Accessing COVID-19 Cash Flow Boost
Legislation has been enacted to provide temporary cash flow support to small and medium businesses and not-for-profit organisations that employ staff during the economic downturn associated with COVID-19 (novel coronavirus). This will be done through two sets of cash flow boosts delivered from 28 April 2020 to support employers to retain employees.
We will provide tax-free cash flow boosts of between $20,000 and $100,000 to eligible businesses, delivered through credits in the activity statement system, when eligible businesses lodge their activity statements.
You must lodge your activity statement to receive 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 ATO is working through a solution and will update their 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, ATO will provide you with a refund of the excess amount. Where a credit exceeds your other tax liabilities, ATO will provide you with a refund of the excess amount.
You may also receive a refund if you overpay your activity statement because your system was unable to take the cash flow boost into consideration when working out how much was payable.
If you are placed in a refund position, ATO will generally deliver the refund within 14 days.
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.
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 characterization of payments made may cause ATO to investigate whether the payments are in fact wages. If the payments are wages, ATO may consider the characterization of past payments, including whether they should have been subject to PAYGW and whether super guarantee contributions should have been made.
Contact Expert Tax on 0449 952 855 or 1300 869 829 for assistance on tax related matters.