Today, the government announced that they would be increasing the Economic Stimulus measures to businesses. The change will see the maximum claim by a business rise from $25k to $100k of cash assistance based on the PAYG withheld on wages and reported via the Business Activity Statement with a minimum payment receivable of $20,000.
Cash Flow Assistance
- Boosting Cash Flow for Employers: Businesses that withhold tax on their employees’ wages will receive a payment equal to 100% of the amount withheld (this is the PAYG withheld on the employee pay, not their gross wage), up to a maximum $50,000.
- The government will then pay a second set of payments equal to whatever was received in the Boosting Cash Flow for Employers payment received in your BAS. This is paid during the July to October 2020 period.
- You are still entitled to a minimum payment of $20,000 if you pay wages but don’t withhold any PAYG on employees wages (eg. Micro employer) – So in this case you receive $10,000 as a PAYG credit, and a further $10,000 top up in the July to October 2020 period.
- The payment will be automatically paid (we will need to check your bank details are up to date with the ATO).
- The maximum is $100k and this amount is supposed to be completely tax free.
- If you lodge PAYG withholding monthly, the months this applies to are March 2020 – June 2020 with the March 2020 BAS being paid at 300% of the PAYG withheld.
- If you lodge PAYG withholding quarterly, it applies to the March & June 2020 quarters.
- Keep in mind the payments will only be available to active eligible employers established prior to 12th March 2020.
Example – Monthly Withholding
Let’s say your wage bill is 15k per month gross with $4,810 of tax withheld per month and you report monthly.
- So if the assistance starts in March (with 300% for that first month for monthly withholders) and runs until June (scheme ends June 2020) then $4,810 each * 6 months = $28,860 * 100% = $28,860 total payout from the government
- This is paid as follows:
- $14,430 credited in the March 2020 BAS (due 21 April)
- $4,810 credited in the April 2020 BAS (due 21 May)
- $4,810 credited in the May 2020 BAS (due 21 June)
- $4,810 credited in the June 2020 BAS (due 21 July)
- Then, the government will pay you again on top of this during the July to September 2020 lodgments:
- 25% of your total payments ($ 28,860 * 25%) = $ 7,215 in the June 2020 BAS (due 21 July)
- 25% of your total payments ($ 28,860 * 25%) = $ 7,215 in the July 2020 BAS (due 21 August)
- 25% of your total payments ($ 28,860 * 25%) = $ 7,215 in the August 2020 BAS (due 21 September)
- 25% of your total payments ($ 28,860 * 25%) = $ 7,215 in the September 2020 BAS (due 21 October)
Example – minimum payment
Let’s change the above and say that your wage bill is 5k per month gross with $1k of tax withheld per month and you report quarterly:
- $10,000 credited in the March 2020 BAS (due 28 April)
- To get any further credit, you would need to withhold more than $10,000
- In this case, you’ve only withheld $4,000 to June 2020, so they won’t up the payment
- The government will pay the minimum on the first BAS:
Then, the government will pay you again on top of this during the July to September 2020 lodgments (because you lodge quarterly, this will be paid 50/50):
- 50% of your total payments ($10,000 * 50%) = $5,000 in the June 2020 BAS (due 21 July)
- 50% of your total payments ($10,000 * 50%) = $5,000 in the September 2020 BAS (due 21 October)
The Prime Minister’s announcement contains further details on this and other stimulus measures being introduced, as well as examples from the Treasury Department:
For business owners considering putting themselves back on wages, please see my recent LinkedIn article for a practical example. Keep in mind we need to be able to prove you are legitimately working in the business or it may be seen as a tax scheme and the payment clawed back to the ATO along with penalties:
Please reach out if you have any questions about the application of this or any of the other stimulus measures on your business!