The Government is providing temporary cash flow support to small and medium businesses and not-for-profit organisations that employ staff during the economic downturn associated with COVID-19 (novel coronavirus). This will be done through two sets of cash flow boosts delivered from 28 April 2020 to support employers to retain employees.

The Government will provide tax-free cash flow boosts of between $20,000 and $100,000 to eligible businesses, delivered through credits in the activity statement system, when eligible businesses lodge their activity statements.

Eligible businesses do not need to apply with a separate form. Upon lodgment of their activity statement, the first amount will automatically be credited to the business’ account, but no earlier than 28 April 2020. A business that lodges early will not receive the cash flow boost before this date.

Eligible businesses, including not-for-profit organisations, must have held an Australian Business Number on 12 March 2020 and lodge their activity statement to receive the credit. 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.

Eligibility — Boosting Cash Flow for Employers payments

Businesses will be eligible to receive the cash flow boost provided they are a small or medium business entity, including not-for-profit organisations, sole traders, partnerships, companies or trusts, that:

  • held an ABN on 12 March 2020 and continues to be active;
  • has an aggregated annual turnover under $50 million (generally based on prior year turnover); and
  • made eligible payments that the business is required to withhold from (even if the amount required to be withheld is zero).

Eligible payments include:

  • salary and wages
  • director fees
  • eligible retirement or termination payments
  • compensation payments
  • voluntary withholding from payments to contractors.

In addition, the business must also have either:

  • derived business income in the 2018–19 income year and lodged its 2019 tax return on or before 12 March 2020; or
  • made GST taxable, GST-free or input-taxed sales in a previous tax period (since 1 July 2018) and lodged the relevant activity statement on or before 12 March 2020.

The most recent income tax assessment for a prior year will generally determine whether a business is a small or medium business entity. However, in the absence of any income tax assessments for prior years, businesses may still be eligible if the Australian Taxation Office (ATO) can use other information it holds on the business to determine that it is a business and would have an aggregated annual turnover under $50 million.

The ATO may also give a business further time to provide notice that business income or supplies were made. This will generally be the case where the business has a lodgment deferral in place. If the business did not have a lodgment deferral in place, it will not become eligible if the business lodges or amends returns for those periods now.

Calculating the cash flow boost — initial cash flow boost

The initial cash flow boost is based on the amount of a business’ PAYG withholding.

Eligible businesses that withhold tax on their employees’ salary and wages will receive a credit equal to 100% of the amount withheld, up to a maximum of $50,000. The minimum credit will be $10,000, even if the amount required to be withheld is zero. However, businesses will not be eligible to receive any more cash flow boosts until their PAYG withholding exceeds $10,000 over the relevant periods.

Monthly lodgers will receive a credit that is calculated at three times the rate (300 per cent) in the March 2020 activity statement to align with quarterly lodgers.

The total of all initial cash flow boosts across all of the relevant periods cannot exceed the maximum limit of $50,000.

Calculating the cash flow boost — additional cash flow boost

The amount of additional cash flow boosts that a business is entitled to is based on the value of initial cash flow boosts the business received.

If the business lodges quarterly business activity statements it will receive 50% of its total initial cash flow boosts for each activity statement.

If the business lodges monthly business activity statements it will receive 25% of its total initial cash flow boosts for each activity statement.