Government Stimulus Increased to $100,000

New and Enhanced Stimulus Measures

Over the weekend the Government has announced a second round of stimulus measures, including several aimed at small to medium businesses. We have included a summary below of the main measures intended to assist small businesses and their cash flow throughout the coming months. These measures include:

• Enhancements to the previously announced cash flow boost of $25,000
• Temporary Relief from the ATO
• Government Secured Loans for SMEs
• Reduced lending standards for existing bank customers applying for credit or credit limit increases.

Government Stimulus Increased to $100,000

The previously announced cash flow boost, covering the period to 30 June 2020, of up to $25,000 has been enhanced:

• The payment will now be equal to 100% of PAYG withheld (increased from 50%)
• The maximum payment has been increased from $25,000 to $50,000
• The minimum payment has been increased from $2,000 to $10,000

An additional payment has been introduced for the period to 30 September 2020, calculated on the same basis, i.e. the payment will be calculated as 100% of PAYG withheld capped at $50,000 with a minimum of $10,000.

Eligibility

The eligibility for the enhanced original cash flow boost is:

1. You are a small or medium business with an aggregated annual turnover of less than $50 million. This has been extended to Not-For-Profits
2. You are registered for PAYG Withholding
3. You make and report a payment of wages between now and 30 September October 2020
4. You were an established employer prior 12 March 2020

To qualify for the additional payment, the employer must remain active. The Government has not elaborated on what “active” means, however, the intended purpose of the stimulus is to encourage businesses to continue employing people which draws one to the conclusion that you must still have employees with continuing employment and paying wages to access the cash flow boost.

Timing of the Cash Flow Boost

The actual amount you will receive is dependent on how much PAYGW you report. The payment will be as a credit directly to your activity statement account on lodgement of your activity statement and will reduce the amount owing for the activity statement. If this pushes you into a refund position, the ATO will refund the remaining credit within 14 days.

For small lodgers, those who are either a first-year lodger or have PAYGW to report of less than $25,000, you will most likely lodge quarterly.

For medium lodgers your PAYGW is between $25,000 and $1 million per year will lodge monthly via an IAS and via the BAS at the end of each quarter.

Timing of the Additional Payment

The timing and method of the additional payment is like the cash flow boost, as it too is linked to the activity statements lodged. The payment will be as a credit directly to your activity statement account on lodgement of your activity statement and will reduce the amount owing for the activity statement. If this pushes you into a refund position, the ATO will refund the remaining credit within 14 days.

Calculation of the Cash Flow Boost

The cash flow boost is calculated based on the PAYGW you report.
For quarterly lodgers it is calculated as 100% of the PAYGW reported in your activity statement, with a cumulative cap of $50,000.

For monthly lodgers, you will receive:

• For the month of March, 300% of the PAYGW reported in your activity statement
• For the remaining months of April, May and June, 100% of the PAYGW reported in your activity statement.

Like for quarterly lodgers, this is capped at a cumulative total of $50,000 over all four activity statements.

For both quarterly and monthly lodgers, if you pay wages but are not required to withhold PAYGW then you will receive a minimum of $10,000. If in a subsequent activity statement, you pay wages and are required to withhold PAYGW then you must have withheld at least $10,000 (i.e. equal to the minimum payment) before you are eligible to receive any additional cash flow boost.

The examples at the end of this email illustrate how this is calculated for a variety of different lodgers.

Calculation of the Additional Payment

For quarterly lodgers, the additional payment will be paid in two instalments. Each instalment will be equal to 50% of the total amount you have received as the cash flow boost.

For monthly lodgers, the additional payment will be paid in four instalments. Each instalment will be equal to 25% of the total amount you have received as the cash flow boost.

Keep in mind, that for each of these payments the ATO will assess whether you are an active employer. If you are not an active employer, you will not receive the payment for that period.

The examples at the end of this email illustrate how this is calculated for a variety of different lodgers.

Examples for the $100,000 Cash Flow Boost and Additional Payment

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. Sarah reports withholding of $15,008 for her employees on each of her monthly Business Activity Statements (BAS).

Under the Government’s changes, Sarah will be eligible to receive the payment on lodgement of her BAS. Sarah’s business receives:

• A credit of $45,024 for the March period, equal to 300 per cent of her total withholding.
• A credit of $4,976 for the April period, before she reaches the $50,000 cap.
• No payment for the May period, as she has now reached the $50,000 cap.
• An additional payment of $12,500 for the June period, equal to 25 per cent of her total Boosting Cash Flow for Employers payments.
• An additional payment of $12,500 for the July period, equal to 25 per cent of her total Boosting Cash Flow for Employers payments.
• An additional payment of $12,500 for the August period, equal to 25 per cent of her total Boosting Cash Flow for Employers payments.
• An additional payment of $12,500 for the September period, equal to 25 per cent of her total Boosting Cash Flow for Employers payments.

Under the previously announced Boosting Cash Flow for Employers measure, Sarah’s business would have received a maximum payment of $25,000.

Under the Government’s enhanced Boosting Cash Flow for Employers measure, Sarah’s business will receive $100,000. This is an additional $75,000 to support her business and help her retain her staff.

Sean’s Hairdresser Salon

Sean owns a hairdresser’s salon on the Gold Coast. He employs 12 hairdressers, with average salary of $50,000 per year. As Sean is a medium withholder, Sean must report withholding monthly. Sean reports withholding of $8,788 for his employees in each of his monthly BAS.

Under the Government’s changes, Sean will be eligible to receive the payments on lodgement of his relevant BAS.

Sean’s business will receive:

• A credit of $26,364 for the March period, equal to 300 per cent of his total withholding.
• A credit of $8,788 for the April period.
• A credit of $8,788 for the May period.
• A credit of $6,060 for the June period, before he reaches the $50,000 cap. Sean will also receive an additional payment of $12,500 for the June period, equal to 25 per cent of his total Boosting Cash Flow for Employers payments.
• An additional payment of $12,500 for the July period, equal to 25 per cent of his total Boosting Cash Flow for Employers payments.
• An additional payment of $12,500 for the August period, equal to 25 per cent of his total Boosting Cash Flow for Employers payments.
• An additional payment of $12,500 for the September period, equal to 25 per cent of his total Boosting Cash Flow for Employers payments.

Under the previously announced Boosting Cash Flow for Employers measure, Sean’s business would have received a total payment of $25,000.

Under the Government’s enhanced Boosting Cash Flow for Employers measure, Sean’s business will receive $100,000. This is an additional $75,000 to support his business.

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 his 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 lodgement of his BAS.

Tim’s business will receive:

• A credit of $10,000 for the March quarter, as he pays salary and wages but is not required to withhold tax.
• An additional payment of $5,000 for the June quarter, equal to 50 per cent of his total Boosting Cash Flow for Employers payments.
• An additional payment of $5,000 for the September quarter, equal to 50 per cent of his total Boosting Cash Flow for Employers payments.

If Tim begins withholding tax for the June quarter, he will need to withhold more than $10,000 before he receives any additional payment.

Under the previously announced Boosting Cash Flow for Employers measure, Tim’s business would have received a total payment of $2,000.

Under the Government’s enhanced Boosting Cash Flow for Employers measure, Tim’s business will receive $20,000. This is an additional $18,000 to support his business.

Help for the Homeless Op-Shop

Help for the Homeless, a registered charity, runs an op-shop to support its programs and employs 5 part-time workers with average income of $30,000 per year. It reports total withholding of $3,510 for its employees for each quarterly BAS.

Under the Government’s changes, Help for the Homeless will be eligible to receive the payment on lodgement of its BAS as it is a charity. Help for the Homeless receives:

• A credit of $10,000 for the March quarter, the minimum payment.
• An additional payment of $5,000 for the June quarter, equal to 50 per cent of its total Boosting Cash Flow for Employers oayments.
• An additional payment of $5,000 for the September quarter, equal to 50 per cent of its total Boosting Cash Flow for Employers payments.

Under the Government’s enhanced Boosting Cash Flow for Employers measure, Help for the Homeless will receive $20,000. Under the previously announced Boosting Cash Flow for Employers measure, NFPs were not eligible for the support.

Temporary Relief from the ATO

ATO leniency

The ATO have been directed to work with business owners that are struggling due to the Coronavirus. This may include a temporary reduction of payments or deferrals of payments or delays in legal enforcements including Director Penalty Notices and windups.

If you are struggling to pay creditors, then we recommend discussing your cash flow issues with this office and we will assist you in coming to an arrangement with the ATO.

Refund of PAYG Income Tax Instalments

Another already existing ATO relief which we can use is to apply for a credit for PAYG Income Tax Instalments you may have paid in previous quarters. Please note, these instalments need to have been paid to be credited back to you.

For example, in the September and December quarter Business Activity Statements an income tax instalment of $10,000 per quarter was included. Now as a result of the impact of Coronavirus on trading conditions you expect that your business will not much of a profit, if any, for the full 2019/20 financial year. When we lodge the March quarter Business Activity Statement we can notify the ATO that your expected tax for the year is nil, and claim a credit for the $20,000 of income tax instalments already paid. This credit will be applied against the total amount payable for the activity statement as well as any other ATO debts. If there is a credit remaining, this will be refunded to you.

Government Secured Loans

The Government have announced the Coronavirus SME Guarantee Scheme where the Government will guarantee 50% of the value of a loan to a Small to Medium Enterprise (SME) for new unsecured loans to be used for working capital.

The purpose of this scheme is to enhance lenders’ willingness and ability to provide credit to SME’s.

To be an eligible SME your turnover must be less than $50 million and the loan must have the following terms:

• Maximum loan of $250,000
• The loan is for three years, with an initial six-month repayment holiday
• The loan is unsecured (i.e. no asset is required as security for the loan)

The loans are still subject to the lenders’ assessment process. The Government has the expectation that most lenders will look at the history of the business and take into account the uncertainty of the current economic environment.

The Government anticipates that the scheme will commence in early April and be available for new loans granted until 30 September 2020.

Quick and Efficient Access to Credit

Where a lender provides credit to an existing small business customer, the Government is providing an exemption to the lender from their responsible lending obligations.

The exemption will apply for six months and will be applied to any credit applications for business purposes, including new credit, credit limit increases, credit variations and restructures.