Cash flow boost for employers – fraudulent arrangements
We are committed to:
- supporting the Australian community to access the help on offer
- working with people to get through this difficult time.
However, when times are tough, there are some people who may try to use fraud to access or increase entitlements to the cash flow boost.
Some arrangements that we will be looking out for include:
- businesses that register for PAYG withholding, or report withholding amounts on behalf of fictitious employees, so that they can claim the cash flow boost
- businesses that overstate their PAYG withholding amounts to increase their entitlement to the cash flow boost
- employers who claim that former employees are still working for them, or who resurrect dormant entities, to wrongfully claim the cash flow boost.
Examples of fraudulent arrangements
Example 1 – Inflated withholding tax or fictitious employees
Sam runs a trucking business with no employees. In an attempt to claim he is eligible for the cash flow boost, Sam registers fictitious employees and reports PAYG withholding amounts for them.
This arrangement is undertaken deliberately with the aim of claiming the cash flow boost. Because Sam is not entitled and his arrangement is fraudulent, he may face criminal penalties for:
- making a false statement to the ATO
- attempting to obtain a financial advantage by deception.
Sam will also have to repay any cash flow boost he received.
End of example
Example 2 – Use of associates to overstate withholding tax
Mark runs a courier business through the M Trust. The business has six employees. The M Trust reports monthly and the estimated PAYG withholding each month is approximately $10,000. The trust is entitled to a cash flow boost of $30,000 (3 × $10,000).
In March, Mark's son John, daughter Mary, wife Jane and his brother Michael all enter into employment contracts with the M Trust. However, they have no involvement in the business.
The M Trust lodges its March activity statement with an overstated PAYG withholding amount of $20,000. The initial cash flow boost is based on three times the monthly withholding amount (3 × $20,000 = $60,000). In this case, the payment to the M Trust is capped at the maximum amount that can be received ($50,000).
The arrangement was undertaken to dishonestly claim that the M Trust was entitled to a larger cash flow boost ($50,000) than its actual entitlement ($30,000). Michael may face criminal penalties for making false statements and attempting to obtain a financial advantage by deception.
End of example
Example 3 – Misuse of dormant entities
Peter is the sole director and shareholder of Diggin-it Pty Ltd which runs an excavation business and has seven employees. The excavation business was previously owned and operated by Dig it Up Pty Ltd. Peter was also the sole director and shareholder of that business. The business was transferred and a new director appointed 12 months ago. Since then, Dig It Up Pty Ltd has undertaken no business activities and has outstanding lodgments.
Peter decides to lodge:
- 2018–19 returns for both Diggin-it Pty Ltd and Dig It Up Pty Ltd
- activity statements that falsely state that two of his employees are still employed by Dig It Up Pty Ltd.
Peter has used a dormant entity in his group in order to falsely obtain two entitlements to the cash flow boost.
Peter is not eligible for the cash flow boost for Dig It Up Pty Ltd. He may also face criminal penalties for making false statements and attempting to obtain a financial advantage by deception.
End of example
We will be looking out for businesses which try to fraudulently access the cash flow boost for employers.