In this article we will provide further clarity on the governments Cash Flow Boost incentive.
As of today, legislation has not been passed on the Jobkeeper subsidy so we will refrain from providing any further detail on this subsidy until the law has passed.
We write to you today to better explain how the cash flow boost for employers will work as this is now coming into effect this month.
There has been a lot of confusion as to the calculation for this boost however it seems it has been made clearer by the government over the last week.
As you are by now aware the cash flow boost will be a subsidy based on tax withheld by employers for their employees. With a minimum payment of 20,000 over 6 months and a cap of $100,000.
The way this will work is as follows:
First and Second phases
The PAYGW in the March and June quarter BAS will constitute the First Cash Flow Boost payment, with a minimum payment of $10,000 and a maximum payment of $50,000. This total amount will then be paid again as part of the Second Cash Flow Boost payment which will be paid over the June and September quarters.
Who is eligible?
For a business to qualify for this support it must have been established prior to 12 March 2020. The cash flow support measures will be provided in the form of a credit in the activity statement system. The business must also have derived income in the 2018-19 income year and lodged their 2019 tax return on or before 12 March OR made GST taxable, GST free or input taxed sales in a previous period (since July 2018) and lodged relevant statements on or before 12 March 2020.
When and how much?
The first phase will see eligible employers receive a credit equal to 100% of the PAYG amounts withheld from salary and wages paid to employees in the March and June quarters, with a maximum payment of $50,000.
The second phase sees eligible employers receive credits equal to the amount received in the first phase. These amounts will be paid during the June and September quarters, or through July to September if the lodger lodges monthly statements.
If a business pays salary and wages to employees but does not withhold any tax, they will still receive a minimum $10,000 payment in the first phase and a $10,000 payment for the second phase.
Example 1 – Small business that employs staff but does not withhold tax, Quarterly lodger.
$10,000 credit in March BAS
$0 credit in June BAS Total = $10,000
$5,000 in June BAS
$5,000 in September BAS
Example 2 – Business that employs staff and withholds $10,000 per quarter
$10,000 credit in March BAS
$10,000 credit in June BAS Total $20,000
$10,000 credit in June BAS
$10,000 credit in September BAS
Example 3 – Business that withholds $3,000 in PAYG per month, Monthly lodger.
$9,000 credit in March BAS (3XPAYGW)
$3,000 credit in April IAS
$3,000 credit in May IAS
$3,000 credit in June BAS Total = $18,000
Second phase (4 equal payments of the total first cash flow boost)
$4,500 credit in June BAS
$4,500 credit in July IAS
$4,500 credit in August IAS
$4,500 credit in September BAS
Please feel free to contact us if you have any questions relating to your business and its eligibility for all the governments COVID-19 stimulus packages.