The realities of the cash flow boost

Now that some businesses have lodged their March activity statements, the much anticipated cash flow boost has started to be received (not offset against any tax liabilities either, as was initially a possibility).

The cash flow boosts (there is to be two of them), delivered as credits in the activity statement system, will generally be equivalent to the amount withheld from wages paid to employees for each monthly or quarterly period from March to June. The ATO says that in practice, this means an employer will get to keep the amounts they have withheld from payments for these periods. There are however a few exceptions, as follows:

  • Monthly lodgers will receive a credit for March 2020 which is 300% of their withholding for that month. This will provide an approximate equivalent to lodgers reporting quarterly.
  • Eligible businesses will receive a minimum of $10,000 across March to June 2020, even if their total withholding is less than $10,000.
  • Total cash flow boosts for March to June 2020 cannot exceed $50,000.

An additional cash flow boost will be applied when activity statements are lodged for each monthly or quarterly period from June to September 2020. These credits will be equal to the total boosts credited for March to June, and will be paid out in either two or four instalments depending on a business’s reporting cycle.

However there continue to be aspects of the cash flow boost that has businesses, and practitioners, scratching their heads. Tax & Super Australia has received many enquiries pertaining to the cash flow boost’s application and finer details — such as the payment mechanism.

Questions answered
One member asked, for example, how the payments are calculated.

The minimum first cash flow boost payment is $10,000 (maximum $50,000) and is payable provided an eligible payment of any amount is made during the first cash flow boost period (regardless of whether any withholding is required) which is the period from:

  • 1 March 2020 to 30 June 2020 (for monthly lodgers); and
  • 1 January 2020 until 30 June 2020 (for quarterly lodgers).

There is a special rule for monthly lodgers for the month of March. So as not to disadvantage monthly lodgers whose payments made in January and February don’t qualify, monthly lodgers receive three times the amount withheld when they lodge their March activity statement (subject to the minimum $10,000 payment and maximum $50,000 payment amounts).

This effectively means that monthly lodgers who have recorded withholding on eligible payments of between $3,334 and $16,666 will receive three times that amount on lodgment of their March activity statement. This is because three times $3,334 exceeds the minimum $10,000 first cash flow boost payment and three times $16,666 equals $50,000, where the first cash flow boost cuts out.

For periods after the first period that the entity qualifies for the first cash flow boost (and is paid a minimum $10,000), the subsequent amounts in the first cash flow boost period ending 30 June 2020 will be equal to the amount of the withholding on eligible payments in each period (subject to the $50,000 cap).

For example, once an entity qualifies for the minimum $10,000 first cash flow boost for say, the month or quarter of March 2020, any subsequent withholding on eligible payments made during any of the periods between 1 April 2020 until 30 June 2020 will be matched dollar-for-dollar by additional first cash flow boost payments up to the maximum $50,000 cap. For monthly lodgers, these periods will be each of the months of April 2020, May 2020 and June 2020 while for quarterly lodgers it will be the June 2020 quarter.

There are many other questions about this matter that the Tax & Super technical team have answered. These include, but are not limited to:

  • If the 2018-19 company tax return was not lodged by 12 March 2020 or the company is new and never lodged a tax return is the cash flow boost available?
  • Are directors, spouses and children eligible if they get paid wages?
  • If wages are paid that don’t require PAYG withholding, and the entity is not registered for GST (i.e. there is no requirement to lodge activity statements) can the entity receive the payment? 
  • Would a company that doesn’t have any employees but has a large number of contractors be entitled to the cash flow boost?
  • Will a business that has ceased (due to downturn) after the March quarter and pays no wages in the June quarter be eligible for the first payment?
  • Can you get the second cash flow boost payments if you do not have any PAYG withholding for the June quarter?
  • Will the anti-avoidance measures be attracted if a company goes from paying dividends to wages instead (or back to paying wages)?

Note that there are many more questions about the cash flow boost answered on this page.

There are also three short video explanations by our Tax Counsel John Jeffreys, giving examples of how the measure works. Example 1 looks at a business that employs two casual staff. Example 2 examines the situation where a business has PAYG withholdings of greater than $10,000 in a quarter but less than $50,000. And example 3 has a business that lodges its BAS each month and obtains the maximum cash flow boost of $100,000.

Comments may be made below, however Tax & Super Australia is not in a position to answer specific enquiries. Replies may be made by Tax & Super Australia, making general observations about the issue raised. People should ensure that their comments are respectful and professional and should not make adverse comments on specific individuals. Members can of course make use of our Helpline service and receive detailed and technically accurate responses in the timeframe mentioned under terms and conditions.

Website Comments

  1. Aloysius Ting
    Reply

    I have a client on Annual GST reporting. 2019 income tax return and annual GST returns were lodged after 12 March but before due date.
    Client has not received any cash flow boost payment. ATO requested me to write to CashFlow panel for objection and review. I did this a fortnight ago. To date I have not received any acknowledgment of that objection. What alternative is available for us to peruse this issue?
    Thanks & regards

    • Steve Burnham
      Reply

      Richard Wilkins replies: Taxpayers are able to object to the non-payment of the cash flow boost through the normal objection pathway. This is confirmed by section 12 of the “Boosting Cash Flow for Employers (Coronavirus Economic Response Package) Bill 2020”:

      “12 Review of decisions.
      (1) A person who is dissatisfied with a decision covered by subsection (2) may object against the decision, in the manner set out in Part IVC of the Taxation Administration Act 1953.
      (2) This subsection covers a decision of the Commissioner under this Act that the person:
      (a) is not entitled to a cash flow boost for a period; or
      (b) is entitled to a cash flow boost for a period of a particular amount.
      (3) For the purposes of this section, treat the reference in paragraph 14ZW(1)(c) of the Taxation Administration Act 1953 to “notice of the taxation decision to which it relates has been served on the person” as instead being a reference to “the taxation decision to which it relates was made”.

  2. Jill Richardson
    Reply

    I have a client who was a sole trader in 2019 but has now opened a company and is trading through the company. How do I go about claiming the cash flow boost for this client?

    • Steve Burnham
      Reply

      Richard Wilkins replies: The cash flow boost is credited when an activity statement for the period up to 30 June 2020 declares an amount at W1.

      Where it is considered that the wages were paid for the dominant purpose of obtaining the cash flow boost, it will not be payable. If this is the first time the company has paid wages, this will likely be reviewed by the ATO.

      The company must also have had an ABN as at 12 March 2020 and either lodged its 2018-19 income tax return (showing income) or made a supply relating to the period between 1 July 2018 and 12 march 2020 (as reported in a BAS) by 12 March 2020 (or such later time as the Commissioner allows).

  3. ExtremelyConfused
    Reply

    What happens to businesses that haven’t had to make a PAYG (or GST) payment since February, ie those that are required to pay their “monthly” April PAYG due on May 21, and their “monthly” March PAYG (along with their Q3 GST, etc) payment due on May 27. Is the March PAYG payment the “first” payment and tripled, or is the April PAYG payment the “first” payment and tripled? As it is now May, if such a business actually pays both now eg. today, does the order of payment matter?

    • ExtremelyConfused
      Reply

      How this cash flow might work differently depending on the ATO’s unspecified arrangements:

      Scenario 1:
      March PAYG payment = $10k. Cash boost payment (mid June?) = $30k = 3 x $10k
      April PAYG payment = $5k. Cash boost (early June) = $5k.
      Total cash boost paid in June = $35k

      Next cash boost paid in early July (hopefully).

      Scenario 2:
      March PAYG payment = $10k. Cash boost payment (mid June?) = $10k
      April PAYG payment = $5k. Cash boost (early June) = $15k = 3 x $5k
      Total cash boost paid in June = $25k

      Next cash boost paid in early July (hopefully).

      • Steve Burnham
        Reply

        Richard Wilkins replies: The tripling of the cash flow boost is only for the month of March 2020 (section 7(3) of the Cash Flow Boost Bill). Further, as there is a minimum payment of $10,000, the tripling only comes into effect when the total withholding on eligible payments exceeds $3,334 (as 3 times $3,334 exceeds the minimum $10,000 first cash flow boost payment). You do not receive three times the minimum $10,000 first cash flow boost.

        There is no tripling for the month of April – even if that is the first month that the entity has made eligible payments such as wages.

        The order in which the activity statements are lodged shouldn’t matter, but as additional payments (above the minimum $10,000) are only payable once the total withholding exceeds this amount, it would be advisable to lodge them in order.

        Please refer to our questions and answers for further information or our Quick Tax videos on the subject.

  4. ExtremelyConfused
    Reply

    What happens to businesses that haven’t had to make a PAYG (or GST) payment since February, ie those that are required to pay their “monthly” April PAYG due on May 21, and their “monthly” March PAYG (along with their Q3 GST, etc) payment due on May 27. Is the March PAYG payment the “first” payment and tripled, or is the April PAYG payment the “first” payment and tripled? As it is now May, if such a business actually pays both now eg. today, does the order of payment matter?

  5. Quarterly Lodger
    Reply

    If a company operates on pure cash accounting and normally at year end pays out all earnings as salary (ie effectively zero or close to zero profit). If they are a quarterly lodger and lodge their June bas on (say) 25 June and they withhold $10000 in the June bas. Would the ATO make the payment of $10000 prior to June 30? If so then they in theory could pay out that $10000 in salaries before June 30 and revise their bas as there is now additional tax withheld. Then would they receive additional boost on that tax withheld? (It could go on forever!)

    • ExtremelyConfused
      Reply

      Thats entirely possible, but it won’t go on forever due to: a finite number of payments in the defined payment schedule, and a cap on the total paid out. Another point is that if a company finds itself with additional profit left over entirely (important!) due to the boost payment then it can pay this as salary during FY20 (say) and it has an obligation to pay this the PAYG owing on this, and the ATO has an obligation to include that PAYG in its Cashflow boost payment calculations.

  6. Small company/quarterly lodger.
    Reply

    I have a small company and my quarterly with holding tax is generally around the $7k mark per qrt. Given that it is under the $10k I will receive the first $10k credit now but what will I receive In The June bas and sept bas?
    Thanks

    • Caroline
      Reply

      I am in the same boat and I assume it is $5000 when BAS lodged June 2020, and $5000 September BAS lodgement.

    • Caroline
      Reply

      https://digit.business/payg-cashflow-boost-calculator-advanced
      Ok I just found this calculator and it suggests that based on me paying $7500 PAYG withholding that in June I will receive $7500, ($10k less amount over paid in initial boost), plus and extra $5000 taking it to $12,500 for June qtr. Then in September lodgement I should get a boost of $12,500. equal to what I received withheld and received eg $7500 plus a $5000 boost! Ha ha confusing I know but makes some sense when you see it on calculator! link I sent you.

      • Caroline
        Reply

        sorry it goes like this for me PAYG eg $7500 (pretty close what I said as above except last line)
        March qtr $10,000
        June Qtr $12,500
        Sept qtr $7,500
        TOTAL $30,000

  7. M
    Reply

    We purchased a business in February. It has 23 staff and turnover $4m+. The company was setup to start Qtrly lodgement with first Qtr ending March. This is a long established ongoing operation of 30+ years. The ATO have indicated that we are not eligible because of the criteria of not having lodged an Activity Statement.

    The crazy thing is that the previous owner who sold the business assets and operations ‘is eligible’, even though he has no staff and no operations.
    Serious technical loophole we fell through 🙁

    • Mark
      Reply

      We are in the same position, Business has been operating for 8 years purchased in January 2020, two staff, we decided to lodge BAS quarterly. We have PAYG and Turnover for February 2020, but don’t qualify according to the ATO to the Cash Flow Boost Payment. The previous owner will get the Cash Boost Payment by default, we get nothing. Has there been any movement to fix this?. If we had chosen to lodge monthly then we would have received the payment. It does not seem fair that a decision to lodge Quarterly vs Monthly is the deciding factor on whether you get the payment or not?
      Not a fair and equitable system.

    • Kate O'Brien
      Reply

      I would push this with the ATO. Our business is in exactly the same boat. Purchased long-established business with 20+ staff in January 2020. Quarterly BAS with March BAS our first (and PAYG of approx. $12500). Initially told we were not eligible, multiple conversations with the ATO by ourselves and our accountant later, they agreed TODAY that we were, and the credit will be processed within 20 business days.

      • Mark
        Reply

        HI Kate, congrats and that gives me some hope, Do you know what was the winning argument that finally got you approved? Need an basis for an objection letter as the ATO have sent a letter saying we don’t qualify and if we disagree (Yes) then we need to lodge an objection. Would your accountant be based in WA?

        • Raelene
          Reply

          Hi Kate and Mark

          I am also in a similar situation, purchased on-going business in January 2020 and we lodged the BAS quarterly (March 2020) and ATO says we are not eligible. I would also like to know what would be the a good basis to present our case.

      • Sue
        Reply

        I am trying to argue a very similar case with the ATO but not having much luck. We had to start a new partnership due to the death of a partner – same business, using the same assets and within the same family. Could you provide me with your ABN or someone I can contact for more information?

      • Helena
        Reply

        Hi Kate
        Would you be able to give me the basis of your objection that got this through and if you could pass me details of your accountant? We are in the same position and have limited time to raise the objection.

  8. LynB
    Reply

    Concerned about the wording for Trust Resolutions for the 2020 year. No online law firms have documentation available for purchase.
    Ideally looking to “stream” the Cash Flow Boost to an individual, to keep it truly tax-free (not a franking credit trap).
    Do you have any suggestions? Quite happy to pay for the service. I normally pay online lawyers for this in any case.

  9. MM
    Reply

    Hi There,

    If companies have done their 2018-19 return before March 2020 and report PAYG as 0 until the last qtr of this year, will they be affected and receive 0?
    Clearly says the Additional Cash Flow payment is dependent on the Initial (but I am assuming if you have already been credited for the month of March and not April, May, June then it will add up to a maximum of $50K.

    Also how does the credit work in regards to the PAYG owing to the ATO based on the employees salaries and income tax owed? Do you need to pay them the amount upfront and then they credit this to your integrated account or once you report it they will put the equivalent credit into your ATO account and the difference is paid?

    Based on the $50,000 credit for any company earning under $20M over a period of March, (April, May, June) and even Q1 in 2020-21 how does this all work. Does it mean if your PAYG is not equal to $50,000 for the first two periods the ATO will give you another cash flow boost payment for Q1 until you reach $50,000 mark?

    Thanks,
    M

  10. AW
    Reply

    So the ATO are saying that the cash flow boost is tax free in the entity it is received, but not necessarily tax free once it is distributed on.

    “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 to another entity (for example, making a trust distribution or paying a dividend to shareholders) there may be tax consequences for the recipient.”

    If the entity is a Trust. And the trust deed allows for distribution of income split into sources (ie keeping franked income separate to capital gains tax income to non assessible income.) Can the income remain tax free?

    Also, should book entries be recorded for the cash flow boost payment relating to the June BAS – ie both the 1st round, and 2nd round – because both relate directly to the June BAS?

    Thank you

  11. Daphne
    Reply

    Did any business get the CASH FLOW PAYMENT by now? I didn’t and where to check? Thnaks

    • Luke
      Reply

      We have not received our cash flow boost either, have been waiting over 1 month.. My accountant has escalated it with the ato. If the cash flow boost is designed to aid businesses during the economic slow down, would it not be necessary to provide them a tad bit quicker?

  12. KathySC
    Reply

    The Cash Flow Boost has been credited to all my clients immediately on lodgement of activity statements from March onwards. The first place I would check would be your activity statement account with the ATO. You can view it via the Business Portal, or ask the ATO or your tax agent for a transaction report. If there is no Cash Boost credit, there would be some issue with eligibility, which might include that no wages were declared in the March BAS.

  13. Andrew
    Reply

    Hi, I pay wages fortnightly to all staff but quarterly to my spouse. I lodge monthly PAYGW due to amount of wages I pay, but when I lodged the monthly wages in March 2020, the government gave a cashflow boost triple the PAYGW which is fine, except technically on my spouses wages the PAYGW should not have been tripled. Is it just ‘lucky’ that my particular circumstances have enabled me to get a larger cashflow boost that I probably shouldn’t have been entitled to, or do I need to contact the ATO and pay the money back (The cashflow boost has been paid out to me already)?

    • H
      Reply

      I do the same and our forward tax planning set the amount t of wages I needed to declare in the March quarter, now the ATO have sent me a please explain because the amount was higher than the previous months where I’ve only reported For our 2 employees, the timing though convenient was not contrived, how do I prove that my intentions weren’t fraudulent to the ATO? This is just extra stress I don’t need right now.

    • Justin Case
      Reply

      New business started paygw jan 2020. Default quarterly lodgement. Easy to prove taxable supplies pre March 2020 yet ATO rejected our eligibility because we had not lodged a BAS earlier. Has anyone had any success in getting some sense in this unfair and discriminatory scenario?

  14. Kkani
    Reply

    Can someone extend help? I have clients that, per my understanding, are eligible in receiving Cash Flow Boost (CFB). They both started last June 1, 2019. Hence, there are no 2019 CTR lodged. Although we have lodged their Q1 (July to September 2019) to Q3 (January to March 2020) Activity Statements, we still didn’t receive the CFB for both Clients that I’m handling. Even until now that we have already lodged their June 2020 BAS statement, we still haven’t received the CFB subsidy, both initial and additional cash flow.

  15. PT
    Reply

    Does anyone know of the commissioner using his discretion allowing an entity (new) to lodge activity statements (1st or 2nd quarters) after the March 12 deadline ? besides using the only examples where it would likely be given which is bushfires/deferrals (obviously )
    And not registered nor required to register for GST

  16. LC
    Reply

    I am a newly setup in Oct 2019. I begin my operation in Dec 19 until now. Recently, I just lodge my 4th Quater 2020 BAS, I treated the jobkeeper payment which I received as salary payment from Apr to Jun 2020- $9000 with PAYG $831. I received a cash boost without any application. 1 weeks later, I received a call from ATO claiming the BAS is wrong. I shouldn’t be paying the jobkeeper as salary. There shouldn’t be PAYG. She change it to NIL and remove the cash boost.

    On the other hand, when I called ATO, they said I should withheld PAYG when I make payment to director.

    Have anyone experience this?

    • JB
      Reply

      Sounds like you applied for JobKeeper as an eligible business participant and not an employee. Therefore you cannot include it as wages. It is a payment to the company.

  17. LIANA
    Reply

    So if there was no wages or withholding for the march Qtr will the business still be able to access the initial cash flow boost in the june Qtr. Generally we pay wages at the end of the qtr or when cashflow allows it which will sometimes be just outside of the end of the qtr.

  18. Penny
    Reply

    What can Cash Flow boost be spent on? Business normally pays a small amount in Wages, no PAYG. Lodged March BAS, with Wages but no PAYG and received $10k Cash Flow boost. Received Jobkeeper for employee from March onwards which also then had PAYG – received $5k Cash Flow Boost after lodging June BAS. Just a bit worried business has been overpaid and will need to repay??

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