more reliable process to have at least an initial consideration, and, in a sense, an identification layer through myGov. That decision was made. I don't know the level of fraud in the paper schemes, but there has been an extraordinarily low level of fraud through this scheme.

Senator KENEALLY: I'm trying to work this out, Mr Hirschhorn. Are you saying that a super fund, having received a declaration from the ATO, could refuse to pay?

Mr Hirschhorn : Yes—and they do.

Senator KENEALLY: Can you give me the number of how many have refused to pay?

Mr Hirschhorn : I cannot. That is within the knowledge of the super funds.

Senator KENEALLY: Then how can you assert to this committee that they do that?

Mr Hirschhorn : Because we speak with super funds, and we know that they do this.

Senator KENEALLY: But you can't quantify it in any way?

Mr Hirschhorn : We cannot quantify it.

CHAIR: Senator Keneally, have you almost finished that line of questioning?

Senator KENEALLY: Mr Hirschhorn said that there was a very low level of fraud, and I am willing to take him at his word on that. However, I would like to know if he can give us an update as to how many cases of fraud have occurred.

Mr Hirschhorn : The rate—and, of course, we're talking about the fraud that has been detected.

Senator KENEALLY: Yes, I understand.

Mr Hirschhorn : In a sense, we can't talk about any fraud which has not been detected, although we are doing—may I put it a different way. We think it's somewhere around one in 5,000 applicants. So it's in the hundreds across the entire scheme.

Senator KENEALLY: I might put that on notice, so you can come back with something more specific.

Mr Hirschhorn : I will just add that we get something which is called a suspicious-matter report. We have received about 3,000 of those, and we follow those up. Most of those are proven not to be fraud.

Senator KENEALLY: I'll just leave that on notice, and you can provide an answer there. Thank you, Mr Hirschhorn. I appreciate your time this afternoon.

Senator SIEWERT: I want to go back to a few of the incentive areas and ask about the instant asset write-off and accelerated-depreciation issues. Do you have any preliminary data on the rate of uptake by businesses of the COVID capital investment incentives?

Mr Hirschhorn : Our challenge here, as compared to some of the other measures, is that we only find out what people have claimed when they lodge their tax returns. Nobody has lodged their tax returns yet. We will have some data in relation to that probably in six months time, but we don't have any data as to uptake on that right now.

Ms Jenkins : I should just clarify what Mr Hirschhorn said. Obviously some people have lodged their tax returns since 1 July, but we don't have enough that would tell us anything in terms of the instant asset write-off.

Mr Hirschhorn : Yes, particularly as—

Ms Jenkins : Businesses tend to do it later.

Mr Hirschhorn : businesses tend to lodge later.

Senator SIEWERT: I hear what you've just said. I'm also aware that there has been a bit of a rush, given the circumstances, in people lodging and, I would have thought, businesses lodging their tax returns. Have you not even looked at that? Of the returns that have been lodged, have you had a look at any of that preliminary data at all?

CHAIR: Have we lost the tax office?

Senator SIEWERT: I think we've lost the tax office.

CHAIR: We have. They were there and now they're gone.

Mr Hirschhorn : I think you were just asking about the instant asset write-off when you lost us.

Senator SIEWERT: Yes, I was making the comment that I thought that more businesses would have submitted early, given that there is an indication that there has been a much earlier lodging of tax returns. So is there no preliminary review to get even a feeling for how that mechanism is being used?

Mr Hirschhorn : We can certainly take that on notice and have a look. Our lodgements this year have been up by about seven per cent on last year, year to date, so only two per cent for current year returns. There's not been a huge pull forward of returns this year and most of that is individuals. We can have a look to see if there's any information but I think it's going to be too early.

Senator SIEWERT: I presume that's the same for SMEs and what value of capital investment has been deducted under the expanded instant write-off.

Ms Jenkins : That's correct.

Senator SIEWERT: I'm interested to know how many businesses and the value of the capital investment that has been deducted under the accelerated depreciation scheme. I'll keep chasing that information. Do you have any further updates from the questions I was asking about JobKeeper earlier? You were going to try and get some more figures?

Mr Hirschhorn : I've received many texts—

Ms Jenkins : Could you just remind us, was that in relation to the 8,000 JobKeeper applicants and the detailed breakdown of the 50 per cent?

Senator SIEWERT: Yes.

Mr Hirschhorn : As I said before in my earlier evidence, we wrote to about 8,000 applicants that we thought were ineligible based on our systems and gave people 14 days to respond or contact us. Of those, 3,800 did not respond; 1,800 didn't satisfy because they were too new; 800 didn't qualify because they didn't actually pay salaries at the relevant time or were backdated, were what we call a PAYGW role, so they weren't an employer in our systems; and about 550 eligible business participants—somebody who is a sole trader, someone who owns a business and who runs it in their own name—made multiple claims in relation to themselves either as multiple business participants or as an employee somewhere else and as an eligible business participant. And there are about 32 businesses that are being investigated for fraud either under the Serious Financial Crime Taskforce or in our own criminal area.

Senator SIEWERT: Thank you.

Mr Hirschhorn : Can I go back again, while we're there—there was an earlier question around whether there needs to be new legislation. My understanding of JobKeeper is that it statutorily comes to an end in September, which I assume means there will need to be more legislation.

Senator SIEWERT: Can I go to the interaction between JobKeeper and jobseeker. In terms of ensuring that people don't end up getting debts into the future, will you be using—it's probably not the Single Touch Payroll approach. Will the new system be online early enough for you to be able to report straight to Centrelink the earnings and who's getting the payments?

Mr Hirschhorn : We have set up a system where we are informing Services Australia of nominated employees. Of course, we get the information from the employer, and they say, 'We employ these 10 people.' We are sharing that information with Services Australia in real time, which says, 'This employer has said that they are employing these 10 people and claiming JobKeeper for them.' Of course, Services Australia—we have been working very closely with them—realise that that does not necessarily mean that the person has received $1,500 because sometimes people don't always tell the truth. So they are using that as the basis of a discussion. If somebody is claiming jobseeker and not disclosing income, Services Australia will be using that as a basis of a discussion with their client to say, 'Have you maybe forgotten that you're employed and getting JobKeeper somewhere else?'

Senator SIEWERT: What about the reverse, where an employer is saying these employees are getting paid on their payroll and the employees aren't in fact receiving that money?

Mr Hirschhorn : We and Services Australia, under our memorandum of understanding, are very, very interested in that situation because, as I've said previously in this committee, we are very focused on where employers don't pass on the benefit or take kick-backs of some sort. So we're very focused on that risk. We see this information exchange and the reciprocal information exchange back from Services Australia as a really key way of identifying employers who are not passing on their JobKeeper. Services Australia will be telling us that.

Senator SIEWERT: To date, how many times has it occurred that employees or jobseekers have reported they're basically not getting paid, and that's reported through Services Australia to you?

Mr Hirschhorn : We have reported data to Services Australia. Services Australia, of course, now has this data and has to start approaching people and doing their data matching. I don't think they have done that yet. I don't think we have received any examples of that yet from Services Australia.

Senator SIEWERT: Services Australia would obviously then pursue it if somebody's been receiving both jobseeker and JobKeeper payments?

Mr Hirschhorn : It's their responsibility, and we would not expect to be informed of that.

Senator SIEWERT: But, as you understand it, this mechanism hasn't been used to check where people have not in fact been paid JobKeeper when they are saying they have?

Mr Hirschhorn : That is correct, Senator, but it's early days.

Senator SIEWERT: Okay. Obviously I need to follow that up with Services Australia. Thank you. Can I go to an issue around negative gearing. Are you able to make any preliminary observations around changes in deductions on rental properties this financial year?

Mr Hirschhorn : I'm afraid not.

Senator SIEWERT: I presume that falls into the same basket as 'not enough returns have come in to have a look at that'.

Mr Hirschhorn : That's correct. And we would typically do that sort of analysis later in the year.

Ms Jenkins : Around October we'd start doing that.

Mr Hirschhorn : Given the nature of the economy at the moment with the bushfires and other natural disasters, and now with COVID, there are a range of new issues relating to negatively geared properties whereby you can't rent them out or, indeed, they might have been destroyed. We've put out a fair bit of new guidance as to what deductions people can still claim. Also, in the context of the deferral of interest by the banks, we've said you can still claim your interest expense even if you don't have to pay it to the bank. So there is a range of guidance we've been giving around negative gearing.

Ms Jenkins : We're happy to share that information with the committee if you would like links to that guidance.

Senator SIEWERT: That would be appreciated. Thank you. Do you have any expectations around whether there will be an increase or a decrease in deductions for rented properties? Have you done any work in that space?

Mr Hirschhorn : We would not ordinarily do that sort of analysis. We count what has happened more than forecasting it. We leave forecasting to our Treasury friends.

CHAIR: I have a couple of questions, and I hope I'm not repeating some of the areas Senator Siewert went to. There is a section in the back of the JobKeeper review which goes to the work the ATO has done around compliance and integrity. Is there a document available around the risk ratings, or a risk register you've done around implementing the JobKeeper payment, that can be provided to the committee?

Mr Hirschhorn : I'm not sure we've got a neat document, but certainly we can pull together, under notice, information as to the issues we are looking at and what we're doing.

CHAIR: That would be useful. In the review there are five main areas where you've identified a high risk of integrity or compliance issues. So I'm aware of those. But, if there was a more comprehensive answer, that would be really useful. In the back of this review, the first item—'Identifying and not accepting enrolments or applications from ineligible organisations or individual recipients'—says that you're applying a system based check. What is a system based check?

Mr Hirschhorn : Going right back to the start: in the design of the form, there are certain fields which are checked. In a sense, you have to—

Ms Jenkins : 'Is the ABN a valid ABN?', for example.

Mr Hirschhorn : It's a range of those sorts of checks, and some of those kick you out before you even get to go. That's what it's referring to.

CHAIR: Okay, so there are some relatively quick ways you can take a group of applications, and then they go through a checking process—is that right?—and as they meet those they go through. Do you do it for all—

Mr Hirschhorn : Yes. For some of the criteria—as I said, for the first phase, some criteria were in that process. In the second phase we're hoping that more of the criteria will get put in that process.

CHAIR: It says 26,000 enrolments or applications from organisations were assessed as being ineligible for the JobKeeper payment through that systems check. Is that right?

Mr Hirschhorn : I'd like to just check exactly what number that one is referring to, because there are so many different ways of cutting the numbers—

CHAIR: It just says they were ineligible.

Mr Hirschhorn : The numbers I have here are that about 42,000 were blocked. We had the enrolment process. We knocked out 42,000 in the enrolment process, which was all about employer eligibility. Then we had the application process, which was about employees. Another chunk were put aside for review at that stage, and there we're talking about around 60,000. But, again, it depends. The challenge here is that the numbers move every day. Again, about two per cent of applications, once they got through the form, got pushed aside for human intervention.

CHAIR: Say we take that 60,000 figure. How many of those were then—is the word 'blocked'?

Mr Hirschhorn : Yes.

CHAIR: How many were blocked from the scheme?

Mr Hirschhorn : This is when we start getting into the manual interventions. That's where we go to the 8,000 that we were talking about—

CHAIR: With Senator Siewert.

Mr Hirschhorn : with Senator Siewert. As of this week we've completed about 34,000 cases. About 20,000 of those were actually found to be eligible. About 10,000 were ineligible, for whatever reason. And 2,000 were partially eligible, which might be that we've knocked out some employees, but not all. So, we've done the review case; 12,000 have been spat into a more detailed process. We say they're completed but really they've escalated to the next stage of review.

CHAIR: Is there a backlog of applicants waiting for this assessment to be completed in order to get their cash?

Mr Hirschhorn : Yes. At any given time there is a number of people who have not received all their money. We generally give them an SMS within a couple of days of receiving their form and say, 'Your application is being reviewed.'

CHAIR: Do you have a figure from a point in time that you can give me?

Mr Hirschhorn : I might come back to you, but it's probably going to be in the order of about 25,000 applications—we call them suppressions.

CHAIR: 'Suppressions'? Can you explain—if you're 'suppressed', what does that mean?

Mr Hirschhorn : Sorry, there's so much ATO jargon. If you're suppressed, you're not going to get money from us—until something else happens.

CHAIR: Ever?

Mr Hirschhorn : No, you can be un-suppressed. And, again, this might be better done in a written response.

CHAIR: I don't know; I think it's quite good. So, how do you become un-suppressed.

Mr Hirschhorn : Well, you convince us that you were eligible.

CHAIR: So, if they're suppressed, you have formed the view that they are not eligible. They're not on hold waiting for anything further.

Mr Hirschhorn : Or we're saying, 'There are enough red flags that we don't want to pay you yet, we want to do some checking before we pay you.'

CHAIR: Okay. Do people get suppressed more than once?

Mr Hirschhorn : If somebody's suppressed, they're found to be ineligible, so we've found that they're ineligible. The suppression will sit there on the file because we don't want them to then reapply the next month. Once we've found that somebody's ineligible forever—

CHAIR: That's it.

Mr Hirschhorn : we might leave the suppression on the file just to make sure that they don't claim and try to get past us the next month. So some suppressions are effectively forever. Obviously, we want to resolve the matters as quickly as possible, because if people deserve their JobKeeper they should get it as soon as they can. So we don't like unprocessed suppressions, because we want to make sure we've made the decision one way or the other.

CHAIR: How many suppressions have there been?

Mr Hirschhorn : There are about 24,000 currently in place, which represent about $100 million of JobKeeper.

CHAIR: That's $100 million that people have applied for but you're not paying?

Mr Hirschhorn : Yes.

CHAIR: Did you say that changes all the time, or is that a cumulative total since the beginning of the scheme?

Mr Hirschhorn : That does change. New people will come on and some people will come off. The ones we've found to be ineligible will just stay, but some will come on and some will come off.

CHAIR: What's your peak suppression? Have you peaked above 24,000?

Mr Hirschhorn : I'd have to come back to you on that. Early on we probably had an initial peak, so the shape is probably that it went up quite high early on when we were trying to really understand the system and everybody's applications were new, and over time that then dipped down as we got through that load, and then I suspect it gradually increases over time.

CHAIR: Okay. Could you perhaps take on notice the highest peak of the suppression and perhaps add in whatever information you need to to explain that?

Ms Jenkins : If it helps, I think what I would say is that over time we've been able to change our risk tolerances. This really goes to the point that Mr Hirschhorn was making about early release of super. Over time we've worked out that actually we don't need to stop this amount, because we've worked out that creates a false positive in the system or there's another data source that we can match it up with to get a better quality of result. That's why over time that will go down: we have a better understanding of the population over time. But we'll provide more detail.

CHAIR: Okay. Just for my info, does 'suppression' actually mean rejection or refusal? Is that the same? I'm not arguing about the word. If you're suppressed, you're not eligible for JobKeeper?

Mr Hirschhorn : I'll clarify that. We have reached a position where we have a serious doubt as to your entitlement. We have not made a decision. So you'll become suppressed because we have serious doubts over your position, but we have not yet made a decision.

CHAIR: Okay. So you move out of being suppressed into rejection?

Ms Jenkins : Ineligible.

CHAIR: Ineligibility or approval—eligibility?

Mr Hirschhorn : Yes, we will make a decision one way or the other.

CHAIR: So suppression is sort of a holding zone?

Mr Hirschhorn : Yes, suppression is a caveat on the system. This might give a bit of context which explains it: our system is designed to pay out money that is on the account. The account balance is assumed to be real. If we did nothing, we'd process the form and the money would just go out. So it's putting a caveat on that amount of money so that we don't pay it out before we've worked out what we want to do.

CHAIR: It's a flag. Yes, I understand. Okay. I've sort got distracted by that suppression discussion. Can you receive money and then be suppressed, or is it before you get anything?

Mr Hirschhorn : It could be either. It's when we become suspicious. That's when you're suppressed.

CHAIR: So, as part of your integrity assessment, a person can be receiving JobKeeper but then go into a suppression arrangement. Do you advise people that they're being suppressed?

Mr Hirschhorn : As the last few minutes have shown, we don't say to them that they've been suppressed, but we do send them a text which says: 'We've got your application. We're reviewing it and we'll be in contact.'

CHAIR: Just finally, 79 businesses were referred to the Serious Financial Crime Taskforce for potentially fraudulent behaviour. That sits within the ATO, doesn't it.

Mr Hirschhorn : The Serious Financial Crime Taskforce is a cross-government group of agencies. It's chaired by the tax office, but it includes organisations like the police.

CHAIR: So those 79 businesses have been referred there. Does that group decide whether or not they get referred to the police, or can you just directly refer to the police?

Mr Hirschhorn : The police are a member of that group and so, as part of that group, the police might say, 'This is one we would like to take on,' or they might make a decision, 'This is not one for the police; it can be done through the ordinary tax system.' That group decides where it goes.

CHAIR: So you've reviewed 79 businesses and referred three matters, and one of those three has been referred to the police. Is that correct?

Mr Hirschhorn : You're reading from the review. Things have moved on.

CHAIR: Can you give me a quick update on that.

Mr Hirschhorn : I think we now have six matters that have been taken on.

Ms Jenkins : I understand there are eight, for JobKeeper, that have gone to the Serious Crime Financial Taskforce.

Mr Hirschhorn : I think six have been accepted by the police.

CHAIR: That's obviously happened in the last month or so.

Mr Hirschhorn : Yes. Things move quickly.

CHAIR: So six have gone off to the AFP. I know you can't discuss particular matters, but can you give me an idea of what some of the issues have been, in terms of potential fraud? Is it just not telling the truth on their forms?

Mr Hirschhorn : For it to get to that stage, it's generally more serious, more organised, such as where there's concern about blatant manipulation of turnover. That's one of them. In another one, somebody has claimed for themselves in about five of their related businesses. That might be another example. The stuff we would refer is really conscious, deliberate behaviour, not the ordinary—

CHAIR: So you've got turnover manipulation and multiple claims. Is there anything else?

Ms Jenkins : Pretending to have employees that they don't have.

CHAIR: And organised crime?

Mr Hirschhorn : There's no real evidence of organised crime. The fraud levels that we're detecting are actually very low for a scheme of this size. I don't think there's any indication that there's organised crime involvement in those frauds. It's not a pattern—

CHAIR: So it's more opportunistic?

Mr Hirschhorn : Yes. The system design features of JobKeeper make it really hard to defraud, as you've got to impersonate a company which employs people who are in the system as having been employed.

CHAIR: In relation to applications that have been deemed ineligible and things like that, is there an appeal mechanism? How do people challenge your view if they think they've been treated unfairly? Where does that go?

Mr Hirschhorn : I'll simplify it. Generally, you will have an opportunity to be reviewed by an independent part of the tax office. The initial decisions are made in my group, the Client Engagement Group. Ms Jenkins's group, which is independent, has independent people who review the decision. So, if you're aggrieved with a decision from my group, you get to go to Ms Jenkins's group for what we describe as an independent internal review or an objection. So there are different labels, but, fundamentally, there's always an opportunity for an internal review, and then, if you are dissatisfied with the internal review, you have access to the tribunal and court system. For small businesses, you have access to the small business tax tribunal where you have no costs and, if we have lawyers, we will pay for your lawyers, so it's actually a very important initiative for small businesses.

CHAIR: Do you have any of those afoot?

Mr Hirschhorn : I think at this stage we have one JobKeeper matter in the tribunal and two cash flow boost matters in the tribunal. We have several hundred objections against decisions, but they are mostly around eligibility.

CHAIR: So, at this stage, those objections are being handled in that internal process—they haven't escalated out yet?

Ms Jenkins : That's correct. To give you a sense of scale, combined JobKeeper and cash flow boost as at, I think, the beginning of this week, just over 2,000 objections have come through, and the teams have been spending quite a lot of time working on them. These objections have been prioritised, obviously, because the key thing here is that we want to get this money out the door as quickly as possible, and the second thing is that the teams have actually spent a lot of time on the phone explaining the circumstances, so that we can actually avoid these matters going to the tribunal or to the court system, and giving them an opportunity to provide us with any additional information as well, which is a really important part of this process.

CHAIR: So you try to close those off pretty quickly?

Ms Jenkins : We do, absolutely, and we've moved the teams so these are the priority. This is their priority work.

CHAIR: Mr Hirschhorn, a final question: how many extra ATO staff have you brought in to manage, basically, the rollout of JobKeeper and the other measures that you're responsible for? Surely you've had to have some additional staff?

Mr Hirschhorn : In the client engagement group, we have not brought in additional staff. We have redeployed about 3,000 staff. We've been able to do that because, given the COVID scenario, we have really redeployed people from initiating new audits. So, for the last few months, we have not been initiating new audits, except in certain circumstances. Things like GST fraud we still have, but, as a general comment, given the position the community is in, I think the last thing most people would like is a call from my auditors saying, 'You've been selected for audit.' So we made a very conscious choice—

CHAIR: It's important work, though. That's just not getting done for the time being?

Mr Hirschhorn : It is important work, and we made the decision that we would not commence new audits.

CHAIR: For how long?

Mr Hirschhorn : In our current planning—and, of course, current planning seems to change quite often—those audits, our general work streams, are recommencing in October.

CHAIR: At this point in time.

Mr Hirschhorn : In September-October, at this point in time, subject to—

Mr Geale : To the senator's question, in terms of extra resources that we brought in, we did bring in resources earlier, additional resources, to support our frontline service delivery work, and so there were approximately 1,500 additional people brought in to that area, as well as an additional 2,000 people reallocated across the organisation to support that frontline work. A lot of that work was around the announcement of JobKeeper and the cash flow boost, where we were helping answer the questions and ensuring they got enrolled into the system. They could use myGov ID. So our workforce was engaged to assist with that. We did experience, throughout April, May and June, significant increases in our telephone call volumes as we assisted the community with that work, as well as assisting them with things like lodgement deferrals and payment plans—that type of work. Those people are now being re-engaged across the organisation, back to new priorities, as that workflow comes off. So they're our additional workforce—

CHAIR: Did you say you brought on 1,500 new staff? Are they temporary, through contract labour hire?

Mr Geale : Those 1,500 are casual workforce. We always engage an increased casual workforce at this time of the year, with tax time, and that's when—

CHAIR: So you brought them on earlier.

Mr Geale : We brought a combination of them in earlier, but we were at times carrying 1,500 additional casuals to assist with the increased work flow.

CHAIR: Is that going to be maintained as you get through this second stage?

Mr Geale : That is available to us over the coming months, to respond to demand; it's very hard to predict what the demand to this workforce is. We also use outsourced providers for some of our telephone queries; we've got additional capacity there. That also provides us capacity for when we deal with situations in Victoria, where, with COVID, we've had to manage shutdowns of sites. That allows us to have surge capacity to deal with that, to ensure—as we have managed to have throughout this crisis—full business continuity.

CHAIR: And you're getting supplementation for those extra labour costs?

Mr Geale : That was absorbed up to the end of June out of our existing budget.

CHAIR: More on that in estimates, no doubt! Thank you.

Mr Hirschhorn : Can I just clarify one answer?

CHAIR: Yes.

Mr Hirschhorn : You asked about operations with the Serious Financial Crime Taskforce. There are currently 10 stimulus related, endorsed SFCT operations. Of those, four relate to JobKeeper and six relate to early release of super. So there are 10 endorsed operations in that task force.

CHAIR: And one still with the police—has that changed?

Mr Hirschhorn : I suspect that all of those 10 will have the police involved.

CHAIR: Thank you for clarifying that, Mr Hirschhorn. Thank you to you and to your colleagues, Mr Geale and Ms Jenkins, for appearing today and for staying a little bit over time. Officers are reminded that answers to questions on notice are due in 10 working days. Thank you very much for appearing before the committee—and reappearing; we lost you there for a while! We look forward to continuing to engage with you, the commissioner and your team over the coming months.

Mr Hirschhorn : Thank you.