You will be eligible to receive the cash flow boost if you are a small or medium business entity, including not-for-profit organisations, sole traders, partnership, company or trust that:
- Held an ABN on 12 March 2020 and continues to be active.
- Has an aggregated annual turnover under $50 million (generally based on prior year turnover).
- Made eligible payments you are required to withhold from employees (even if the amount you need to withhold is zero).
In addition, you must also have either:
- Derived business income in the 2018–19 income year and lodged your 2019 tax return on or before 12 March 2020, or;
- Made GST taxable, GST-free or input-taxed sales in a previous tax period (since 1 July 2018) and lodged the relevant activity statement on or before 12 March 2020.
Initial Cash Flow Boost
Your initial cash flow boost is based on the amount of your PAYG withholding.
Eligible businesses that withhold tax on their employees’ salary and wages will receive a credit equal to 100% of the amount withheld, up to a maximum of $50,000. The minimum credit will be $10,000, even if the amount required to be withheld is zero. However you will not be eligible to receive any more cash flow boosts until your PAYG withholding exceeds $10,000 over the relevant periods.
Monthly lodgers will receive a credit that is calculated at three times the rate (300 per cent) in the March 2020 activity statement, to align with quarterly lodgers.
The total of all initial cash flow boosts across all of the relevant periods cannot exceed the maximum limit of $50,000.
Example – PAYG Withholding is less than $10,000 in first period
Tim owns and runs a small paper delivery business in Melbourne, and employs two casual employees who each earn $10,000 per year. In the March 2020 quarterly activity statement, Tim reports wages paid at W1 and $0 at W2 for his employees as they are under the tax-free threshold.
The March 2020 quarter is the first period Tim is eligible for an initial cash flow boost. His withholding of $0 is less than $10,000 so Tim’s initial cash flow boost will be the minimum amount $10,000.
Tim will not receive any further initial cash flow boosts unless his withholding in the June 2020 quarter is greater than $10,000.
- Example – Total cash flow boosts reaches maximum limit of $50,000Sarah owns and runs a building business in South Australia and employs 8 construction workers on average full-time weekly earnings who each earn $89,730 per year. In the months of March, April, May and June for the 2019–20 income year, Sarah reports wages paid at W1 and withholding of $15,008 for her employees at W2 on each activity statement.
For March 2020, Sarah’s initial cash flow boost is three times her withholding (W2). This equates to $45,024 ($15,008 3). As this amount is greater than $10,000, Sarah will receive a cash flow boost of $45,024.
For April 2020, Sarah’s withholding is $15,008, however there is only $4,976 of initial cash flow boosts remaining before she reaches the $50,000 limit. She will receive a further initial cash flow boost of $4,976.
Sarah will not receive any further initial cash flow boosts after she has reached the $50,000 limit.
Additional Cash Flow Boost
The amount of additional cash flow boosts you are entitled to is based on the value of initial cash flow boosts you received.
If you lodge quarterly business activity statements you will receive 50% of your total initial cash flow boosts for each activity statement.
If you lodge monthly business activity statements you will receive 25% of your total initial cash flow boosts for each activity statement.
Example – Quarterly Activity Statement
Tim received initial cash flow boosts of $10,000. When Tim lodges his June and September 2020 quarterly business activity statements he will receive additional cash flow boosts as follows:
- $5,000 for quarter ended June 2020,
- $5,000 for quarter ended September 2020
- Example – Monthly Activity Statement
Sarah received the maximum initial cash flow boosts of $50,000. When Sarah lodges her June to September 2020 business activity statements she will receive additional cash flow boots as follows:
- June 2020, $12,500
- July 2020, $12,500
- August 2020, $12,500
- September 2020, $12,500
If you require assistance, please contact our office.
Date of Issue: 26 March 2020 Author: Noé Vicca (supported extracts from ATO Portal)
Disclaimer: The contents herein are intended for general information only and should not be construed as legal or accounting advice. Vicca Chartered Accountants Brisbane bears no responsibility for any loss that might occur from reliance on information contained in this publication. Please do not reproduce, transmit or distribute the contents herein in any form without prior permission from Vicca Chartered Accountants, Taxation Accountants Brisbane Australia.