The Cash Flow Boost for Businesses is Coming!

by Vanessa Lovie 15th of April, 2020

The Government's cashflow boosts to businesses will start to roll out after April 28, 2020. The initial cashflow boost will see eligible businesses receive between $10,000-$50,000 in tax-free payments in this initial boost.

The important message from the ATO: 'Lodge your Activity Statement'

Important Dates:

Quarter 3, March 2020 (lodgment due date 28 April 2020)

Monthly, March 2020 (lodgment due date 21 April 2020)

The initial cash flow boosts will be delivered as credits in the activity statement system from 28 April 2020. The second and third cashflow payments are based on this initial cashflow, so it's important to get your Activity Statements lodged.

There have been a lot of questions from small to medium sized businesses about their eligibility, how to apply and when they will receive the funds, so we want to help clarify these uncertainties.

When will the first cashflow be received?

After 28 April 2020.

Depending on your activity statement, you may be able to pay less tax (hence have access to those funds already in your account) or you may be entitled to a refund, the funds will be deposited directly into your bank account within 14 days.

Are you Eligible?

According to the ATO, 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 (even if the amount you need to withhold is zero).

Eligible payments include:

salary and wages
director fees
eligible retirement or termination payments
compensation payments
voluntary withholding from payments to contractors.

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
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 can you expect in the initial boost?

The initial cashflow boost is based upon your PAYG withholding.

Eligible businesses that withheld tax from their employees wages and salary will receive a minimum credit of $10,000. So if you meet the eligible criteria, have employees, withhold payroll tax and submit your activity statements, you can expect a minimum credit of $10,000. If you withhold more PAYG tax than this, then you will get 100% of the tax withheld, up to the value of $50,000.

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.

ATO Cashflow Boost Scenario - ATO.GOV.AU

Additional cash flow boost

The next cashflow boost you receive will be based on your initial cashflow boost. If you lodge quarterly it will be based on 50%, so with the example above, Tim will receive $5,000 in June 2020 and $5,000 in September 2020. If lodged monthly, you will receive 25% of the initial cashflow, so in the case of Sarah, they will be received $12,500 per month June - September.

How do you apply?

Applications are not necessary. Businesses will just need to lodge their usual activity statements to the ATO. They are encouraging businesses to lodge the March and Q3 statements on their due dates and no earlier, to ensure businesses receive the maximum refund available to them.

If your business is eligible, the credit will automatically be applied to the Activity Statement - but not before 28 April 2020.

The ATO is currently working on a solution for businesses who do not need to lodge PAYG on their activity statements, such as Sole Traders.

For full information on the CASHFLOW boost please see the ATO website or Treasury FactSheet