What You Need to Know About ATO’s Cash Flow Boost

What You Need to Know About ATO’s Cash Flow Boost

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As of this writing, the COVIC-19 virus has already infected 6,825 people in Australia, causing 95 deaths and millions of people suffering the consequences of the lockdown. Around the world, almost 3.6 million people have been infected and more than 250,000 people have died because of the virus. Aside from the direct effect of the virus to the public, businesses, workers, employers, government offices, and various organizations were also not able to escape the clutches of this pandemic.

As COVID-19 rampages country by country across the globe, global financial experts are preparing for the economic crisis that is soon to follow. In fact, according to the International Monetary Fund (IMF):

The latest Global Financial Stability Report shows that the financial system has already felt a dramatic impact, and a further intensification of the crisis could affect global financial stability.

Businesses and economies around the world are suffering the effects of this health emergency as establishments (except for essential services) continue to remain closed, offices are not operating, banks and other institutions are running with skeletal workforce, tourism and transportation are crippled,  and people are forced to stay at home due to the lockdown. And this scenario does not affect Australia alone, but is reflected in various countries around the world.

To mitigate the effects of the COVID-19 pandemic and to help the businesses all over Australia, the Australian government, is providing temporary cash flow support to small and medium-sized businesses, as well as not-for-profit organisations, via ATO or Australian Taxation Office. This move aims to boost cashflow for employers affected by the economic downturn associated with the COVID-19 crisis.

What Are These Cash Flow Boosts?

This cashflow boosting provides assistance to businesses and organisations that have employees. It consists of two (2) sets of cash flow boosts to help employers support their employees and minimize layoffs during this period.

Eligible businesses are able to claim tax-free cashflow boosts of between $20,000 – $100,000 through the Australian Taxation Office (ATO). These cashflow boosts will be delivered in the form of credits in the activity statement system when these businesses and organisations lodge their activity statements.

Generally, the cashflow boosts will be equal to the amount the employer withheld from the employees’ pay per month or per quarter, from March to June 2020. 

For entities that lodge quarterly, you’ll be eligible to receive the credit for:

  • 3rd Quarter on March 2020 (lodgment due date 28 April 2020)
  • 4th Quarter on June 2020 (lodgment due date 28 July 2020)

For entities that lodge monthly, you’ll 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)

Additional cash flow boost will also be applied when they submit their June-September activity statements. These credits are equivalent to the total boosts from March to June 2020 and will be paid out through either two or four instalments according to your reporting cycle.

Who Are Eligible for These Cash Flow Boosts?

The government’s cash flow boost program is designed for businesses, sole traders, companies, partnerships, trusts, or non-profit organisations that meet the following requirements:

  • Small or medium business  or non-for-profit of equivalent size (the aggregated annual turnover should be less than $50 million)
  • Holds an ABN on 12 March 2020
  • Has made payments to employees subject to withholding:
    • salary and wages
    • director fees
    • eligible retirement or termination payments
    • compensation payments
    • voluntary withholding from payments to contractors
  • Has lodged at least one of the following on or before 12 March 2020:
    • a 2018–19 income tax return showing that you had an amount included in your assessable income in relation to you carrying on a business
    • an activity statement or GST return for any tax period that started after 1 July 2018 and ended before 12 March 2020 showing that you made a taxable, GST-free or input-taxed sale

How Do You Apply?

If you’re worrying about how to apply for these cash flow boosts, don’t fret because there are no forms and no online application that needs to be filled out. This program is a tax-free payment for employers to support their employees. The cash flow boosts will be automatically calculated by ATO and should be credited to your account once you lodge your activity statement.

If you need help to comply and prepare requirements for lodging your activity statements, Online Officer Accountants can assist you for as low as $10/hr. Online Officer offers bookkeeping services for small and medium businesses all over Australia.

Our bookkeepers are certified with Xero, Quickbooks, and MYOB and are experienced with Australian ATO compliance. Our bookkeepers are always available via Messenger and WhatsApp to answer your questions or to provide clarifications regarding any bookkeeping or compliance issues. Help is just one chat away.

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