Temporary cash flow boosts support small and medium businesses and not-for-profit organisations during the economic downturn associated with COVID-19.
Overview
Eligible businesses and not-for-profit (NFP) organisations who employ staff will receive between $20,000 to $100,000 in cash flow boost amounts by lodging their activity statements up to the month or quarter of September 2020.
You do not need to apply for the cash flow boost. All you need to do is lodge your upcoming activity statements. If you’re eligible, the cash flow boost will be automatically credited to your activity statement account. If you’re lodging online through our Business Portal, you now need to log in using your myGovID.
The cash flow boosts will be delivered as credits in the activity statement system. They will generally be equivalent to the amount withheld from wages paid to employees for each monthly or quarterly period from March to June 2020. In practice, this means you keep the amounts you have withheld from payments for these periods.
You must be eligible for the initial cash flow boost, in order to be eligible for the additional cash flow boosts.
An additional cash flow boost will be applied when activity statements for each monthly or quarterly period from June to September 2020 are lodged. These credits are equal to the total boosts credited for March to June 2020. They will be paid out in either two or four instalments depending on your reporting cycle.
See examples of what you will receive and check out our Cash flow boost estimator (XLSX 5.3MB) to work out an estimate of your cash flow boost amount.
Tax consequences
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.
Any cash flow boost amounts you receive are non-assessable non-exempt (NANE) income and should be reported in the same way as you report other NANE income when lodging your tax return
The amounts do not need to be paid back when your cash flow improves. However, if you have been paid more cash flow boosts than you are entitled to you will need to repay the excess.
Passing on the Cash Flow Boost to others
If you distribute an amount representing the cash flow boost through your company or trust, the tax consequences of the recipients will depend on your type of entity making the distribution.
For example, if your unit trust distributes all or part of the cash flow boost amount to a unitholder, there will be no tax consequences for the unitholder in receiving that amount. If your company distributes all or part of the cash flow boost amount to a shareholder, the amount will be treated as a dividend, and it will need to be included in the recipient’s assessable income for that income year.
No GDP adjustment to PAYG instalments for 2021-22
The GST and PAYG instalment amounts are usually adjusted every year using a formula known as the gross domestic product (GDP) adjustment.
There is no GDP adjustment to work out quarterly GST and PAYG instalment amounts for the 2020-21 and 2021-22 income year. This change is in response to the COVID-19 pandemic.
If you need assistance with your tax return, please feel free to contact KMT office on 08 8431 0022 or email kmtp@kmtpartners.com.au.
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.
Source: ATO
