The COVID-19 Cash Flow boost is undoubtedly among one of the best incentives for businesses, and if you qualify it is well worth understanding how your business can get a cash flow boost during the next few months.

Below is a summary of the frequently asked questions paired with answers to the main points you need to know about the Cash Flow payments and how your business can access them.

 

What Is The Cash Flow Boost?

The Cash Flow Boost is cash back to your business for the PAYG Withholding Tax (Pay As You Go) on payments where tax was withheld, such as wages and salaries.

The additional cash flow is meant to boost your businesses cash flow as well as enable you to retain your employees during the COVID-19 economic downturn.

cash flow boost covid-19

What Type Of Business Does It Apply To?

  • The Cash Flow boost is available to all qualifying businesses including Not for Profits Organisations and Charities.
  • Business where your annual turnover is less than $50 million.
  • If your business pays wages or other payments where you are required to withhold tax.
  • Where your business has held an active ABN on 12 march 2020 (Charities and Not for Profits that are registered with the Australian Charities and Not for profits Commission will be eligible regardless of when they were registered provided, they meet the other requirements)

What Will Your Business Need  To Do?

  • You will need to lodge your Business Activity Statement (BAS) to be able to get the credit back.
  •  If your BAS is not up to date now is a good time to get in touch with your BAS Agent or Tax Agent to sort out your affairs.

What Is The Maximum Amount of the Cash Flow Boost That Your Business Can Get, And Is There Any Cut Off?

The total available is $100,000 with a minimum of $20,000.

There will be an initial payment with a maximum of $50,000 and a minimum of $10,000 whichever is greater. If your business qualifies, the second payment will be the amount that your business received in the initial payment- paid in instalments in the June 2020 and September 2020 quarters.

How Will The Cash Flow Boost Operate?

The cash flow boost will be a credit paid through your activity statement. If you end up in a refund position a refund will be paid out to you in cash within 14 days of the due date of lodgement.

 

What Is The Timing Of The Payments?

Initial Payment

The initial cash flow boost will be 100% of your PAYG Withholding Tax reported for the March 2020 to June 2020 quarters up to a maximum of $50,000 and a minimum of $10,000 whichever is the larger amount.

If you are a monthly lodger you will receive a credit of 300% of your withholding in the March 2020 activity statement.

Second Payment

The second cash flow boost will be the total cash flow boost that you received in the initial payment. If you are a quarterly lodger this will be paid in two instalments and if you are a monthly withholder this will be paid in four instalments.

Example: Hera-Quarterly Lodger

For instance, lets say that business owner Hera reports withholding from wages of $24000 for the quarter ending March 2020.  

payg wtax break for business

Hera-Initial Payment

In the initial payment, Hera will receive 100% or the withholding tax or $24,000 as a credit to her tax account.

In her June 2020 BAS Hera lodges a PAYG Withholding tax of $13,000. Hera will receive 100% or $13,000 credit as part of the initial cash flow boost. Hera receives a total of $37,000 as her total initial cash flow boost.

Hera-Second Payment

In the second cash flow boost payment Hera will receive $18,500 in her June 2020 BAS and the remaining $18,500 in her September 2020 BAS. This is the total $37,000 that she received in the initial payment.

n.b If you withheld less than $10,000 in the first round, to qualify for the second boost you must have withheld $10,000 or more in the June 2020 quarter.

 

What If I Have A Refund?

If you have a refund, this will be sent back to you within 14 days of the due date of your lodgement.

What Action Is Required?

File your Business Activity Statements (BAS).

Below are the due dates for BAS Lodgment:

Monthly Lodgers

March 2020 (lodgement due date 21 April 2020)

April 2020 (lodgement due date 21 May 2020)

May 2020 (lodgement due date 21 June 2020)

June 2020 (lodgement due date 21 July 2020).

Quarterly Lodgers

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

Quarter 4, June 2020 (lodgement due date 28 July 2020)

How Is The Cash Flow Boost Reported?

The cash flow boost credits are tax free.

 

Additional Resources

www.ato.gov.au

https://digit.business/payg-cashflow-boost-calculator

For additional information about tax consequences and eligibility requirements please visit the Australia Tax Office website.