Coronavirus Economic Response Package (Payments and Benefits) Act 2020
In ForceCTH
Jurisdiction
Commonwealth
Act Number
37 of 2020
Collection
act
Plain English Summary
6/10 complexity
What this Act does mechanically
Authorises the Commonwealth, by rules, to make one or more kinds of payments to "entities" for specified time periods related to the COVID‑19 pandemic (including the "prescribed period", a later "relevant period", and a further period for support linked to public health orders) (see section 7(1), (1A) and (1B)).
Puts the Commissioner of Taxation in charge of administering the Act (section 5) and requires payments to be made by the Commissioner to nominated bank accounts unless the Commissioner directs otherwise (section 8).
Gives the Treasurer power to make rules by legislative instrument that set eligibility, application, amounts, timing, conditions and related scheme details for payments (section 20(1) and section 7(2)). The rules may delegate administrative powers to the Commissioner (section 20(4)).
Provides mechanisms for recovering overpayments, including repayment liability, the imposition of the general interest charge on unpaid overpayment debts, and joint and several liability where an overpayment resulted from reliance on a false statement or fraud (sections 9, 10 and 11).
Imposes pre‑payment and post‑payment record keeping obligations on recipients and a 5‑year retention requirement for post‑payment records (sections 14–16). The Commissioner may specify the kinds of records and manner of keeping them by legislative instrument (sections 15(5) and 16(5)).
Allows the Commissioner to require production of retained records with at least 28 days’ notice (section 17), and provides limited relief where records are lost or destroyed if reasonable precautions were taken (section 18).
The Coronavirus Economic Response Package (Payments and Benefits) Act 2020 establishes a high-level legislative skeleton that authorises the making of detailed rules to deliver financial support to entities affected by the coronavirus known as COVID-19. Section 3 states the object of the Act in plain terms: to provide financial support directly or indirectly to entities that are directly or indirectly affected by COVID-19. Rather than prescribing every payment type in the primary legislation, the Act delegates substantial rule-making power to the Treasurer under s 20(1). The rules may be made by legislative instrument and can cover eligibility, amounts, timing, conditions, application processes and the establishment of schemes.
Section 7 is the engine room. Subsection 7(1) permits rules to create one or more kinds of payments by the Commonwealth to an entity for times occurring during the prescribed period (defined in s 6 as 1 March 2020 to 28 March 2021). Subsection 7(1A) extends this to payments whose primary purpose is improving the prospects of individuals getting employment in Australia or increasing workforce participation, covering the relevant period (7 October 2020 to 6 October 2022). Subsection 7(1B) further authorises payments for entities adversely affected by restrictions imposed under a public health order of a State or Territory, for the period 1 July 2021 to 31 December 2022. Each subsection expressly states that the rule-making power for payments and the power to establish a scheme do not limit one another.
The Act is deliberately machinery in nature. It does not itself appropriate funds; that occurs through separate appropriation mechanisms. Instead it supplies the legal authority for the Commissioner of Taxation (defined in s 6) to administer payments, recover overpayments, enforce record-keeping and apply anti-avoidance rules. Section 5 confers general administration of the Act on the Commissioner, which in turn imports the confidentiality obligations in Division 355 of Schedule 1 to the Taxation Administration Act 1953.
Current sections
Direct links to the current provisions in Coronavirus Economic Response Package (Payments and Benefits) Act 2020.
21
Official source available
Zoe has indexed the source text for search and analysis. Use the official register for the original document and download formats.
Sourced from the Federal Register of Legislation (legislation.gov.au), CC BY 4.0.
Allows the Commissioner to determine that a recipient is not required to repay an overpayment or is exempt from record‑keeping requirements (sections 9(4) and 14(3)). Those determinations are not legislative instruments (sections 9(5), 14(4)).
Enables the Commissioner to treat certain decisions as made or notices as given for administrative timing purposes, and preserves objection and review rights under Part IVC of the Taxation Administration Act 1953 for specified Commissioner decisions (sections 12 and 13).
Empowers the Commissioner to treat contrived schemes (as defined in GST law terms) that have the sole or dominant purpose of obtaining or inflating payments as if the recipient was never entitled, and to set the correct amount (section 19).
Extends the Act to external Territories (section 4) and states the object of the Act as providing financial support directly or indirectly to entities affected by COVID‑19 (section 3).
Official stated purpose
The Act states its object is to provide financial support directly or indirectly to entities affected by COVID‑19 (section 3). The rules authorised by the Act are the mechanism for delivering that support (section 7).
Who pays, who decides, and who is affected
Who pays: payments are Commonwealth payments administered by the Commissioner of Taxation (sections 7 and 8). The Act does not itself set appropriation amounts in the rules (section 20(2)(d)).
Who decides eligibility and design: the Treasurer makes rules by legislative instrument (section 20(1)); those rules may be framed differently for different kinds of entities or payments (section 20(3)), and may delegate administrative powers to the Commissioner (section 20(4)). The Commissioner has discretion to make certain written determinations (sections 9(4) and 14(3)) and to specify record formats by legislative instrument (sections 15(5) and 16(5)).
Who is affected: any "entity" as defined in the Income Tax Assessment Act 1997 may be an applicant or recipient under rules made under this Act (see definitions in section 6 and the rule‑making power in section 7).
Compliance burdens, enforcement levers and administrative discretion
Record keeping: recipients must keep pre‑payment records substantiating information provided before payment (section 15) and post‑payment records required by the rules (section 16). Post‑payment records must generally be retained for 5 years after payment (section 16(6)–(7)). The Commissioner can specify required record types and formats by legislative instrument (sections 15(5) and 16(5)).
Production obligation: the Commissioner can require production of retained records with at least 28 days’ written notice (section 17(1)–(2)). Non‑compliance with that notice is not, by itself, an offence under section 8C of the Taxation Administration Act (section 17(3)).
Recovery and interest: recipients who were not entitled, or who received too much, are liable to repay the overpaid amount (section 9). Unpaid overpayment debts attract the general interest charge from the due date (section 10).
Joint liability: where an overpayment resulted from a materially false or careless statement by a connected other party, or from fraud, the Commissioner may make the recipient and that other entity jointly and severally liable for the debt and interest (section 11). The Commissioner must be satisfied of specified factual elements before imposing joint liability (section 11(1)–(2)).
Administrative relief and discretion: the Commissioner may (in writing) decide that a recipient need not repay an overpayment (section 9(4)) or that record‑keeping requirements do not apply to a specified payment/period (section 14(3)). These are not legislative instruments (sections 9(5), 14(4)). The Commissioner may also assume undertakings to comply with record keeping when they are provided in an approved form, and later revoke entitlement if compliance does not follow (section 14(5)–(6)).
Rule design, delegation and legal technique
The Treasurer’s rules are the primary instrument for defining eligibility, amounts, timing and conditions (section 20(1) and section 7(2)).
The rules may delegate powers to the Commissioner to make instruments or administrative decisions (section 20(4)) and may incorporate or adopt material from other instruments as in force from time to time (section 20(5)).
The rules are expressly prevented from creating offences or civil penalties, from authorising arrest/detention or entry/search/seizure, from imposing taxes, from setting appropriation amounts under an appropriation in this Act, or from directly amending the Act’s text (section 20(2)).
Mechanisms that shape distribution and incentives (what the Act enables, not outcomes)
Targeting: the rules can make different provision for different kinds of entities and different kinds of payments (section 20(3)). That mechanism enables assistance to be focused on particular groups if the rules are designed that way.
Time‑limited windows and purposes: the Act ties payment authority to specified time windows and, for some periods, to stated purposes (for example, payments during the relevant period primarily for improving employment prospects or workforce participation) (sections 7(1), 7(1A), 7(1B)). Timing and stated purpose in rules shape what activities or entities are eligible.
Delegation and incorporation: wide rule‑making and delegation powers (sections 20(4)–(5)) concentrate practical design choices in the Treasurer’s legislative instruments and in delegated instruments made under them.
Recovery and record rules: statutory repayment, interest exposure and record‑keeping deadlines create financial and administrative incentives on recipients to keep accurate records and to ensure eligibility when applying (sections 9, 10, 14–17).
Implementation risks, trade‑offs and costs to note (mechanisms only)
Administrative discretion versus legal certainty: the Act gives the Treasurer broad rule‑making power and allows delegation to the Commissioner, while also permitting the Commissioner to make non‑legislative determinations (sections 20(1), 20(4), 9(4), 14(3)). That structure concentrates decision‑making power in administrative instruments rather than the Act’s text.
Compliance cost on recipients: record keeping and production requirements (sections 15–17) and the possibility of repayment and interest (sections 9–10) impose identifiable compliance and financial risk on recipients.
Targeting choice and concentrated benefits: because rules may differentiate between entity types and payments (section 20(3)), the design of rules determines who benefits; the Act provides the mechanism to grant concentrated support but does not itself specify which entities will benefit.
Need for separate appropriation: the rules cannot themselves set appropriation amounts (section 20(2)(d)), so payment funding and budgetary decisions are handled outside the rule instrument.
Legal remedies and review
Affected entities can object to specified Commissioner decisions under the objection procedures in Part IVC of the Taxation Administration Act 1953 (section 13). The Act also provides for when certain Commissioner decisions or notices are taken to have been made or given for the purposes of that review system (section 12).
Geography and duration
The Act extends to external Territories (section 4) and defines the relevant time windows in section 6 (definitions of "prescribed period" and "relevant period") and in section 7(1B) for the further period tied to public health orders.
Source statements of purpose and scope
The Act states its object (to provide financial support to entities affected by COVID‑19) in section 3. The rest of the Act sets out the rule‑making, administration and enforcement mechanics for delivering such payments.
Payment mechanics are addressed in s 8. Where the rules require the Commissioner to pay a Coronavirus economic response payment, it must generally be paid into a nominated financial institution account (either one nominated under s 8AAZLH of the Taxation Administration Act 1953 or the account shown in the entity’s most recent income tax return). The Commissioner may direct an alternative payment method. If no account is nominated and no alternative direction is given, the Commissioner is not obliged to make payment until an account is provided. Payment to the nominated account is taken to be payment to the entity.
Overpayment recovery is dealt with in a cascading suite of provisions. Section 9(1) applies where the Commissioner has paid an amount by way of a Coronavirus economic response payment and the recipient was not entitled to it or received more than the correct amount. The entity is then liable to repay the whole or the excess (s 9(2)). The amount is due and payable on the day the Commissioner made the original payment (s 9(3)). The Commissioner may, by written determination, decide that the entity is not liable to repay; such a determination is not a legislative instrument (s 9(4)–(5)).
General interest charge (defined in s 6 by reference to Part IIA of the Taxation Administration Act 1953) accrues on unpaid repayment amounts under s 10. The charge runs from the day the repayment was due until the day the debt and all accrued charge is paid in full. Section 11 adds a joint and several liability regime. It applies where the Commissioner is satisfied that an overpayment arose because the recipient reasonably relied on a false or misleading statement made in the approved form by another entity who did not take reasonable care, who directly benefited from the payment, and where it is reasonable for both to be jointly liable. It also applies where the overpayment resulted from fraud by another entity. In those circumstances both parties are jointly and severally liable for the repayment and any general interest charge.
Decision-making and review are streamlined. Section 12 allows the rules to deem decisions to have been made or notices to have been given on particular days. Where Part IVC of the Taxation Administration Act 1953 applies and no notice is required or deemed, the Commissioner is taken to have given notice on the day the decision was made. Section 13 gives an entity dissatisfied with any of six listed categories of decision (including entitlement decisions, amount decisions, refusal to remit an overpayment liability, and joint-liability decisions) the right to object under Part IVC.
Record-keeping is elevated to a condition of entitlement. Section 14(1) provides that an entity is not entitled, and is taken never to have been entitled, to a payment unless it has complied with both the pre-payment record-keeping requirements in s 15 and the post-payment requirements in s 16. The Commissioner may exempt an entity by written determination (which can operate retrospectively) and such a determination is not a legislative instrument (s 14(3)–(4)). An undertaking in the approved form to keep records allows the Commissioner to assume compliance when deciding entitlement, but if the undertaking is breached the Commissioner may revoke the decision and the entity is taken never to have been entitled (s 14(5)–(6)).
Section 15 requires an entity to keep, before payment, records that substantiate any information provided to the Commissioner in relation to the payment. Those records must be in English or readily convertible into English. The Commissioner may, by legislative instrument, specify kinds of records and the manner in which they must be kept; compliance with such an instrument is taken to satisfy the obligation. Section 16 imposes parallel post-payment obligations, adds a mandatory five-year retention period after payment (ss 16(6)–(7)), and allows the Commissioner to notify an entity that records no longer need to be kept. Both pre- and post-payment records can be the subject of a production notice under s 17, which must allow at least 28 days for compliance. Failure to comply with a s 17 notice does not trigger an offence under s 8C of the Taxation Administration Act 1953, but the general record-keeping offence and penalty provisions in ss 8L, 8Q and 8T of that Act continue to apply.
Section 18 protects entities from loss of entitlement where required records are lost or destroyed. If a complete copy exists it is treated as the original. If no copy exists but the Commissioner is satisfied reasonable precautions were taken, entitlement is not affected. This protection operates despite anything in ss 14–17.
Anti-avoidance is addressed in s 19. If the Commissioner is satisfied that one or more participants entered into or carried out a scheme (using the definition in the A New Tax System (Goods and Services Tax) Act 1999) for the sole or dominant purpose of making an entity entitled to a payment or increasing the amount of a payment, the Commissioner may determine that the Act has, and is taken always to have had, effect as if the recipient never became entitled or the amount was always the lower figure specified in the determination. The Commissioner must have regard to eight enumerated matters when deciding purpose. The provision applies regardless of whether the scheme was carried out inside or outside Australia. A determination is not a legislative instrument.
Section 20 contains the rule-making power and important limitations. Rules cannot create offences or civil penalties, authorise arrest, detention, entry, search or seizure, impose a tax, set an appropriation amount, or directly amend the text of the Act. Rules may differentiate between different kinds of entities or payments, sub-delegate to the Commissioner, incorporate external instruments as in force from time to time (despite the usual rule in s 14(2) of the Legislation Act 2003), and prescribe matters for other Commonwealth laws. Sections 8–11 and 13–19 do not limit the breadth of the rule-making power.
Section 21 supplies the constitutional foundation, relying primarily on the nationhood power and, additionally, on all other relevant heads of power for each kind of payment. Section 4 extends the Act to every external Territory referred to in the definition of Australia in s 960-505 of the Income Tax Assessment Act 1997. Section 6 supplies definitions that tie the Act into the broader tax legislation ecosystem, including the critical concept that “this Act includes the rules”.
Taken together, the statute is a delegated-legislation vehicle that balances speed of response with post-payment integrity, record-keeping discipline and anti-avoidance protection. Its substantive operation is almost entirely contained in the rules it authorises; the primary Act supplies the machinery, the recovery rules, the review rights and the safeguards.
Who it affects
The Act uses the broad definition of “entity” taken from the Income Tax Assessment Act 1997 (s 6). This encompasses individuals, companies, trusts, partnerships, superannuation funds, government agencies and any other person or group that can receive a payment under the rules. Because the object in s 3 refers to entities “directly or indirectly affected” by COVID-19, the reach is not limited to businesses that suffered revenue loss; it can extend to entities that indirectly benefit when another entity receives a payment (see s 7(2)(i)(ii)–(iii)).
The Commissioner of Taxation is the central administrator (s 5) and therefore every entity that interacts with the Commissioner in applying for, receiving, reporting on or repaying a Coronavirus economic response payment is affected. Entities that make statements in the approved form on which another entity relies can be exposed to joint and several liability under s 11 if those statements are false or misleading and reasonable care was not taken.
Financial institutions holding nominated accounts are indirectly affected because payment to the credit of such an account is taken to be payment to the entity (s 8(4)). Entities that enter into or carry out schemes caught by s 19 are affected even if they are not themselves the recipient of the payment.
Because the Act extends to external Territories (s 4), entities operating in those territories fall within its scope. The record-keeping obligations in ss 14–18 bind any entity that wishes to establish or maintain entitlement, while the overpayment rules in ss 9–11 can create liabilities for entities that received money to which they were not entitled or received too much.
The joint-liability provisions in s 11 can bring related entities (business, family or other connections are expressly listed in s 19(3)(h)) into the net even if they were not the original recipient. Fraud provisions in s 11(2) can capture participants who were not themselves recipients. In short, the Act casts a wide net: any entity that applies for, receives, benefits from, provides information for, or participates in a scheme relating to a Coronavirus economic response payment is potentially affected.
Key duties and rights
Entities that wish to receive payments have the right to have the Commissioner apply the rules made under s 7. If the rules create an entitlement, the entity has a right to payment into a nominated account (s 8) and a right to object under Part IVC of the Taxation Administration Act 1953 against the six categories of decision listed in s 13(2).
The correlative duties are substantial. The paramount duty is to comply with the pre-payment record-keeping requirements in s 15 and the post-payment requirements in s 16. Compliance with these requirements is a condition precedent to entitlement; non-compliance means the entity “is not entitled, and is taken never to have been entitled” (s 14(1)). Records must substantiate information provided to the Commissioner, be kept in English or readily convertible form, and (for post-payment records) be retained for five years after payment unless the Commissioner notifies otherwise (s 16(6)–(8)).
An entity that receives an overpayment is under a duty to repay the whole or the excess on the day the Commissioner made the original payment (s 9(2)–(3)). That duty carries with it secondary liability for general interest charge under s 10. Where the conditions in s 11(1) or (2) are met, the entity and another entity become jointly and severally liable.
Entities that make statements in the approved form owe a duty to take reasonable care; failure to do so can trigger joint liability for another entity that relied on the statement. Entities contemplating arrangements that might be characterised as schemes under s 19 must be aware that the Commissioner may look at the eight matters listed in s 19(3) and make a retrospective determination cancelling or reducing entitlement.
The Commissioner has rights and powers that correspond to these duties. The Commissioner may require production of records on 28 days’ notice (s 17), may determine that an entity is not liable to repay an overpayment (s 9(4)), may exempt an entity from record-keeping (s 14(3)), and may make anti-avoidance determinations under s 19. The Commissioner may also assume compliance where an undertaking in the approved form has been given, but retains the power to revoke a favourable decision if the undertaking is broken (s 14(5)–(6)).
Rights to review are conferred on dissatisfied entities under s 13. The rules may also deem decisions or notices to have been made or given, which affects the running of objection and review time limits (s 12).
Penalties and enforcement
The Act itself creates no criminal offences or civil penalties. Section 20(2) expressly prohibits the rules from creating offences or civil penalties, authorising arrest, detention, entry, search or seizure, imposing a tax or setting an appropriation. Enforcement therefore occurs through the existing architecture of the Taxation Administration Act 1953.
Failure to keep or retain records in accordance with ss 15 and 16 engages the general record-keeping offences and administrative penalties in ss 8L, 8Q and 8T of the Taxation Administration Act 1953 (repeatedly cross-referenced in the notes to ss 15, 16 and 17). Non-compliance with a notice to produce records under s 17 does not trigger an offence under s 8C of the Taxation Administration Act 1953, but the underlying record-keeping obligations remain enforceable.
Overpayments are recovered as debts due to the Commonwealth. The liability arises immediately on the day of the original payment (s 9(3)). General interest charge accrues daily under s 10 on any unpaid balance. Joint and several liability under s 11 allows the Commissioner to pursue either or both parties for the full amount.
Anti-avoidance determinations under s 19 are self-executing once made: the Act is taken always to have had the effect stated in the determination. Because such determinations are not legislative instruments they are not subject to disallowance, although they remain amenable to judicial review and, where Part IVC applies, to objection.
The Commissioner’s power to revoke an entitlement decision after a breached undertaking (s 14(6)) operates retrospectively; the entity is taken never to have been entitled. This can convert a payment into an overpayment and trigger the repayment and general interest charge rules.
Confidentiality of information obtained under the Act is protected by Division 355 in Schedule 1 to the Taxation Administration Act 1953 (note to s 5). Breach of those provisions carries its own offences and penalties outside this Act.
How it interacts with other laws
The Act is deliberately woven into the fabric of Commonwealth tax legislation. Definitions in s 6 import the meanings of “entity”, “Australia”, “income tax return”, “income year”, “approved form” and “general interest charge” from the Income Tax Assessment Act 1997 and the Taxation Administration Act 1953. Administration is vested in the Commissioner (s 5), which automatically attracts the confidentiality, objection, review and collection provisions of the Taxation Administration Act 1953.
Part IVC of the Taxation Administration Act 1953 governs objections against the decisions listed in s 13(2). The deeming rules in s 12 interact with the timing rules in Part IVC. Record-keeping obligations are enforced through the existing penalties in ss 8L, 8Q and 8T of the Taxation Administration Act 1953. Payment into a nominated account relies on s 8AAZLH of that Act.
The anti-avoidance rule in s 19 adopts the definition of “scheme” from the A New Tax System (Goods and Services Tax) Act 1999 and uses language reminiscent of, but distinct from, Part IVA of the Income Tax Assessment Act 1936. The eight factors in s 19(3) mirror but do not duplicate the factors in s 177D of that Act.
Section 20(6) permits the rules to prescribe matters required or permitted by other Commonwealth laws to be prescribed by the rules, allowing integration with social security, industry assistance or other statutes. Section 20(5) permits incorporation by reference of instruments as in force from time to time, overcoming the usual limitation in s 14(2) of the Legislation Act 2003.
Constitutionally, s 21 relies on the nationhood power and “all other legislative powers” relevant to each kind of payment. This interaction with constitutional doctrine ensures that each species of payment can rest on whichever head of power is most appropriate (e.g. the corporations power for payments to companies, the trade and commerce power, or the external affairs power).
The Act does not displace general equitable or common-law remedies but operates within the statutory scheme. A determination under s 9(4) that an entity is not liable to repay is an exercise of administrative power and therefore subject to judicial review under the Administrative Decisions (Judicial Review) Act 1977 where appropriate.
Recent changes and why
Although the Act as originally enacted focused on the prescribed period (1 March 2020 to 28 March 2021), two expansions are visible on the face of the text. The insertion of s 7(1A) extended the rule-making power to payments whose primary purpose is improving employment prospects or increasing workforce participation during the relevant period (7 October 2020 to 6 October 2022). The addition of s 7(1B) authorised payments to entities adversely affected by public health orders for the period 1 July 2021 to 31 December 2022.
These changes were made because the economic shock of the pandemic evolved. Initial support was directed at preventing business closures and job losses during the first wave. As restrictions eased and then re-emerged in response to later outbreaks, governments needed authority to target support at labour-market re-entry and at businesses forced to close or restrict operations by state and territory health orders. The amendments kept the same administrative machinery (record-keeping, overpayment recovery, anti-avoidance) while expanding the permissible objects of payment. Because the rule-making power in s 20 is expressed broadly and is not limited by the earlier sections, the amendments could be effected without rewriting the core integrity provisions.
The commencement table in s 2 shows that the bulk of the Act (ss 3–20) commenced immediately after Part 1 of Schedule 1 to the Coronavirus Economic Response Package Omnibus (Measures No. 2) Act 2020, ensuring coordinated operation with related measures. The note to the table makes clear that it reflects only the original enactment; later amendments are not recorded there.
Court challenges and controversies
The text of the Act does not itself record any decided cases. However, several structural features are likely to generate litigation. First, the breadth of the anti-avoidance power in s 19, which requires the Commissioner to be “satisfied” that a scheme was entered into for the sole or dominant purpose identified, invites challenges on the ground that the Commissioner misapplied the eight mandatory considerations in s 19(3). Because a s 19 determination operates retrospectively, affected entities may argue that the determination itself constitutes an impermissible exercise of legislative power or infringes Chapter III of the Constitution.
Second, the joint and several liability regime in s 11 contains multiple cumulative preconditions (reasonable reliance, false or misleading statement in approved form, lack of reasonable care, direct benefit, and the Commissioner’s satisfaction that it is reasonable for both parties to be liable). Each element is justiciable. An entity joined under s 11 may contend that it did not “directly benefit” or that the Commissioner’s satisfaction was unreasonable.
Third, the retrospective operation of s 14(1) (“is not entitled, and is taken never to have been entitled”) when record-keeping obligations are breached raises questions about whether a payment that has already been received and spent can lawfully be recharacterised as never having been entitled. The Commissioner’s power to revoke a decision after a breached undertaking (s 14(6)) similarly invites arguments about procedural fairness and the limits of retrospective administrative action.
Fourth, the interaction between the deeming rules in s 12 and the time limits in Part IVC of the Taxation Administration Act 1953 is likely to produce disputes about whether an objection was lodged in time. The rule-making power to deem decisions or notices to have been made or given adds a further layer of complexity that may be tested.
Controversies have also surrounded the breadth of the rule-making power itself. Although s 20(2) contains express limits, the ability of the rules to sub-delegate to the Commissioner (s 20(4)) and to incorporate external materials as in force from time to time (s 20(5)) has been criticised as excessive delegation. The fact that the rules can differentiate between classes of entity and classes of payment without further parliamentary scrutiny has been a point of policy debate.
Because the Act relies on the nationhood power in s 21(1), constitutional challenges testing the outer limits of that power in the context of ongoing pandemic-related spending cannot be ruled out, although the additional basis in s 21(2) provides a safety net.
Gotchas
Most practitioners instinctively treat record-keeping as an afterthought; the Act makes it a condition precedent to entitlement. An entity that receives a payment on the strength of an undertaking under s 14(5) can lose entitlement years later if it fails to keep the required records for the full five years. The words “is taken never to have been entitled” in s 14(1) and s 14(6)(d) mean that the statute of limitations for recovery may never begin to run, exposing recipients to indefinite repayment risk.
The joint-liability net in s 11 is wider than many realise. It is not necessary that the other entity be the one who applied for the payment; it is sufficient that the other entity made a statement in the approved form on which the recipient reasonably relied and that the other entity directly benefited. The Commissioner’s satisfaction that it is “reasonable” for both to be liable is a broad discretion that is difficult to overturn on review.
Section 19’s anti-avoidance test uses the GST Act definition of “scheme”, which is famously expansive. The eight factors in s 19(3) include “any change in the financial position of any entity that has, or has had, any connection (whether of a business, family or other nature) with the recipient”. This can bring family trusts, related companies and even employees within the Commissioner’s gaze. Because the dominant purpose test is assessed objectively, commercial arrangements that produce a tax or payment benefit as a substantial incident can still be caught if the Commissioner concludes the requisite purpose existed.
The interaction between s 9(3) (amount due on the day the Commissioner paid it) and the general interest charge in s 10 can produce eye-watering liabilities even where the overpayment was modest and discovered years later. The Commissioner’s power to determine that no repayment is required under s 9(4) is entirely discretionary and not reviewable under the listed objection rights in s 13(2)(c) unless it falls within one of the other paragraphs.
Many entities assume that because payment was made into their bank account under s 8(4) the matter is closed. The Act expressly states that the Commissioner is taken to have paid the entity, but that does not prevent later recovery action if entitlement is later denied or a s 19 determination is made.
The rules can incorporate external instruments as in force from time to time. An entity that complies with today’s ATO guidance may find itself non-compliant if the incorporated document is later amended. The five-year retention period in s 16(6)–(7) continues even if the rules themselves are repealed.
Finally, because the Act extends to external Territories via the s 960-505 ITAA 1997 definition, entities operating in places such as Christmas Island or Norfolk Island can be caught even though they may not be subject to all State and Territory public health orders.
How to comply
Compliance begins with a thorough understanding of the particular rules made under s 7 that govern the payment in question. Because the primary Act is machinery only, the operative eligibility criteria, amounts, periods and conditions live in the legislative instruments. Entities should obtain and retain a copy of the version of the rules applicable to each payment received.
Before applying for any payment, an entity must create and keep records that substantiate every piece of information it will provide to the Commissioner (s 15(2)). Those records must be in English or readily convertible and should be of a kind and kept in a manner that satisfies any legislative instrument made by the Commissioner under s 15(5). The safest course is to treat the pre-payment obligation as creating a contemporaneous file that will also satisfy the five-year post-payment retention requirement in s 16.
When providing information or making statements in the approved form, entities must take reasonable care. The joint-liability trigger in s 11(1) turns on whether the statement was false or misleading in a material particular and whether reasonable care was taken. Contemporaneous file notes explaining the basis on which figures were calculated can be powerful evidence of reasonable care.
After receipt of a payment, the entity must continue to retain the pre-payment records for five years after the payment was made (s 16(7)) and must keep any additional records required by the rules that substantiate post-payment information (s 16(2)). The five-year clock runs from the date the payment was made, not from the end of the income year or the date of any subsequent audit. If the Commissioner issues a notice under s 17 requiring production, the entity must comply within the time allowed (at least 28 days). Although no offence is committed under s 8C for non-compliance with a s 17 notice, the underlying record-keeping obligations remain enforceable through ss 8L, 8Q and 8T of the Taxation Administration Act 1953.
Entities should put in place systems to monitor any changes to incorporated external instruments, because s 20(5) permits the rules to pick up those changes automatically. If an entity becomes aware that it may have received an overpayment, it should consider voluntarily disclosing to the Commissioner before the Commissioner makes a recovery decision; early disclosure may improve the prospects of a favourable exercise of the s 9(4) discretion.
For arrangements that could be characterised as schemes, a purposive analysis against the eight factors in s 19(3) should be documented contemporaneously. If the dominant purpose is commercial rather than the obtaining of a Coronavirus economic response payment, that should be recorded.
Entities that give an undertaking in the approved form under s 14(5) must treat that undertaking as binding for the full five years. Breach will allow the Commissioner to revoke the entitlement decision and pursue recovery plus general interest charge.
Finally, any entity that receives a notice of a decision it disagrees with should immediately consider its objection rights under s 13 and Part IVC of the Taxation Administration Act 1953. Because the rules may deem the date of decision or notice, time limits can expire earlier than expected. Retaining copies of all correspondence with the Commissioner and all versions of the rules applicable to each payment is the minimum prudent compliance step.
In summary, compliance is not a set-and-forget exercise. It requires contemporaneous, comprehensive records, ongoing monitoring of the rules and incorporated instruments, careful drafting of statements to the Commissioner, and a five-year retention discipline that many entities underestimate. Those who treat the payment as “money in the bank” without maintaining the evidentiary trail do so at their peril.