Government Cash Flow Assistance
One of the Stimulus Package measures the Government announced last week was a cash flow measure for small and medium businesses who are employers.
- You are a small or medium business with an aggregated annual turnover of less than $50 million
- You are registered for PAYG Withholding
- You make and report a payment of wages between now and 30 June 2020.
The minimum amount for all businesses is $2,000.
The maximum amount is $25,000.
The actual amount you will receive is dependent on how much PAYG Withholding you report. We have listed the relevant activity statement reporting periods these concessions apply to in the table below.
We have also included some examples further in this email.
How and When Will I Get it?
The Government will “pay” this as a credit to your activity statement with the ATO. This will be credited upon lodgement of the activity statement for the relevant period and will be used to “pay” the activity statement lodged and/or any other outstanding debt.
For most businesses this will reduce the amount payable for the total activity statement. However, if after application of the credit you are entitled to a refund, the ATO will pay this to you within 14 days.
How is it Calculated?
This will depend on if you are a monthly or quarterly lodger:
For quarterly PAYGW lodgers the credit will be 50% of the PAYGW reported in each quarter.
For monthly lodgers:
- The month of March will be 150% of the PAYGW reported. This is to allow for catch up for the months of January and February and provide similar treatment to quarterly lodgers.
- For the months of April, May and June the credit will be 50% of the PAYGW reported.
These examples have been taken from the Government’s fact sheet:
Sarah’s Construction Business
Sarah owns and runs a building business in South Australia and employs 8 construction workers on average full-time weekly earnings who each earn $89,730 per year. As Sarah is a medium withholder, Sarah must report withholding monthly. In the months of March, April and June for the 2019-20 income year, Sarah reports withholding of $15,008 for her employees on each Business Activity Statement (BAS).
Under the Government’s changes, Sarah will be eligible to receive the payment on lodgment of each of her BAS. Sarah’s business receives:
- A payment of $22,512 for the March period, equal to 150 per cent of her total withholding.
- A payment of $2,488 for the April period, before she reaches the $25,000 cap.
- No payment for the May period, as she has now reached the $25,000 cap.
- No payment for the June period, as she has now reached the $25,000 cap.
Sean’s Hairdresser Salon
Sean owns a hairdresser’s salon on the Gold Coast. He employs one apprentice who earns $37,970 per year and two stylists who both earn $44,260 per year. As Sean is a small withholder he only reports withholding quarterly in each BAS. In the March and June 2020 quarterly BAS, Sean reports withholding of $4,570 for his employees.
Under the Government’s changes, Sean will be eligible to receive the payment on lodgment of his BAS.
Sean’s business will receive:
- A payment of $2,285 for the March quarter, equal to 50 per cent of his total withholding.
- A payment of $2,285 for the June quarter, equal to 50 per cent of his total withholding.
Sean’s business will receive a total payment of $4,570.
Sean may also benefit from the assistance for existing apprentices and trainees measure.
Tim’s Courier Run
Tim owns and runs a small paper delivery business in Melbourne, and employs two casual employees who each earn $10,000 per year. As Tim is a small withholder he only reports withholding quarterly in each BAS. In the March and June 2020 quarterly BAS, Tim reports withholding of $0 for his employees as they are under the tax-free threshold.
Under the Government’s changes, Tim will be eligible to receive the payment on lodgment of his BAS.
Tim’s business will receive:
- A payment of $2,000 for the March quarter, as he pays salary and wages but is not required to withhold tax.
- No payment for the June quarter, as he has already received the minimum payment and he has no withholding obligation.
If Tim begins withholding tax for the June quarter, he would need to withhold more than $4,000 before he receives any additional payment.