Tax-free payments up to $100,000 for employers
- From: 28 April 2020
- Eligibility: Small and medium business entity employers and not-for-profit entities, with an aggregated annual turnover under $50 million.
The Government has increased the previously announced measures to provide cash flow support to business.
Now, eligible businesses with a turnover of less than $50 million will initially be able to access tax-free cash flow support, with the minimum amount being increased to $10,000 and the maximum amount increased to $50,000 (previously $2,000 to $25,000). However, additional support will be provided in the July – October 2020 period so that eligible entities will receive total minimum support of $20,000 and up to $100,000.
In order for a business to qualify for this support it must have been established prior to 12 March 2020. The rules are more flexible for charities because the Government recognises that new charities might be established in response to the pandemic.
The cash flow support measures will be provided in the form of a credit in the activity statement system. The support will be provided in two phases.
- The first phase ensures that eligible employers receive a credit equal to 100% of the PAYG amounts withheld from salary and wages paid to employees during the relevant period, up to the maximum amount of $50,000.
- The second phase ensures that eligible employers receive another series of credits, equal to the credits that were received under the first phase. For example, if a business received $40,000 of credits in the first phase it will receive a further $40,000 of credits in the second phase. These additional credits will be spread over two or four activity statement periods, depending on whether the employer lodges on a quarterly or monthly basis.
If a business pays salary and wages to employees but is not required to withhold any tax then a minimum payment of $10,000 will be made in the first phase and a further payment of $10,000 will be made in the second phase.
The credits are automatically calculated by the ATO and employers will need to lodge an activity statement to trigger the entitlement. If the credit puts the business in a refund position the excess amount will be refunded by the ATO within 14 days.
Businesses that lodge activity statements on a quarterly basis will be eligible to receive credits in the first phase for the quarters ending March 2020 and June 2020. Credits in the second phase will be available for the quarters ending June 2020 and September 2020. The minimum $10,000 payment will be applied to the first lodgement.
Business that lodge on a monthly basis will be eligible for the credits in the first phase for the March 2020, April 2020, May 2020 and June 2020 lodgements. Credits in the second phase will be available for the June 2020, July 2020, August 2020 and September lodgments. The minimum $10,000 payment will be applied to the first lodgement.
Eligibility for the measure will be based on prior year turnover. We will have to wait for the legislation for the finer details.
Not-for-profit employers, including charities, with an aggregated turnover under $50 million will also be able to access the cash flow support.
If you are changing your business structure (eg from sole trader to a company), you …