Tread Carefully - Budget 2020
With the recent release of the Federal Budget 2020, Kingsley Smith and Phil McCredden share with you some of the 'quirks' that you should know before spending your heard earned cash.
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The Government is providing a cashflow boost to small and medium businesses and not-for-profit organisations that employ staff have been
affected by the economic downturn associated with COVID-19 (novel coronavirus). Eligible businesses and not-for-profit (NFP) organisations
will receive between $20,000 to $100,000 in cash flow boost amounts by lodging their activity statements up to the month or quarter of
September 2020.
To view a useful online Cashflow Boost Calculator, click here.
The initial cash flow boost has now been delivered as credits in the activity statement system when you lodge your activity statements for each monthly or quarterly period from March to June 2020.
Your initial cash flow boost amount is based on the amount of your PAYG withholding. If you receive the minimum credit of $10,000 you will not be eligible to receive any more cash flow boosts until your PAYG withholding exceeds $10,000 over the eligibility periods.
If you lodge quarterly, you will be eligible to receive the credit for April, May & June 2020 - Lodgment due date 28 July 2020.
If you lodge monthly, you will need to lodge by 22 June for your May payment; and by 21 July for the June payment.
Additional cash flow boost
Eligible entities who received initial cash flow boosts will receive additional cash flow boosts when you lodge your activity statements for each monthly or quarterly period from June to September 2020. These will be delivered in either two or four instalments, depending on your reporting period. The amounts will be equal to the total amount of initial cash flow boosts received.
Key dates
If you lodge:
Tax consequences
You do not need to pay tax on the amount of the cash flow boost. However, if you distribute the cash flow boost from the business entity to another entity (for example, making a trust distribution or paying a dividend to shareholders) there may be tax consequences for the recipient. The amounts do not need 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 need to repay the excess. The cash flow 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.
If you have any questions about the Cashflow Boost and how we might be able to help your business at this time, please do not hesitate to contact us.
Author: Phil McCredden CPA, Director