The Australian Comfort Group delayed issuing invoices and the processing of customer orders in April, according to staff emails seen by The Australian Financial Review first reported on Monday.
The firm’s monthly revenue fell by more than 30 per cent – the required threshold to be eligible for the $70 billion JobKeeper program.
AFP officers executed a search warrant at the company’s Deer Park head office and factory on late Wednesday afternoon in an industrial area in Melbourne’s west.
Officers were seen collecting laptops, electronic records and documents for further examination.
The Australian Comfort Group owns the SleepMaker and Dunlop Foams brands.
The police were acting on a tip-off to the Australian Taxation Office, which has received more than 3300 tips via its online and telephone hotlines related to the JobKeeper scheme.
An AFP spokeswoman said it could confirm its “Taskforce Iris Melbourne strike team” conducted operational activity on Wednesday.
“Investigations remain ongoing at this time,” the AFP said.
Emails and messages between senior staff and employees at the company show there were a series of internal discussions about deferring April sales to May.
One employee tracking the bedding sales noted to colleagues they would need to resort to “holding back orders or deliveries without invoicing till May”.
A staff member wrote: “I have provided the attached to them so they can work on moving out production/invoicing into May.”
A senior employee wrote of the “need to get a bit more creative” on foam mattresses, while another senior member noted: “We need to pull out another $150k for bedding and $350k for foams.”
In a separate email, a worker wrote: “It’s going to exceed – it’s then how we deliver without invoicing (to push sales value into May). It makes me very nervous.”
In a statement to the Financial Review on Sunday, the Australian Comfort Group said it had always acted with integrity.
“Any examination of our eligibility to claim the JobKeeper subsidy will stand up to scrutiny,” it said.
“Our business has been seriously impacted by the COVID crisis with major parts of the retail distribution network closed or partially closed.”
Comfort Group was re-contacted for comment on Thursday.
The decline in revenue helped almost 600 of its employees become eligible for the $1500 fortnightly wage subsidies for six months.
So far, the New Zealand-owned firm has received about $1.8 million in subsidies from the ATO, according to sources.
Over the six-month program, it is in line to receive about $11 million.
To qualify for JobKeeper, a business must record or credibly forecast at least a 30 per cent decline in monthly or quarterly revenue between March 30 and September 27, compared with the same period last year.
Once eligible, a business receives the $1500-a-fortnight payment for each worker for six months, even if its revenue rebounds before the scheme expires in September.
Large companies with an annual turnover above $1 billion must endure a 50 per cent revenue decline to qualify.
Undoubtedly, the Comfort Group’s revenue was adversely affected by the coronavirus business shutdowns.
Some of its big customers, such as Myer, Forty Winks, Bedshed, Beds R Us and Radio Rentals, either closed or reduced operations in April.
A large customer, Harvey Norman, recorded strong sales growth and its bedding orders remained strong.
The Comfort Group’s Melbourne, Sydney and Brisbane mattress-making factories were closed for eight of 20 business days in April and staff were asked to reduce their number of working days and hours.
NZ Prime Minister Jacinda Ardern’s decision to impose harsher business shutdowns influenced the company’s decisions to temporarily reduce its operations in Australia because it was feared similar lockdown rules would follow here.
According to claims by one source, the business was on track to record a 15-20 per cent fall in April revenue compared with last year, before it delayed invoicing and customer orders.
It is understood the ATO is also looking into the allegations.
An ATO spokeswoman said it could not comment on the tax affairs of any individual or entity because of taxpayer confidentiality laws.
Treasury will undertake a review of the JobKeeper program in June.
Treasury expects almost 1 million businesses to enrol about 3.5 million employees, at an updated estimated cost of $70 billion over six months.
The Financial Review reported in May that some businesses were manipulating their cash flows to game the wage subsidies.
The ATO has published an integrity rule aimed at stopping “contrived and artificial arrangements” that technically satisfy the eligibility requirements, but have been implemented for the sole or dominant purpose of accessing a JobKeeper payment.
This includes bringing forward or delaying making supplies to a third-party customer.
“There is a dedicated team at the ATO examining all tip-offs, including claims relating to JobKeeper,” an ATO spokeswoman said.
“We are committed to tackling illegal activity and behaviour of concern to protect honest businesses and the community.”
“We take all information referred to us seriously and protect the complainant’s identity in accordance with the law requiring whistleblower protection.
“When we receive information through a tip-off, we will cross check the information and assess whether further action is required.
“Where appropriate, this action may include the imposition of penalties.
“We are working closely with the Fair Work Ombudsman and will refer tip-offs to them, as permitted under the law.”
There are civil and criminal penalties open to the ATO, including fines and jail sentences.
To help businesses comply, the ATO has published a practical compliance guide, Schemes in Relation to the JobKeeper Payment.