With all the different support & stimulus packages having been announced over the last few months, it’s hard to keep up with what you are eligible for as a business owner or not. We’ve been getting a lot of questions about the Cashflow Boost (ATO rebate), so we thought it would be easiest to put all the information you need to know, as well as criteria for eligibility into the one blog for all the small & medium business owners to answer all the FAQ’s so you can completely understand how it will help you.
The idea of the cashflow boost is to provide temporary cash flow to small & medium businesses and not-for-profit (NFP) organisations. These businesses will receive between $20,000 to $100,000 in cash flow boost amounts by lodging their Business Activity Statements (BAS) up to the month or quarter of September 2020. To be eligible for this cash flow boost your business or NFP must:
Employ staff, and
Must have been affected by the economic downturn of COVID-19
Further to that, you must:
Have an aggregated annual turnover of less than $50million
Have held an ABN on 12th March 2020
Made payments to employees subject to withholding (even if the amount you were required to withhold was zero). This applies to:
Salary & wages
Director fees
Eligible retirement or termination payments
Compensation payments
Voluntary withholding from payments to contractors
And, on or before 12 March 2020 you lodged at least one of the following:
A 2018-19 income tax return showing that you had an amount included in your assessable income in relation to you carrying on a business, or
An activity statement or GST return for any tax period that started after 1 July 2018 and ended before March 12 2020, showing that you made a taxable, GST-free or input taxed sale.
The Cash Flow Boost is related to the tax withheld from wages. The way the boost works is that you will receive credits on your ATO Integrated Client Account, equivalent to the amount of tax withheld on wages during the quarter or month. So in general terms, whatever sum you have been withholding from wages to pay your activity statement you will be able to keep as cash flow for your business. This is really exciting news for business owners because just about everyone has been affected by COVID-19 and cash flow has become a crippling issue for small & medium businesses.
How Much Credit Will I Receive?
The credit or rebate is typically equal to the sum you have withheld for that period. For example, if you have withheld $15,000 in PAYGW for the Apr - June quarter, you should receive a credit of $15,000 for the quarter.
How Do I Get The Cash Flow Boost?
You’re probably thinking there is a heap of hoops to jump through and information to work through in order to receive the cash flow boost like the JobKeeper Payments, however, this payment is far more simple! If you are eligible, for March - June 2020, you will receive a credit to your ATO Integrated Client Account for 100% of the amount withheld for the relevant month/quarter once you have lodged your statement. However, there are some exceptions, so continue to read on and we will cover those in the rest of the blog below.
For the additional Cash Flow Boost payments from July - September 2020, these will be paid out in either two or four installments, depending on your reporting cycle, and will be based on the credits you received in the March and June 2020 quarters. We will cover this further down as well.
What Date Does This Apply To?
The Cashflow Boost will apply for the following periods as long as you lodge your Business Activity Statement on time: Jan-March 2020 & Apr-June 2020. There will also be an additional Cash Flow Boost applied when activity statements for each monthly or quarterly period from June - September 2020 are lodged.
How Much Credit Will I Receive For the Additional Cash Flow Boosts for July-Sept?
The additional Cash Flow Boost credits will be based entirely on the total of your initial Cash Flow Boost. For example, if you lodge quarterly you will receive 50% of your total initial cash flow boost and this will be applied to the June Business Activity Statement. You will then receive another credit for the same amount for the September quarter.
If you lodge monthly you will receive 25% of your initial cash flow boost for each activity statement. You will be eligible to receive credit for June, July, August & September 2020.
What If There Is Excess Credit On My Account After My Tax Liabilities Have Been Settled?
Any excess credit on your ATO Integrated Client Account will be refunded. So if you have already lodged and paid your March & April BAS’s you won’t miss out. Refunds generally take 14 days to be processed. This is to support you and ease the pressure on your current cash flow during an extremely tough time for business.
Is There a Maximum Sum That Will Be Paid?
Yes, total Cash Flow Boosts paid during March - June 2020 can not exceed $50,000. For example, let’s say your business gets a credit of $40,000 for April, this means you have $10,000 remaining before you reach the maximum sum that will be credited. The following month you will be credited the $10,000 but no more. However, this doesn’t include the additional boost from July-Sept.
The Minimum Cash Flow Boost
The minimum cash flow boost that will be credited is $10,000. If you have withheld less than $10,000 that’s fine (even $0 if your employees didn’t reach the tax threshold), you will still be paid the minimum $10,000. Once your liabilities with the ATO are sorted any remaining credit will be refunded to you. However, if you fall under the minimum $10,000, you will only receive that credit once.
Are There Tax Consequences For The Cash Flow Boost?
Unlike the JobKeeper payments which are taxable income, the Cash Flow Boost Credits are tax-free. However, if you distribute the Cash Flow Boosts from your business to another entity, the recipients may be required to pay tax on that income (such as paying a dividend to a shareholder or making trust distributions).
Will I Have To Pay This Back?
In short, no. The money is not a loan, it is support from the Australian Government to help small & medium businesses with their cash flow. But, if you have been paid more cash flow boosts than you’re entitled to, you will be required to pay back the excess.
Key Dates to Be Aware Of
To ensure you receive the cash flow boost credits, it’s important to have your BAS’s lodged by the due dates.
Quarterly Lodgements:
Quarter 3 (Jan, Feb, March). Lodgement due date 26th May 2020.
Quarter 4 (Apr, May, June). Lodgement due date 28th July 2020.
Monthly Lodgements:
March 2020. Lodgement due date is 21st April 2020.
April 2020. Lodgement due date is 21st May 2020.
May 2020.. Lodgement due date is 22nd June 2020.
June 2020. Lodgement due date is 21st July 2020.
If you are having trouble getting your activity statements lodged in time. Get in touch with us and we can work with you to ensure you get them lodged on time and receive the credits you are eligible for.
We hope the above has answered a lot of questions you may have had about the Cash Flow Boost and helped you better understand how it will benefit your business in the coming months.
Cash flow can be a huge challenge for businesses at the best of times, let alone when our economy is experiencing challenges from a worldwide pandemic. If you're looking for some simple ways to improve your business cash flow now, take a look at our blog that covers great tips on improving business cash flow.
If you think you need to reassess how you run your business moving forward to ensure it’s still profitable, get in touch with us today and we can discuss ideas and changes you can make so your business can continue to grow. We have been working closely with a lot of local small businesses to take a deeper look at how their business is structured and run to find better ways to save money, make money, and keep ahead during the pandemic. If you need help to do this too, don’t be afraid to reach out and get in touch with us to discuss your business moving forward from here. You can call our office on 6424 4021.