Even as many large companies face pressure to return JobKeeper subsidies after they grew profits during the pandemic, it has emerged that some sole traders and micro businesses missed out on payments, despite being eligible.

In one case, a taxpayer who was legally blind mistakenly applied for JobSeeker payments through Centrelink instead of applying for JobKeeper, but the Tax Office did not let him reapply, saying his case was not an "exceptional" circumstance that would allow him to receive the wage subsidy.

In another case, a tax agent advised that the JobKeeper enrolment notification had been delayed due to the serious illness of an applicant's family member, and staff shortages.

Again, the Australian Taxation Office (ATO) did not allow leniency, because the tax agent's circumstances did not fall within one the ATO's "specified circumstances".

These are two of 20 cases the tax ombudsman investigated, and sit in contrast to the ATO's approach to many other businesses ineligible for the payments, which the agency forgave for making errors on their JobKeeper applications.

Last week, the ATO told the Senate Economics Committee that $180 million of the $470 million owed to the agency in wrongful payments, mostly from small businesses, was never recouped because employers had made "honest mistakes" — they had claimed the JobKeeper wage subsidy "in good faith" and had already passed it on to their employees.

But more than 11,000 individuals on Centrelink who were overpaid COVID-support payments are being forced to pay back about $32.8 million in debt.

Inspector-general of taxation and taxation ombudsman Karen Payne said a more lenient approach could have been extended to a small number of sole traders and micro businesses that made late applications.

"On the one hand, the ATO has been lenient by not pursuing people who they believe made a genuine mistake and who received JobKeeper," she said.

"But on the other hand … complaints are coming to us."

Ms Payne said her office had received 20 complaints from taxpayers who requested a deferral in applying for JobKeeper for what she said were valid reasons, but whose claims were rejected by the ATO.

She added that the actual number of taxpayers in the same situation might be far higher, because many had no idea they could complain to her office when issues like this arose.

"Since 2011, it's always been the instruction to [agency] staff that if you're considering somebody's late lodgement application in every tax circumstance you should apply a test that is easy, fair and reasonable in the circumstances," she explained.

She said the ATO set out all the criteria and the way in which staff could go about doing that.

"But in the JobKeeper applications that we investigated the scripting had become so narrow that it was only allowing late lodgement or late applications in very limited circumstances," Ms Payne noted.

"You've got a small business that doesn't have any employees, and it's being run by an 81-year-old and with his elderly wife," she added, citing an example where the ATO reversed its decision once her office investigated.

She said the business owner was not aware he was eligible for JobKeeper as a sole trader. 

"And it wasn't until he spoke with his bookkeeper, and he was advised that, 'Actually, you are eligible,' that then the application was made.

"And so it was only once they returned to Australia that they were actually able to launch their application.

"Initially, they got told, 'No, the computer says no.' But ultimately, the tax office reversed that initial decision and said, 'Yep, fair and reasonable in the circumstances.'"

Ms Payne said, while her office had 14 of 20 cases overturned by the ATO, the numbers of taxpayers in this situation could be far higher.

"We want to make sure people in those circumstances are aware that … maybe their application should be reconsidered," Ms Payne said.

ATO says time extensions made on a 'case-by-case basis'

ATO deputy commissioner Emma Rosenzweig told Ms Payne in a written statement that the ATO rejected her investigation's findings that ATO staff were giving the wrong advice to taxpayers seeking deferrals, despite Ms Payne including evidence of that advice in her findings.

"We are proud of the ATO's delivery of the government's COVID-19 stimulus measures, including the delivery of $89 billion in payments to eligible businesses and supporting 3.8 million individuals through the JobKeeper program," Ms Rosenzweig said.

"As you are aware, granting additional time is a discretion to be considered in light of individual facts and circumstances, and exercised where it is fair and reasonable to do so in those circumstances.

"This principle has underpinned the ATO's approach throughout the duration of the JobKeeper program."

Ms Rosenzweig said the ATO had put in place "various procedures to rationalise and expedite decisions for applicants impacted by exceptional and unforeseen circumstances".

"This involved setting out those cases where the circumstances were clearly ascertainable by the ATO as being fair and reasonable to grant additional time for enrolment, enabling decisions to be made quickly and consistently by ATO officers at first instance.

"However, the ATO did not restrict or narrow the granting of additional time to those in limited exceptional or unforeseen circumstances.

"Where requests for additional time did not correspond to a clear circumstance allowing the ATO to streamline decision-making, escalation and review pathways were available for applicants to have their situations reconsidered.

But Ms Payne said she "struggles to understand" the ATO's reasoning here.

She said the ATO did not apply the "fair and reasonable threshold", despite this threshold being set out in the tax commissioner's instructions to ATO staff.

"We've got evidence in our report of how they did not apply the PS LA [law administration practice statements that provide direction to ATO staff on approaches to take in administering the law] correctly," she said.

"We've got evidence of what's in the training materials. And we've got evidence of what's in their frontline scripting to staff. And we've got evidence of what we saw in emails that we went in and investigated. And we've got 20 cases.

Ms Payne's report did not make any recommendations for the ATO.

"If we had made a recommendation, it would have been, 'Hey, tax office, you should update your instructions to staff because they seem to be misunderstanding it,'" she said.

An earlier separate review by the inspector-general found the ATO had made errors in determining whether small businesses were eligible for JobKeeper and the business cashflow boost

She expressed concerns at the time that the ATO's public guidance was not clear and warned businesses could miss out on payments because they did not understand they were eligible.

Meanwhile the political debate has been focused on companies that profited but still legally received JobKeeper. 

Labor, the Greens and independent senator Rex Patrick have all been calling on the federal government to publicly out the companies that refuse to pay back the wage subsidy despite increasing revenue and/or profits during the pandemic.

But tax commissioner Chris Jordan and Treasurer Josh Frydenberg have rejected publishing a list of companies with more than $10 million turnover that received JobKeeper, saying it would breach tax secrecy laws. Both have claimed public interest immunity.

Mr Jordan has been warned he could face fines and or jail for refusing to release the information to the Senate, but he has said he will wait for the outcome of the federal government's public interest immunity claim.