Am I eligible for the cash flow boost?
A business (including a charity or not-for-profit) will be eligible for the cash flow boost if it meets the following conditions.
- The business must make a payment that is subject to the withholding tax provisions (the most common example will be payments of salary or wages).
business must be one of the following:
(a) a small business entity: which generally means carrying on business in the relevant income year and with an aggregated turnover of less than $10 million
(b) a medium business entity: which generally means carrying on business in the relevant income year and with aggregated turnover of less than $50 million
(c) a charity or other not-for-profit entity of an equivalent size. The business must have notified the Commissioner of the payment that was subject to withholding tax in the approved form. This will usually be done by lodging the relevant Business Activity Statement (BAS).
- The payment
must relate to either:
(a) for monthly withholders: the months of March 2020, April 2020, May 2020 or June 2020
(b) for quarterly withholders: the quarters ending March 2020 or June 2020.
- The business must have held an ABN on 12 March 2020. This is not relevant for charities.
business must have either:
(a) derived assessable income from carrying on a business in the 2019 income year.
(b) made supplies in the course of carrying on its enterprise within Australia after 1 July 2018 and before 12 March 2020.
The legislation contains rules that prevent businesses from trying to manoeuvre into the eligibility conditions. For example, if you previously have not paid wages to yourself in prior years, and then start paying wages to increase your withholding payments, which in turn increase the amount you will be entitled to under the package, this would be a breach of the rules.
What do I have to do to get the cash flow boost?
Businesses will need to lodge their BAS’s showing the payments that are subject to withholding.
If the business is a charity or not-for-profit with no income tax notices of assessment, it will need to notify the Commissioner that it should satisfy the small to medium business entity requirement.
How much are the cash flow boosts?
There are two cash flow boosts. The minimum amount for each cash flow boost is $10,000 – so $20,000 in total. The maximum cap for each cash flow boost is $50,000 – so $100,000 in total.
Subject to the minimum amount and maximum cap, the cash flow boost is 100% of the amount that has been withheld for the March quarter (the period).
However, if the payment is for the month (not quarter) of March 2020, the cash flow boost is 300% of the amount that has been withheld for March 2020. This means there is no difference between monthly and quarterly reporting.
How do I get the first cash flow boost?
The Commissioner has the power to direct how the cash flow boost payments will be made.
In practice, we expect that the Commissioner will allocate the payments as credits to the business’ tax liabilities – either on the Integrated client account (BAS) or the Income Tax account. In many cases, this will result in a credit to offset against the business’ GST liability. The Commissioner should then refund any excess.
However, the Commissioner also has a discretion to refund amounts instead of applying them as credits against other tax liabilities.
How do I get the second cash flow boost?
The second cash flow boost is the same amount as the first cash flow boost. There are further eligibility conditions, but most will be satisfied if the business remains in business.
- For large and medium withholders (>$25,000 p.a), the second cash flow boost will be made in four equal amounts for the months of June 2020, July 2020, August 2020 and September 2020.
- For other businesses, the second cash flow boost will be made in two equal amounts for the quarters ending June 2020 and September 2020.
Access my Super and how to apply
The government as part of the stimulus package will allow individuals to access up to $10,000 of their superannuation in 2019-20 and a further $10,000 in 2020-21. Eligibility to apply for early release you must satisfy any one or more of the following requirements:
- You are unemployed; or
- You are eligible to receive a job seeker payment, youth allowance for jobseekers, parenting payment (which includes the single and partnered payments), special benefit or farm household allowance; or
- On or after 1 January 2020: you were made redundant; or your working hours were reduced by 20 per cent or more; or if you are a sole trader: your business was suspended or there was a reduction in your turnover of 20 per cent or more.
People accessing their superannuation will not need to pay tax on amounts released and the money they withdraw will not affect Centrelink or Veterans’ Affairs payments.
If you are eligible for this new ground of early release, you can:
- Apply directly to the ATO through the myGov website: www.my.gov.au. You will need to certify that you meet the above eligibility criteria.
- After the ATO has processed your application, they will issue you with a determination. The ATO will also provide a copy of this determination to your superannuation fund, which will advise them to release your superannuation payment.
- Your fund will then make the payment to you, without you needing to apply to them directly. Make sure you bank details are up to date.
The new Coronavirus supplement
A new six-month ‘Coronavirus supplement’ of $550 per fortnight will be paid to individuals who are currently eligible for certain income support payments, including the:
- Jobseeker Payment;
- Youth Allowance; and
- Parenting Payment (Partnered and Single).
Furthermore, it appears that this new (additional) supplement will be paid to eligible individuals as part of their existing income support payments. Expanding access (and eligibility) to certain income support payments for the period that the Coronavirus supplement is paid, the Government will also expand access to certain income support payments (e.g., the Jobseeker Payment, the Youth Allowance Jobseeker and the Parenting Payment) for eligible individuals.
For example, a new category of Jobseeker Payment and Youth Allowance Jobseeker will become available for eligible individuals financially impacted by the Coronavirus. According to the Government, this could include, for example, permanent employees who are stood down or lose their employment; sole traders; the self-employed; casual workers; and contract workers who meet the income tests, as a result of the economic downturn due to the Coronavirus.
Additionally, asset testing for the Jobseeker Payment, the Youth Allowance Jobseeker and the Parenting Payment will be waived for the period of the Coronavirus supplement. Income testing will still apply to the person’s other payments, consistent with current arrangements.
Tax-free payments of $750 to eligible recipients
The Government will be providing two separate $750 tax-free payments (referred to as ‘economic support payments’) to social security, veteran and other income support recipients and to eligible concession card holders.
- The first $750 payment will be available to individuals who are residing in Australia and are receiving an eligible Government payment, or are the holders of an eligible concession card, at any time from 12 March 2020 to 13 April 2020 (inclusive). This payment will be made automatically to eligible individuals from 31 March 2020.
- The second $750 payment will be available to individuals who are residing in Australia and are receiving one of the eligible Government payments or are the holders of one of the eligible concession cards on 10 July 2020 (except for those receiving an income support payment that qualifies them to receive the $550 fortnightly Coronavirus supplement).
This payment will be made automatically to eligible individuals from 13 July 2020. Each of the $750 payments will be exempt from income tax and will not count as income for the purposes of Social Security, the Farm Household Allowance and Veteran payments
Reducing Minimum pension payments from Super
The Government is allowing individuals affected by temporarily reducing superannuation minimum drawdown rates
The Government is temporarily reducing superannuation minimum drawdown requirements for account-based pensions and similar products by 50 per cent for 2019-20 and 2020-21.
Reducing social security deeming rates
On 12 March, the Government announced a 0.5 percentage point reduction in both the upper and lower social security deeming rates.
The Government will now reduce these rates by another 0.25 percentage points. As of 1 May 2020, the upper deeming rate will be 2.25 per cent and the lower deeming rate will be 0.25 per cent. The reductions reflect the low interest rate environment and its impact on the income from Increasing the instant asset write-off
Instant Asset Write off
The Government is increasing the instant asset write-off threshold from $30,000 to $150,000 and expanding access to include businesses with aggregated annual turnover of less than $500 million (up from $50 million) until 30 June 2020.
Accelerated Depreciation Rates
The Government is introducing an investment incentive (through to 30 June 2021) to support business investment and economic growth over the short term, by accelerating depreciation deductions.
Businesses with a turnover of less than $500 million will be able to deduct 50 per cent of the cost of an eligible asset on installation, with existing depreciation rules applying to the balance of the asset’s cost.
What types of relief are available from the ATO?
The ATO has provided the following options as possible ways to obtain tax relief.
- The ATO may allow payments for income tax, GST, PAYG instalments, FBT and excise to be deferred for up to six months.
- Taxpayers may get quicker access to GST refunds by changing from quarterly to monthly reporting. If a change is made now, the first monthly tax period will be the one starting on 1 April 2020.
- Changing reporting periods has other consequences, if taxpayers are considering changing before 1 April 2020, please check that these other consequences are acceptable before changing.
- Taxpayers can vary their quarterly PAYG instalment for the March 2020 quarter. The ATO says it will not apply penalties or charge interest to varied instalments for the 2020 income year.
- The ATO may remit interest and penalties incurred after 23 January 2020.
- The ATO may be prepared to enter into ‘low interest’ payment plans.
Taxpayers who are employers need to continue to meet their compulsory superannuation obligations.
The ATO does not have the power to defer or vary any superannuation contribution dates and cannot waive the superannuation guarantee charge.
How to apply to the ATO?
Taxpayers will need to apply to the ATO for relief. We expect the ATO will be willing to help taxpayers affected by COVID-19 as much as possible. However, it will be important to explain to the ATO how COVID-19 is affecting the business, and how the relief that is being asked for will help.
This publication is for information only and is not legal advice. You should obtain advice that is specific to your circumstances and not rely on this publication as legal advice. If there are any issues you would like us to advise you on arising from this publication, please let us know.