On 24 March 2020, the Australian Government’s Economic Response to the Coronavirus package passed without objection through Parliament. With the green light to go ahead, the economic stimulus package, currently worth $84 billion, promises direct financial support for workers and students and a cash flow boost for businesses and not-for-profits.
As a result, the Australian Taxation Office (ATO) will deliver the tax-free cash flow boosts to small and medium businesses and not-for-profits from 28 April 2020. Entities do not need to apply. The ATO will calculate a business’ eligibility for the cash flow boost when the business lodges its activity statement. Businesses will receive tax credits, which means that eligible entities will pay less tax to the ATO.
- The Australian Taxation Office is administering the business cash flow boost.
- Your entity must have held an ABN on 12 March 2020 and still be active.
- A business must lodge its activity statements so that the ATO can assess its eligibility for the cash flow boost.
- Not-for-profits, sole traders, partnerships, companies or trusts with an aggregated annual turnover under $50 million (based on prior year turnover) are eligible.
- Your entity must have lodged its 2019 tax return on or before 12 March 2020.
- The ATO will issue businesses with payments from 28 April 2020, as credits in the activity statement system.
- Additional payments are available for businesses that are still active July-October 2020.
Lodge activity statements to receive the cash flow boost
The ATO will deliver the cash flow boost of up to $100,000 (minimum $20,000) per eligible businesses through credits in the activity statement system. Therefore, to be eligible, businesses must lodge their activity statements.
Your business will receive its first cash flow boost from 28 April 2020, even if it has lodged the activity statement earlier.
Eligible entities that remain active throughout July-October 2020 will receive an additional payment, equal to previous payments they have received under the Boosting Cash Flow for Employers scheme.
March 2020 activity statements are due to the ATO in April 2020. If your business lodges monthly, the due date is 21 April 2020. Quarterly reporters must submit by 28 April 2020.
Is my business eligible for the cash flow boost?
12 March 2020 is a critical date. Your business must have held an ABN on 12 March 2020 and continue to be active. Only registered charities are exempt from this cut-off date.
The ATO will assess your business’ eligibility based on your most recent income tax assessment for a prior year. (You may still be eligible if you do not have any income tax assessments for prior years.)
Not-for-profits, sole traders, partnerships, companies, and trusts with an aggregated annual turnover under $50 million are eligible if they meet all other criteria.
Your small or medium business must have made the eligible withholding payments it was required to:
- salary and wages
- director fees
- eligible retirement or termination payments
- compensation payments
- voluntary withholding from payments to contractors
In addition, your business must also have either:
- Lodged your 2019 tax return on or before 12 March 2020 to declare your business income in the 2018–19 income year.
- 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.
How much money will my business receive?
In the initial cash flow boost, your business will receive 100 per cent tax back on the withholding tax you pay the ATO for employees’ salary and wages (maximum limit of $50,000).
Even if your business is not required to withhold tax, you will receive a minimum payment of $10,000 if you pay salaries and wages.
If your business remains active and eligible in July, August, September and October 2020, you will be eligible for additional payments, equal to previous payments you have received.
However, you will not be eligible to receive any more cash flow boosts until your PAYG withholding exceeds $10,000 over the relevant periods.
How do I receive the money?
The ATO will apply the cash flow boost as credits to offset your business’ liabilities owing from the current activity statement.
For example, a quarterly activity statement lodged in April 2020 will receive credits for quarter 3 ending March 2020. A monthly activity statement lodged in April will receive credits for March 2020. 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.
If your business receives more credit than it has tax liabilities, the ATO will refund the excess amount within 14 days.
Note: The ATO acknowledges that some business systems will be unable to take the cash flow boost into consideration when working out how much tax is payable on the activity statement. Businesses that overpay will receive a refund.
The earliest the ATO will release credits is 28 April 2020.
Additional payments to eligible businesses for the July-October period will be 100 per cent of the initial cash flow boost. The ATO will distribute additional payments in four or two equal instalments depending on whether your business lodges activity statements monthly or quarterly.
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