Cash Flow Boost for Employers
The Australian Government has released a measure to provide temporary cash flow support for small to medium sized businesses and not-for-profit entities that employ staff during as part of the Governments Covid-19 economic support packages.
Cash flow boost - what is it?
The Australian Government is providing up to $100,000 (minimum $20,000) to eligible small and medium businesses to employers to assist these businesses to pay their rent, electricity and other operating costs.
Be a small or medium business entity, including not-for profit organisations, sole traders, partnerships, companies and trusts that:
held an ABN on 12 Match 2020 and continues to be active
has an aggregated annual turnover of less than $50 million (generally based on prior year)
made eligible payments from which you are required to withhold tax (even if the withholding amount is nil)
The business must also have either:
derived business income for the 2018/19 income year and lodged the 2019 income tax return on or before 12 March 2020, or
made GST taxable, GST-free or input taxed sales in a tax period since 1 July 2018, and lodged the relevant activity statement on or before 12 March 2020.
What is an Eligible Payment?
Eligible payments that require PAYG withholding include:
salary and wages
eligible retirement or termination payments
voluntary withholding from payments to contractors
What do you need to apply to receive the rebate?
Once you have lodged your Business Activity Statement for required periods the ATO will automatically calculate your first rebate and credit your activity statement account.
When do you receive the credit?
The rebate will be paid in two stages from the 28th April 2020.
The first credit will be applied to your Activity Statement Account after you have lodged your Activity Statements for the eligibility periods (March to June 2020)
The credit will be equal to the the amount withheld from eligible payments for the eligible periods as follows:
if you are required to withhold from Nil to $10,000 - your credit will be $10,000
if you are required to withhold $10,000 or more - your credit will be equal to the amount withheld, up to a maximum of $50,000
if you are a monthly lodger, your credit will be calculated as three times the amount withheld (up to the maximum $50,000) to provide an approximate equivalent to quarterly lodgers
The credits will only be delivered from 28 April 2020 regardless of whether you lodge your Activity Statement for March reporting before this date.
Note: If you receive the minimum credit of $10,000 you will not be eligible to receive any more cash flow boosts until your PAYG withholding exceeds $10,000 over the eligibility periods.
The second stage of credits will be based on the cash flow boost credit received in Stage 1.
If you lodge quarterly you will receive a credit equal to 50% of your initial cash flow boost as follows:
when you lodge June 2020 Quarterly Activity Statement, due date 28 July 2020
when you lodge September 2020 Quarterly Activity Statement, due date 28 October 2020
If you lodge monthly you will receive a credit equal to 25% of your initial cash flow boost as follows:
when you lodge June 2020 Activity Statement, due 21 July 2020
when you lodge July 2020 Quarterly Activity Statement, due 21 August 2020
when you lodge August 2020 Quarterly Activity Statement, due 21 September 2020
when you lodge September 2020 Quarterly Activity Statement, due 21 October 2020
Will I receive the Cash Flow Boost as cash into my account?
The cash flow boosts will be applied to reduce liabilities arising from the same activity statement.
To support eligible entities during the period associated with COVID-19, from 28 April 2020 any excess credit from the activity statement that received the cash flow boost amount will be refunded to you, rather than offset against any other tax debts you have. However, excess amounts may still be applied against any outstanding debts with other Australian Government agencies.
You may also receive a refund if you overpay your activity statement because your system was unable to take the cash flow boost into consideration when working out how much was payable.
If you are due to receive a refund, the ATO will generally pay it within 14 days.
Contact our office to find out whether you are eligible and how this Cash Flow Boost will work for your business.