ATO, Industry News

COVID-19 Cash Flow Boost for Employers

By Paolo Coniglio, 25.03.2020

COVID-19 Cash Flow Boost for Employers

The Cash Flow Boost initiative has been introduced to provide relief of PAYG Withholding Tax payable to eligible businesses over the period starting from 1 January 2020 to 30 September 2020. The credit relief is set to provide temporary cash flow support to small and medium businesses and now Not for Profit Organisations that employ staff. This measure is estimated to cost the Australian Government $31.9 billion over the estimated period.

Who is eligible for the Cash Flow Boost?

Private Businesses and Not for Profit organisations  who fulfil the following requirements:

  • have an aggregated turnover of $50 million dollars per annum
    (based on prior year turnover);
  • held an ABN on 12 March 2020;
  • made eligible payments required to withhold from (employ staff).

What payments are eligible for the Cash Flow Boost?

Eligible Payments include:

  • Salary and Wages;
  • Director Fees;
  • Eligible Retirement or Termination Payments (i.e. Redundancy Payments);
  • Voluntary Withholding from payments to contractors.

All the above eligible entities may be entitled to Additional Cash Flow Boosts implemented in the future.

How is the Cash Flow Boost provided?

Initial Cash Flow Boost
Eligible businesses will receive a full 100% rebate of the PAYG Withholding element with a minimum payment of $10,000 up to a maximum of $50,000. The rebate applies to the PAYG Withholding lodged between January to June 2020.

Quarterly Lodgers
The ATO will issue a credit to the Business’ Integrated Client Account upon lodgement of the January to March and April to June 2020 Activity Statements, up to the $50,000 cap.

Monthly Lodgers
The credit for monthly lodgers will be calculated at 300% of the PAYG Withholding lodged in their March 2020 Activity Statement. Then 100% rebate will apply to the PAYG Withholding lodged monthly between April and June 2020. This will be to a total cap of $50,000.

Additional Cash Flow Boosts
Additional Cash Flow Boosts will be paid to eligible businesses over the course of the April to June and July to September 2020 Activity Statements.

Quarterly Lodgers
The ATO will issue two additional rebates calculated  as follows:

  1. 50% of the total PAYG Withholding rebate calculated over the period from January to June 2020.  This will be credited in the April to June 2020 Activity Statement.
  2. 50% of the total PAYG Withholding rebate calculated over the period from January to June 2020.  This will be credited in the July to September  2020 Activity Statement.

Monthly Lodgers
The ATO will issue additional rebates calculated as follows:

  1. 25% of the total PAYG Withholding rebate calculated over the period from January to June 2020.  This will be credited in the June 2020 Monthly Activity Statement.
  2. 25% of the total PAYG Withholding rebate calculated over the period from January to June 2020.  This will be credited in the July, August and September 2020 Monthly Activity Statement.

Do businesses need to apply or register for the Cash Flow Boost?

No. There is no registration or application process. The ATO will simply credit the Integrated Client Account of all businesses who satisfy the eligibility requirements. However, to access the Cash Flow Boost, businesses must lodge Activity Statements.

How do I pay my Activity Statements during the Cash Flow Boost Stimulus?

Once the Activities Statements are lodged, the ATO will issue a credit in the Integrated Client Account within 14 days.

You are only required to pay the balance, after deducting the eligible rebate, for that Activity Statement period.

If you overpay your Activity Statement, once the credit is issued to the Integrated Client Account, any credits will be refunded back to you.

Where the PAYG Rebate exceeds all other tax liabilities lodged, the ATO will refund the excess amount.

Refunds will be paid to businesses within 14 days.

As the Cash Flow Boost is generated on lodgement of Activity Statements, if a lodgement deferral has been granted by the ATO, the Cash Flow Boost will be issued at the time of the deferred lodgement.

How does the minimum cap work?

The total applicable minimum cap is $20,000
($10,000 to the Initial Cash Flow Boost and $10,000 to the Additional Cash Flow Boosts)

Minimum Cap – Quarterly Lodgers

  • $10,000 credited over the January to March 2020 Activity Statement.
  • $5,000 credited over the April to June 2020 Activity Statement.
  • $5,000 credited over the July to September 2020 Activity Statement.

Minimum Cap – Monthly Lodgers

  • $10,000 credited over the March 2020 Activity Statement.
  • $2,500 credited over the June 2020 Activity Statement.
  • $2,500 credited over the July 2020 Activity Statement.
  • $2,500 credited over the August 2020 Activity Statement.
  • $2,500 credited over the September 2020 Activity Statement.

This also applies to businesses who lodge NIL PAYG Withholding for the above periods.

How does the maximum cap work?

The total applicable maximum cap is $100,000
($50,000 to the Initial Cash Flow Boost and $50,000 to the Additional Cash Flow Boosts)

Maximum Cap – Quarterly Lodgers

  • $50,000 credited across the January to March and/or April to June 2020 Activity Statements.
  • $25,000 credited over the April to June 2020 Activity Statement.
  • $25,000 credited over the July to September 2020 Activity Statement.

Maximum Cap – Monthly Lodgers

  • $50,000 credited across the monthly Activity Statements March to June 2020.
  • $12,500 credited over the June 2020 Activity Statement.
  • $12,500 credited over the July 2020 Activity Statement.
  • $12,500 credited over the August 2020 Activity Statement.
  • $12,500 credited over the September 2020 Activity Statement.

Fact Sheet – Cash Flow Assistance for businesses
ATO – Boosting Cash Flow for employers

Disclaimer

This blog and attached resources are of general nature designed for informational and educational purposes only. They should not be construed as professional financial advice for your individual business. Should you need such advice, consult a licensed financial or tax advisor.

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