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Cash flow boost change

Cash flow boost change

Legislation has been enacted to clarify that the cash flow boost is available to eligible small and medium businesses that are required to pay an amount to the ATO because they receive an alienated personal services payment.

An alienated personal services payment is, broadly, a payment received by a personal services entity (e.g. a company or trust) that is ultimately treated as forming part of the income of an individual under the personal services income (PSI) rules (and has not been promptly paid to the individual as wages or salary). The PSI rules are relevant if your services are hired out through a company or trust.

Payment of an amount to the ATO in these circumstances gives rise to an entitlement to the cash flow boost in the same way as payment to the ATO of an amount withheld from an employee’s salary or wages.

The cash flow boost allows eligible small and medium businesses to receive up to a maximum of $100,000 in total in cash flow boost amounts by lodging their activity statements up to the month or quarter of September 2020.

Cash flow boosts are tax-free and not subject to GST. However, this can give rise to later tax consequences when the tax-free amounts are paid out of companies and unit trusts. This is complicated so talk to your tax adviser.

No GDP adjustment to PAYG instalments for 2020-21

The GST and PAYG instalment amounts are usually adjusted every year using a formula known as the gross domestic product (GDP) adjustment.

A recent law change means there is no GDP adjustment to work out quarterly GST and PAYG instalment amounts for the 2020-21 income year. This change is in response to the COVID-19 pandemic.

Please contact KMT office on 08 8431 0022 or email kmtp@kmtpartners.com.au if you need assistance with cash flow boosts.

This is general advice only and does not take into account your financial circumstances, needs and objectives. Before making any decision based on this document, you should assess your own circumstances or seek tax advice from your accountants at KMT Partners. Information is current at the date of issue and may change.

See also:

Tax consequences of the Cash Flow Boosts

The cash flow boost is not taxable. You do not need to pay tax on the amount of the cash flow boost and the cash flow boost is not subject to GST because there is no supply for the payment… Read more

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