Further to the brief introduction to this measure mentioned in this post, here are more details about Australian Government’s Cashflow assistance for businesses.
The key qualifying measure for this one is that organisations must employ people. If your organisation don’t employ anyone, you won’t quality for this measure.
The government will provide tax-free payments up to $1,000,000 for eligible small and medium sized entities (SMEs), and not for profits (including charities, “NFPs”) that employ people, with a minimum payment of $20,000.
The payments will be made in 2 stages. The first payment will be available from 28 April 2020. Employers will receive a payment equal to 100% of their salary and wages withheld, with the maximum payment being $50,000. In addition, the minimum payment will be $10,000. The second cash flow boost payment for employers will be made from 28 July 2020. Eligible entities will receive an additional payment equal to the total of the first cash flow boost payment received.
- Small and medium sized business entities and NFPs with aggregated annual turover under $50m and that employ workers.
- Businesses are deemed to be SME based on turnover for the most recent income year (Y/E 30/06/2019) or if the Commissioner is “reasonably satisfied” that the entity will be a SME in the current income year.
- The qualifying entity must continue to be active over the next 6 ‘months.
- The payments will only be available to active eligible employers that held and ABN at 12 March 2020 and derived assessable income from carrying on a business in the 2018/2019 year.
Payment and processing
- The payments will be automatically calculated by the ATO and will flow automatically through the ATO. There are no new forms required.
- The payments will be tax free.
- All payments will be delivered by the ATO as credit to the entity upon lodgement of their activity statements. Where this places the entity in a refund position, the ATO will deliver the refund within 14 days.
- The first cash flow boost payments will be delivered by the ATO as an automatic credit in the activity statements system from 28 April 2020, upon employers lodging eligible (upcoming ) activity statements.
- If entities lodge early, the ATO confirms that, they will not receive the fist cash flow boost payment before 28 April 2020.
- Eligible employers that withhold tax to the ATO on their employees’ salary and wages will receive a payment equal to 100% of the amount withheld, up to a maximum payment payment of $10,000, even if they are not required to withhold tax.
- Note that the amount of cash boost an employer receives in the second payment period doesn’t relate to the tax withheld in that period. So, if the employer has to let three quaters of staff go on 30 June 2020, the employer still gets the amount based on the original pre COVID-19 employee tax withheld in the second payment period.
- Payment processing will depend on whether the taxpayer is a monthly or quarterly remitter.
- Monthly lodgers will get a payment equal to a quarter of their first cash flow boost payment following the lodgement of their June, July August and September BAS’s.
- Quarterly lodgers, will get a payment equal to half of their total fist cash flow boost payment following the lodgment of their June an September BAS’s (up to a total of $50,000).
Who does not quality for the cashflow assistant package?
- Any business without employees (eg sole traders)
- Any business that does not pay wages, eg trusts that pay family members by way of trust distributions, companies that pay dividends, partnerships where partners take drawings.
- If sole trader A pays a casual employee $5,000 in wages, he/she will receive $20,000 through the cashflow assistance payment
- If sole trader B pays a contractor $5,000, the payments are not classified as wages and he/she won’t get any cashflow assistant payment.
Note the following ATO comments:
“You will not be eligible for cash flow boosts if you (or a representative) have entered into or carried out a scheme for the purpose of :
- becoming entitled to cash flow boosts when you would otherwise not be entitled for;
- increasing the amount o the cash flow boots.
This may include restructuring your business or the way you usually pay your workers to fall withing the eligibility criteria, as well as increasing wages paid in a particular month to maximise the cash flow boost amount.
Any sudden changes to the characterisation of payments made may cause us to investigate whether the payments are in fact wages. If the payments are wages, we may consider the characterisation of past payments, including whether they should have been subject to PAYGW and whether super guarantee contributions should have been made. You may have FBT obligations that have not yet been met.”