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As part of its economic response measures to COVID-19, the Federal Government is providing a temporary cash flow boost to small and medium-sized businesses and not-for-profit organisations that employ staff. The measures, which became law on 24 March 2020, provide tax-free payments between $20,000 and $100,000 to eligible businesses and not-for-profits.Daniel Hui, Maddocks Lawyers
The new law took effect on 24 March 2020 as part of the Federal Government measures aimed at supporting the Australian community and economy during COVID-19 crisis.
The cash flow boosts will provide eligible entities with tax-free payments of up to $100,000 (with a minimum payment of $20,000) to assist those entities with cash flow so they can continue operating, paying bills and retaining staff.
Entities will be eligible to receive the cash flow boosts provided they are a small or medium business (including not-for-profit organisations). This is regardless of the business structure they use (so sole traders, companies, partnerships and trusts are all eligible).
Eligible entities must:
In addition, eligible entities must also have either:
The income tax assessment for the 2019 income year will generally determine whether an entity satisfies the $50 million turnover threshold (which includes turnover of related entities). However, in the absence of any income tax assessments for prior years, entities may still be eligible if the Australian Taxation Office (ATO) can use other information to determine that the turnover requirement is satisfied.
Charities registered with the Australian Charities and Not-for-profits Commission are eligible regardless of when they were registered if they meet the other eligibility requirements. This recognises that some charities may be established to respond to the COVID-19 crisis.
Note there are specific provisions in place to prevent entities from being eligible for the cash flow boosts where they have entered into or carried out a scheme to:
The first cash flow boost will be based on entities' PAYG withholding liability for the relevant periods. Eligible entities that are required to withhold and remit tax on amounts (such as employees' salary and wages) will receive a credit equal to 100% of the amount withheld (up to a maximum of $50,000) in the activity statements for the following periods:
Note that monthly lodgers will receive a credit that is calculated at 300% in the March 2020 activity statement to align with quarterly lodgers.
The minimum credit will be $10,000, even if the amount required to be withheld is zero. However, entities will not be eligible to receive any more cash flow boosts until their PAYG withholding exceeds $10,000 over the relevant periods.
The second cash flow boost, payable for activity statements for June to September 2020 to will be based on the value of initial cash flow boosts the entity received, payable as follows:
The cash flow boosts will be administered by the ATO and delivered through credits/refunds in the activity statement system when eligible entities lodge their regular activity statements with the ATO. No separate form or application is required.
Upon lodgement of their activity statement, the first amount will automatically be credited to eligible entities' account.
For more information, contact Maddocks on (03) 9258 3555.
You can read earlier ClearLaw articles on a range of topics, such as:
 The new law is the Boosting Cash Flow for Employers (Coronavirus Economic Response Package) Act 2020 (Cth)
Daniel is a Senior Associate in the Maddocks Tax & Revenue team.Daniel advises extensively in the following areas:
His advice covers both direct and indirect tax considerations.
Prior to joining Maddocks, Daniel worked at a Big Four Chartered Accounting Firm focusing on tax consulting for mergers and acquisitions.
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For more information, contact Maddocks on (03) 9258 3555 and ask to speak to a member of their team.