'Robodebt 2.0': tax office tells hundreds of childcare providers they are ineligible for jobkeeper
The tax office has told hundreds of childcare providers across Australia they are ineligible for jobkeeper payments and warned they may have to pay back what they have already received, despite the government’s free childcare scheme automatically qualifying them for the wage subsidy.
Further detail about the extent of the Australian tax office’s jobkeeper compliance program – dubbed “robodebt 2.0” by those affected – comes after the Guardian reported last week that 8,000 sole traders previously approved for the $1,500 a fortnight payment had been deemed ineligible.
The targets of the compliance procedure are sole traders, including graphic designers, cleaners and child care providers, who began their businesses recently and therefore have not been reporting their income for a full financial year.
The reports and associated complaints have since prompted action from the ombudsman, with Karen Payne, inspector general of taxation, telling the Guardian it was now investigating the ATO’s job compliance activities after a recent surge in complaints.
Affected businesses, many of which have received the $1,500 a fortnight wage subsidy covering the months since April, were sent an email by the ATO last Monday warning that because they “started business on or after 1 January 2020” their “entity would not have assessable business income” - and therefore could not prove the 30% reduction in revenue required to access jobkeeper.
However, the ATO’s website describes how businesses started after 1 January are eligible for jobkeeper, outlining an alternative test for proving a reduction in revenue, by comparing the average monthly turnover in February with turnover in following months.
As part of the Covid-19 free childcare scheme announced in April, the government cut its direct contribution to operators by about 50%, to an amount based on an enrolment period before the pandemic hit.
The government engineered the free childcare scheme so jobkeeper would pay the remaining cost to carers. This funding change guaranteed a reduction of more than 30% of income, and qualification for the subsidy. The free childcare scheme is set to be wound back from 13 July, when the government will pay a different contribution to providers who will able to begin charging fees again.
However, many individuals who operate family daycare for small groups of children in their own home have now been told they are ineligible for jobkeeper.
The Guardian understands family daycare industry bodies held negotiations with the ATO and education department earlier in the year when they were told all educators who operated as sole traders would be eligible for jobkeeper.
Victoria Edmond is the director of Rainbow Bridge, a childcare provider network that lists educators across NSW and Queensland that individually operate as sole traders under the Rainbow Bridge brand and care for up to seven children in their own homes.
Edmond also administers an online directory of Australian family daycare educators.
She said while all 4,000 educators across her Rainbow Bridge and online communities had been receiving jobkeeper payments since the subsidy was announced, “at least a couple of hundred” carers were told in late June they were ineligible and may need to pay back what they had received.
Every educator who received the ineligibility notice had started their business after 1 January this year, despite qualifying under the alternative test for eligibility for new businesses.
In addition to the threat of repaying what they had relied on as income, it has meant the affected businesses have not yet received their jobkeeper payments for the month of June.
While many have since called the ATO to complain, Edmond told the Guardian she has not heard of any of the cases being resolved, despite the notice of ineligibility “completely contradicting” the ATO’s alternative income reduction test for new businesses.
“It’s been diabolical ... the limbo the ATO has put them in, to make them wait for their payments not knowing if it will actually arrive.”
Edmond said there had been a surge in new family day care providers after parents moved their children out of larger childcare centres early on in the pandemic because they feared more germs would spread in those settings, which drove demand for day care options with smaller groups.
“Day carers were mandated to stay open by the government, or we’d lose our ability to get funding. But there’s no way now these educators can ever recoup the money they’ll have to pay back, or what they won’t get for June.
Edmond said despite not being able to charge fees, many family day care educators saw an influx of children, often at extended hours and weekends, whose parents were essential workers including doctors and nurses at hospitals.
“There’s some of our women telling me they’ve only got enough to pay their rent or buy food for their family, because they’ve still got to provide nappies and food for the children they are caring for as their business. It’s heartwrenching.”
Edmond said some educators were working five days a week, for longer hours than they were pre-pandemic, for an income of $94. This is because they have now been deemed ineligible for jobkeeper, and rely on a government contribution calculated at lower prepandemic enrolments.
“Family day care literally kept Australia going ... but if some have to pay back their jobkeeper, they’d have been way better off on jobseeker and hiber
nating their business.”
An ATO spokeswoman told the Guardian that while sole traders who started their businesses after 1 January may have met the alternative turnover reduction test, there was an additional “integrity rule”, stipulating a sole trader needed to have a monthly tax reporting period to be eligible for jobkeeper if they started business after 1 January 2020.
“Where a sole trader has a quarterly tax period, they will not be able to satisfy this integrity rule unless they commenced business before 1 January 2020.”
The Guardian understands that all new sole traders are set on quarterly reporting periods by default, with only larger businesses, with a turnover over $20m, forced to report monthly.
The ATO’s website outlining jobkeeper eligibility does not warn that monthly tax reporting is a requirement for new sole traders.