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How does the Employers Cash Flow BOOST work

Businesses with turnover under $50m will benefit from a cash flow boost over a six month period as part of a Government stimulus package. This package has been upgraded with the second tranche of government stimulus announced on 22 March 2020.

Eligibility criteria

  • Businesses with turnover under $50m per year
  • Employ staff where a payment is made to an employee 
  • Either

    • (i)  the entity is an ACNC?registered charity at any time in the period; or

    • (ii)  the entity had an ABN on 12 March 2020

  • Lodge Activity Statements during the period 1 January 2020 to 30 September 2020

Form of cash flow boost

The government announcements are designed to help businesses cover the cost of employee wages. The stimulus package does this by allowing a credit of up to 100% of PAYG withheld over a six-month period. This first cash flow boost is capped at $50,000. A second cash flow boost will be paid between June and September, which will be equal to the amount that has been received under the first cash flow boost payments. This brings the total amount you could receive to $100,000 over next 6 months.

The minimum amount an employer would be able to receive over the period between March and September quarters is $20,000. Provided you report some wages paid on your March 2020 Activity statement, a credit of $10,000 will be applied to your ATO Activity Statement Account. If you qualify for the minimum $10,000 payment on the March 2020 Activity Statement, you will also receive a further $10,000 from the second cash flow boost.

Timing of Activity Statement “credits”

On lodgement of the March and June quarter Business Activity Statements, the ATO will automatically apply a credit to the Running Balance Account in the amount of the PAYG tax withheld up to a maximum of $50,000 across the two quarters.

For employers with monthly Activity Statement lodgements, the March 2020 credit will be calculated at three times the amount withheld for that month, to cover for the January, February and March months. The amounts then withheld on the April, May & June monthly Activity Statements will be eligible towards the $50,000 maximum across those 4 monthly activity statements.

The second cash flow boost payment will then apply, which will be equal to the total amount received on those March - June Activity Statements.  For quarterly lodgers, the total you've received in the first boost payments will be paid to you again, in two equal instalments, after the lodgement of your June and September 2020 quarterly statements.  For monthly lodgers, the total you've received in the first boost payments will be paid to you again, in 4 equal instalments, after the lodgement of your June, July, August & September 2020 monthly statements.

The ATO has advised that, where these credits end up with the business having a net refundable amount in your ATO activity statement account, these refunds will be paid within 14 days to a nominated bank account.

Example

You run a business which employs staff and lodges monthly activity statements. All staff are on salary, and a monthly withholding of $15,000 is declared each activity statement.

On the March 2020 activity statement, the $15,000 PAYG is reported. The ATO will automatically apply a credit in the Activity Statement Account of $45,000 ($15,000 × 3 times).

On the April, May and June 2020 activity statements, $15,000 PAYG is also reported. The ATO will automatically apply a credit of $5,000 for April lodgement. That will then take the total amount received in the first boost payment to the maximum of $50,000. Now that you have received the full $50,000 under the first cash flow boost payment, you will now be entitled to a further $50,000 in the second cash flow boost payment. The ATO will automatically apply a credit of $12,500 to your activity statement account after the lodgement of your June, July, August & September 2020 activity statements.

If you are a quarterly payer, the timing is adjusted to suit.  Lets assume your monthly withholding is only $6,000.  On your March 2020 activity statement, you will report $18,000 in PAYG withholding.  The ATO will automatically apply a credit in your Activity Statement Account for $18,000.  If your withholding is again $18,000 for the June quarter, the ATO will again apply a credit of $18,000 to your Account, giving you a total first cash flow boost of $36,000.  This will then entitle you to a second cash flow boost payment of $36,000, paid in two $18,000 instalments, once you have lodged your June and September 2020 activity statements