What you need to know about the Cashflow Boost

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:

• quarterly, you will receive 50% of your total initial cash flow boosts for each activity statement. You will be eligible to receive the credit for:
  • quarter 4 (April, May and June 2020). Lodgement due date is 28 July 2020.
  • quarter 1 (July, August and September 2020). Lodgement due date 28 October 2020.
• monthly, you will receive 25% of your total initial cash flow boosts for each activity statement. You will be eligible to receive the credit for:
  • June 2020. Lodgement due date 21 July 2020.
  • July 2020. Lodgement due date 21 August 2020.
  • August 2020. Lodgement due date 21 September 2020.
  • September 2020. Lodgement due date 21 October 2020.

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