Tax and Cash flow initiatives COVID

For the first payment

To be eligible

For SMEs and NFPs with annual turnover less than $50 million ( this will be calculated based on the 2019 Financial year who  have or had employees on their third quarter BAS in 2020 Financial Year(FY). Turnover will generally be calculated on prior Financial Year turnover.

The ATO will make an automatic credit in the activity statement when lodging their third quarter activity statements for 2020 FY.

This is eligible to employers registered prior to 12 March 2020.

This is calculated how?

The employers that withhold tax for their employees’ wages will receive a 100 per cent of the amount withheld or minimum payment of $10,000 whichever is greater, to a maximum of $50,000.

Employers that paying wages though aren’t required to withhold tax will receive a payment of $10,000 regardless.

$50,000 is the maximum cap, So, if you the withheld amount does not exceed this in in the third quarter BAS. This will mean that you will be eligible to receive the payment in the following fourth quarter 2020 (FY), as calculated above up to the maximum $50,000 cap.

Second payment

Eligibility

To be eligible for the second payment, the employer is required to be active and to lodge the fourth quarter BAS.

The second payment will be provided automatically as a credit in the activity statement when the fourth lodgement is done. Payments will be capped at $50,000 over the 2 quarters $50,000.

Timing of payments

The ATO will provide payment as a credit, once lodgements are made. The ATO will generally provide the refund within 14 days.

How does it work in real life?

Example – Jamie’s Coffee Business

Jamie owns and runs a takeaway cafe business in Sydney and employs 2 people on an average full-time wage of $50,000 each per annum. Ryan reports withholding of $15,000 for his employees on his quarterly Business Activity Statements (BAS). Under the Government’s changes, Ryan will be eligible to receive:

First Payment for Cash Flow for Employers payments

• ATO will provide $15,000 credit for the third quarter 2020 FY, an equal amount withheld of 100%.
• ATO will provide $15,000 credit for the fourth quarter 2020 FY period, an equal amount withheld of 100%.

First Payment for Cash Flow for Employers payments

• An additional payment of $15,000 for the fourth quarter 2020 FY, equal to 50% of his total. Third Quarter and Fourth Quarter Boosting Cash Flow for Employers payments – First Payment.
• An additional payment of $15,000 for first quarter of 2021 FY, equal to 50% of his total (Third quarter and fourth quarter Boosting Cash Flow for Employers payments – First Payment).

Government’s Boosting Cash Flow for Employers measure, Jamie business will receive $60,000.

Supporting apprentices and trainees

Employers will be subsidised up to $21,000 per eligible apprentice or trainee ($7,000 per quarter), that small business maintain. Government is supporting eligible employers who can apply for a 50% wage subsidy for trainees’ or apprentices being paid a wage. In an instance where a small business is not financially able to maintain trainee or apprentice, the subsidy will be transferred to the new employer

However, this will be only applicable for up to 20 full-time employees who maintain employment as an apprentice or trainee. And must have begun employment by the small business as of 1 March 2020. Assessments for eligibility for the subsidy will be reviewed by the Australian Apprenticeship Support Network (AASN) provider.

Registrations is required by early April 2020. Final claims for payment must be lodged by 31 December 2020. For more information see links below:

• The Department of Education, Skills and Employment website 
• Australian Apprenticeships website 

Increasing the instant asset write-off

The Government has enhanced the asset write-off (threshold from $30,000 to $150,000 for all businesses with an aggregate turnover of less than $50,000,000 up from $50,000,000 until 30 June 2020.

Increasing the threshold has cash flow benefits, allows businesses that will be able to immediately deduct eligible assets each that are less than $150,000. This is applicable asset.

Coronavirus SME Guarantee Scheme – Small Business Loans

The government has responded to COVID by providing lenders  a guarantee of 50% for new unsecured loans up to $250,000. SMEs turning over less than $50,000,00 can use this as working capital to be used as working capital for SMEs with turnover under $50,000,000. Loans are subject to lenders credit assessment and the scheme will commence in early April 2020 for new loans until 30 September 2020.

For more info, please see the fact sheet link below:

Treasury

Disclaimer: This page is current as of 10/4/2020 10:03AM AEST