Boosting Cash Flow for Business
The purpose of this Fact Sheet is to enable you to make a quick assessment of your eligibility for the Government's Boosting Cash Flow for business.. It is not a comprehensive guide as the rules are quite complex. If, after you have examined the information in this Fact Sheet and believe that you may be eligible, please contact us immediately so we may assist you further.
Eligibility requirements for cash flow boost
The cash flow boost will be available only to ‘active eligible employers established prior to 12 March 2020’. To be eligible for the cash flow boost, an entity must meet all of the seven conditions set out below.
Condition 1
You are a Small Business Entity or Medium Business Entity
Broadly, the cash flow boost is available only to entities that are either a small business entity (SBE) or a medium business entity (MBE), which means they must have an aggregated annual turnover of less than $50 million.
There are special rules to calculate aggregated turnover but basically it is your ordinary income and the ordinary income of other entities that are connected to you or are affiliated to you.
You must carry on a business and be below the $50 million turnover threshold.
Not for profits and Charities may also qualify and there are special rules relating to their turnover for eligibility.
When am I required to be a SBE or MBE?
The cash flow boost is only available for a period to entities that carry on a business if either:
· the entity was a small or medium business entity for the income year for which they have most recently been assessed; or
· the Commissioner is reasonably satisfied it is likely that the entity is a small or medium business entity for the income year that includes the period
Where you have a prior year assessment
You will be an SBE or an MBE for the most recent income year that has been assessed
So, if you:
have a 2019 assessment — eligibility is based on the aggregated turnover for 2018–19;
have not yet lodged their 2019 tax return, but has a 2018 assessment — eligibility is based on the aggregated turnover for 2017–18; etc.
Where you do not have any prior year assessments
You will still be eligible if the Commissioner is reasonably satisfied it is likely that you are an SBE or an MBE for the income year that includes the period.
The ATO can determine, based on other information they hold, that you are carrying on a business and has an aggregated annual turnover of less than $50 million for the 2019–20 or the 2020–21 income years.
Condition 2 - You make a payment subject to PAYG withholding
You are required to make a payment in the period from which an amount must be withheld (even if the amount is not actually withheld) under Subdiv 12-B, 12-C or 12-D in Schedule 1 to the TAA. Basically, these are payments to workers.
General commentary on the measure has often referred to eligibility being based on 100 per cent of the PAYG withholding reported at label W2 on the activity statement. However, not all amounts reported at label W2 on the activity statement are eligible for the cash flow boost because not all withholding payments are paid to workers.
Condition 3 - You notify the Commissioner
You are required to notify the Commissioner of your entitlement to the cash flow boost in the approved form. This will generally be done by way of lodging your monthly or quarterly activity statement.
Condition 4 - You make a payment during the eligible period
You must make an eligible payment during the prescribed period. For 2019-20 year the periods are as follows.
If the period is:
a month (this applies to large and medium withholders) — the month is March 2020, April 2020, May 2020 or June 2020;
a quarter (this applies to small withholders) — the quarter ends on 31 March 2020 or 30 June 2020.
Condition 5 - You have an ABN or are ACNC-registered
You either:
had an ABN on 12 March 2020 and meet the requirements in condition 6 below; or
are an ACNC-registered charity at any time in the period.
Condition 6 - You are actively in business
One of the conditions in 5 above, where you had an ABN on 12 March 2020, you also must satisfy the condition of being actively in business.
This is an integrity rule that prevents new or inactive entities being established or revived solely to obtain the cash boost. It sets a low threshold, only requiring a single supply or amount of business income to have been reported to the Commissioner on or before 12 March 2020. It can be satisfied if an entity has provided a single activity statement for any month or quarter since 1 July 2018 or an income tax return in relation to the 2018–19 income year.
You will satisfy the "actively in business" requirement in one of two ways.
The Tax Return. Where:
an amount was included in your assessable income for 2018–19 income year in relation to it carrying on a business; and
the 2019 income tax return was lodged on or before 12 March 2020 (or a later time allowed by the Commissioner).
This means that you must have lodged your 2019 income tax return by 12 March 2020. However, this is one of two alternative conditions, so if you can’t meet this condition, you will still be eligible if they meet the second condition.
You have made a supply
You will satisfy the actively in business requirement if:
You made a taxable supply in a tax period that applied to you that:
started on or after 1 July 2018; and
ended before 12 March 2020; and
the activity statement for that period was lodged on or before 12 March 2020 (or by a later time allowed by the Commissioner).
This means that the entity must have made a supply anytime in the period from 1 July 2018 to:
if the entity is a quarterly lodger — 31 December 2019; and
if the entity is a monthly lodger — 29 February 2020,
and they must have lodged the activity statement notifying the Commissioner of that taxable supply by 12 March 2020.
Condition 7 - Integrity Rule
You will be ineligible if the entity, or its associate or agent, has entered into or carried out a scheme or part of a scheme for the sole or dominant purpose of:
making the entity entitled to the cash flow boost for the period; or
increasing the amount of the cash flow boost to which the entity is entitled for the period
How will the Cash Flow Boost Actually Work?
The cash flow boost will be tax-free and automatically calculated by the ATO; no new registrations or new forms will be required.
The cash flow boost will be delivered by the ATO as an automatic credit (not a cash payment) in the activity statement system from 28 April 2020 upon employers lodging eligible upcoming activity statements.
Quarterly lodgers will be eligible to receive:
the first boost once they lodge their March 2020 and June 2020 activity statements (up to a total of $50,000); and
the second boost once they lodge their June 2020 and September 2020 activity statements (up to a total of a further $50,000).
Monthly lodgers will be eligible to receive
the first boost once they lodge their March 2020, April 2020, May 2020 and June 2020 activity statements (up to a total of $50,000); and
the second boost once they lodge their June 2020, July 2020, August 2020 and September 2020 activity statements (up to a total of a further $50,000).
Timing of the first boost — 2019–20
The first boost will be based on 100 per cent of the PAYG withheld in respect of eligible payments up to a maximum of $50,000.
The first boost will be payable (i.e. credited) by the Commissioner following lodgment of the eligible activity statements as set out in the table below.
Rules which apply to the first boost
The first boost will be payable (i.e. credited) by the Commissioner following lodgment of the activity statement according to the following rules:
The Commissioner will not credit the first boost any earlier than the due date of the activity statement, however if the entity lodges the activity statement after the due date for lodgment, the Commissioner will credit the first boost only once the activity statement is lodged.
Despite, point 1. above, monthly lodgers will not receive their first boosts for March 2020 any earlier than 28 April 2020, which is the earliest date the ATO will apply the credits to eligible entities, regardless of whether the entity is a monthly or a quarterly lodger.
The minimum payment of $10,000 will be applied to the entity’s first lodgment.
No further cash flow boost will be paid to an entity until, but for the minimum amount of $10,000, the amount the entity is entitled to receive exceeds the minimum payment. This means that no further cash flow boost will arise unless the PAYG withheld for the June 2020 quarter, or the months of April, May and June 2020, exceeds $10,000.
The ATO will apply the cash flow boost against other tax liabilities arising from the same activity statement. This will result in the entity paying less to the ATO.
Where the entity is in a refund position, the ATO will deliver the refund within 14 days. This could happen where:
· the credit exceeds the other tax liabilities on the same activity statement, in which case, the excess is refunded to the entity as a cash payment;
· the activity statement is overpaid because the first boost wasn’t, or couldn’t, be taken into account when working out the amount payable on the activity statement, in which case, the credit is refunded to the entity as a cash payment.
If an entity receives a cash flow boost to which it was not entitled, it is obliged to repay that amount, and the general interest charge (GIC) will apply.
Timing of the second boost — 2020–21
The second boost will be equal to the full amount of the first boost to which the entity was entitled.
The second boost is available to all entities that received the first boost, provided the entity lodges an activity statement for the tax periods from June 2020 to September 2020.
The second boost is not subject to:
the minimum payment of $10,000; or
the cap that applies to the first boost (i.e. $50,000).
While there is no minimum amount or cap on the second boost, it is inherently capped because it is equal to the first boost, which will be at least $10,000 and cannot exceed $50,000.
Rules which apply to the second boost
The second boost will be payable (i.e. credited) by the Commissioner following lodgement of the activity statement according to the following rules:
1. The Commissioner will not credit the second boost any earlier than the due date of the activity statement, however if the entity lodges the activity statement after the due date for lodgement, the Commissioner will credit the second boost only once the activity statement is lodged.
2. Entities eligible for the first boost will receive the second boost provided that it:
was active prior to 12 March 2020 ;
satisfies the integrity rule ; and
notifies ATO of its entitlement — this means it must lodge activity statements for the period June 2020 to September 2020.
3. The second boost is payable only once activity statements for the tax periods from June 2020 to September 2020 are lodged, but it is not based on the amounts reported in those activity statements. As stated above it is equal to the amount of the first boost.
4. If the entity is:
a large or medium with-holder — the second boost will be made in four equal payments for the months of June 2020, July 2020, August 2020 and September 2020;
a small with-holder — the second boost will be made in two equal payments for the quarters ending June 2020 and September 2020.
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