PAYG Stimulus

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.

Businesses do not need to apply for the cash flow boost. The cash flow boost will be automatically be applied to the accounts of eligible businesses when they lodge their activity statement for the relevant periods.

To access the cash flow boost, businesses must lodge their activity statement. If a business does not need to lodge an activity statement in respect of PAYG withholding, the ATO is working through a solution and will update their website with more information on what businesses need to do. The cash flow boosts will be applied to reduce liabilities arising from the same activity statement. This will result in eligible entities being required to pay less to the ATO.

Generally where a credit exceeds a business’ other tax liabilities, the business will be refunded the excess amount. A business may also receive a refund if it overpays its activity statement because the business’ system was unable to take the cash flow boost into consideration when working out how much was payable.

If a business is placed in a refund position, it will generally receive the refund within 14 days.

The initial cash flow boosts will be delivered as credits in the activity statement system from 28 April 2020. If a business lodges early, it will not receive the cash flow boost before this date.

If the business lodges:

• quarterly, it will be eligible to receive the credit for:
  • quarter 3, March 2020 (lodgment due date 28 April 2020)
  • quarter 4, June 2020 (lodgment due date 28 July 2020).
• monthly, it will be eligible to receive the credit for the lodgment periods of:
  • March 2020 (lodgment due date 21 April 2020)
  • April 2020 (lodgment due date 21 May 2020)
  • May 2020 (lodgment due date 21 June 2020)
  • June 2020 (lodgment due date 21 July 2020).

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

All cash flow boosts are tax free (non-assessable non-exempt income) and are not required to be paid back when the business’ cash flow improves. However, if the business has been paid more cash flow boosts than it is entitled to, it will be required to repay the excess.

The boost is not subject to GST as the business is not making or agreeing to make a supply for the payment. The business will still be entitled to a deduction for PAYG withholding paid. There is no effect on tax paid by employees in respect of their salary and wages.