The Tax Office has admitted that it didn't check the JobKeeper numbers earlier partly because they matched the Treasury forecasts of how many people would be paid under the scheme.
The 6.5 million people wrongly thought to be receiving JobKeeper matched the number that Treasury originally forecast for the scheme when it was announced on March 30.
The correlation appears to have led the Tax Office into a false sense of security about its numbers.
In fact, only 2.9 million people have been receiving the wage subsidy, as revealed on Friday when the Tax Office and Treasury announced the miscount.
Asked how the mistake wasn't picked up earlier, a Tax Office spokesperson said officials had done some integrity checks on the information provided by businesses.
"However, we decided to not perform a full data and analytical review on this information, for the following reasons," the spokesman said in a statement.
One of those reasons was that "the employee estimates were tracking broadly in line with the Treasury forecasts".
The agency had also expected a lag in the final paperwork, with a spike expected especially for big employers in the week leading up to the deadline (for April and May payments) of May 31.
The Tax Office had been focused on getting ready to make payments and in any case the full data was to be available by the end of May, the spokesperson said.
"Our data and analytics focus was on the payment phase, making sure we could pay valid claims quickly, and suspend suspicious claims for manual intervention, and we have delivered on this."
On Friday, Tax Office second commissioner Jeremy Hirschhorn said the mistake had occurred because 1000 businesses had filled in the form incorrectly - stating the amount they expected to receive in a field that asked for the number of employees.
Mr Hirschhorn said about 550 of those firms had entered "1500", which is the amount of the fortnightly wage subsidy, instead of the number of employees. That would account for about 800,000 of the over-count.
Another 450 firms had entered "a range of numbers" that overstated their employee numbers, a spokesman said. The Tax Office has not given more detail, other than saying some had entered multiples of 1500 and some had not.
A simple calculation suggests that for those 450 incorrect forms to account for the rest of the 3.5 million wrongly included workers, they would have had to entered an average of more than 5000 employees apiece.
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The Tax Office said about 638,000 of the businesses had between one and four workers on the wage subsidy. About 2300 had more than 100 workers on the payment.
Businesses have been able to apply for JobKeeper since April 20, using an online form in what the Tax Office says is an automated process, but with controls and checks. Officials check that businesses are eligible - and have rejected about 10,000 enrolments on this basis. They also monitor some enrolments as they move through to verify the information.
The scheme will now cost $60 billion less than the $130 billion budgeted, and Labor and the Greens are pushing for it to be extended to university staff - the only sector to be excluded - and to other workers such as casuals who have worked for less than 12 months with their employer, and overseas workers. But the government rejects the call.
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