Boosting Cash Flow for Employers – Eligibility

Eligibility

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 2019 income year and lodged your 2019 tax return before 12/03/20
• Made GST taxable, GST-free or input-taxed sales in a previous tax period (since 1 July 2018) and lodged the relevant BAS before 12/03/20.

The ATO will generally determine whether you are a small or medium business entity based on your most recent income tax assessment for a prior year.  However, where you do not have any income tax assessments for prior years, you may still be eligible if the ATO are satisfied, based on other information we hold, that you are in business and would have an aggregated annual turnover under $50 million.

The ATO may also give you further time to provide notice that business income or supplies were made.  This will generally be the case where you have a lodgment deferral in place.  If you did not have a lodgment deferral in place, you will not become eligible if you lodge or amend returns for those periods now.

Accessing the cash flow boost

You do not need to apply for the cash flow boosts.  If you are eligible, the cash flow boosts will be automatically applied to your account when you lodge your activity statement for the relevant periods.

To access the cash flow boost, you must lodge your activity statement.  If you do not need to lodge an activity statement in respect of you PAYG withholding we are working through a solution and will update our website with more information on what you need to do.

The cash flow boosts will be applied to reduce liabilities arising from the same activity statement. This will result in eligible entities being required to pay less to the ATO.

Generally where a credit exceeds your other tax liabilities, we will provide you with a refund of the excess amount. Where a credit exceeds your other tax liabilities, we will provide you with a refund of the excess amount.

Tax consequences

All cash flow boosts are tax free (non-assessable non-exempt income) and are not required to be paid back when your cash flow improves.  However, if you have been paid more cash flow boosts than you are entitled to, you will be required to repay the excess.

The boost is not subject to GST as you are not making or agreeing to make a supply for the payment.

You will still be entitled to a deduction for PAYG withholding paid.

There is no effect on tax paid by employees in respect of their salary and wages.

Schemes

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, or
• increasing the amount of the cash flow boosts.

This may include restructuring your business or the way you usually pay your workers to fall within 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 the ATO to investigate whether the payments are in fact wages.   If the payments are wages, the ATO 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 also have FBT obligations that have not yet been met.

Source (30/03/2020): Australian Taxation Office