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Deadline For Director Identification Number Applications

  • October 24, 2021
  • by:  Deepak Saboo 
  • note:  0 Comments 
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The Director Identification Number regime came into force late in 2020 as a tool for the government to reduce phoenixing and black economy activities. Broadly, the regime will require all directors to confirm their identity with the ATO, at which time they will be issued a unique identifier. This identifier will then be permanently linked to the individual even if they cease to be a director. 

While this regime was introduced in late 2020, the government has recently introduced an instrument that extends the time available for persons who are eligible officers immediately before the commencement of the director identification number obligations to apply for a director identification number (DIN). Individuals that operate under the Corporations Act and became a director on or before 31 October 2021 are required to apply for a DIN before the end of the transitional period, which is between 4 April 2021 to 30 November 2022. 

Directors operating under the Corporations (Aboriginal and Torres Strait Islander) Act 2006 and became a director on or before 31 October 2021 will have even more time, these individuals will have until the 30 November 2023 to apply for a DIN (the transition period is 4 April 2021 to 30 November 2023). Any individuals that are appointed directors between 1 November 2021 and 4 April 2022 will have within 28 days of appointment to apply for the DIN and from 5 April 2022, individuals seeking to become directors will need to apply for a DIN before their appointment. 

It is envisaged that the DIN will provide traceability of a director’s relationships across companies, enabling better tracking of directors of failed companies and prevent the use of fictitious entities. It will also assist regulators to investigate a director’s involvement in what may be repeated unlawful activity including illegal phoenixing.

ASIC and external administrators will also benefit by saving time and money as the DIN will make it simpler to track the corporate history of various directors and assist liquidators improve the efficiency of the insolvency process. In addition, the DIN is also expected to protect individuals against the fraudulent use of stolen identities to set up companies, and improve overall data integrity and security.

To prevent abuse of the regime, any conduct that would be considered to undermine the DIN requirement will be subject to civil and criminal penalties. This includes deliberately providing false identity information, intentionally providing a false DIN, or intentionally applying for multiple DINs.   

Although we’re currently in the transitional period, directors don’t need to do anything yet. At the moment, the ATO is testing the new DIN application process in private beta to ensure the new system works as intended. It notes that once the testing process is complete, directors will be able to use the new Australian Business Registry Services (ABRS) online services to register.

Sign-ins and director identity verification will be conducted using the myGovID app. This app requires a compatible smart device and will require an individuals to enter personal details and verify at least two Australian identity documents (ie drivers licence, birth certificate, citizenship certificate, passport etc) to obtain the “standard identity strength”. The “strong identity strength” which is currently in testing phase will require the completion of an additional face verification check. 

Be ready.

If you’re already the director of the company under the Corporations Act, you will have until 30 November 2022 to register for a DIN. If you’re thinking of becoming a director, you’ll have substantially less time. So, it’s prudent to do the necessary prep work now. Contact us today if you need help.  

Home as a place of business: CGT implications

The COVID-19 pandemic has resulted in more employees working from home than ever before. This, in turn, has resulted in such people being able to claim a range of deductions for various “running expenses” associated with working from home. These expenses include electricity, phone service, cleaning, decline in the value of equipment, furniture and furnishing repairs, and so on. To make things easier, the ATO even provided several “short-cut” options to claim “working from home” expenses (as opposed to claiming the relevant proportion of the actual costs).

In addition, many people who operate a business (e.g. as a sole trader or in partnership) have been required to use part of their home as a place of business – or may have been doing so for many years anyhow. They, too, are entitled to claim various “running expenses” associated with working from home.

Moreover, if part of the home has the character of a place of business and is set aside as such, then such persons would generally also be able to claim a portion of occupancy expenses (such as mortgage interest or rent, council rates, land taxes, house insurance premiums) in addition to running expenses. This is because part of the home is an asset that is used in carrying on their business. However, where part of a home is being used as a business to generate assessable income, the homeowner will not be able to sell their home CGT-free. Instead, a partial CGT main residence exemption will apply on the basis that part of the home has been used to produce assessable income (in the same way it would apply if part of the home had been rented at arm’s length).

The rules for calculating a partial CGT main residence can be difficult to apply – particularly in determining the appropriate apportionment and correctly applying any exclusions. A professional’s expertise here is invaluable.

More importantly, in cases where a partial exemption may apply because of part-business use of a home, then the CGT small business concessions may be available to eliminate, reduce or roll over any assessable capital gain. The ATO accepts this as being possible: “You may be able to apply one or more of the small business CGT concessions to reduce your capital gain unless the main use of the house was to produce rent.” (See the ATO website here).

However, the CGT small business concessions are difficult to apply at the best of times – let alone in the case where part of a home is used as a place of business. For example, issues may arise as to whether the homeowner meets the basic threshold requirement for the concessions (including the holding period rule), the effect of joint ownership of the home and, in the case of the 15-year exemption, whether the sale of the home (or CGT event) that gives rise to the capital gain is made in connection with the retirement of the taxpayer.

And of course, where a company or trust carries on the business, a crucial issue also arises as to whether the part of the home used in the business qualifies as an active asset, which is required for the CGT small business concessions to apply.

These (and related) issues require the expertise of a professional. So if you find yourself in this position, your first port of call should be your trusted accountant.

The content of this summary is general by nature. We therefore accept no responsibility to persons acting on the information herein without consulting with DSV Partners.

Liability limited by a scheme approved under Professional Standards Legislation.

Tax Consequences Of Rent Deferrals Or Waivers

  • August 15, 2021
  • by:  Deepak Saboo 
  • note:  0 Comments 

As many tenants and landlords turn their attention to their 2020-21 tax returns, one of the big questions is perhaps how they should treat rental concessions provided and received during the last financial year as a result of COVID-19. Tax treatment of these rental concessions depends on a variety of factors including whether it was a waiver (ie the tenant does not have to pay the rental amount outstanding), a deferral (ie the tenant is still required to pay the amount of outstanding rent but at a later date), the period of tenancy, and the accounting method used.

 

Tenants

 

For tenants the tax treatment of a rental waiver depends on whether it is related to a past or future occupancy. In relation to past occupancies, tenants that have already paid the incurred rent which was subsequently refunded will need to include this amount in their assessable income when it is received. In instances where the tenant has not paid the incurred rent which has been waived, the rent waiver will be considered to be debt forgiveness. The commercial debt forgiveness rules may apply in some instances.

 

If the rental waiver is in relation to a future period of occupancy, tenants will not be entitled to a deduction for the amount. Businesses will need to account for the reduced amount of rent paid, or if your business has already accounted for the original rent in your accounts, you’ll need to make appropriate adjustments in either the accounts or your tax return to ensure you don’t claim the waived amount as a tax deduction.

 

Tenants that have received a rental deferral will be entitled to a deduction for the deferred rent when it is incurred. Rent is generally incurred in the period that the rent relates to or when it is paid.

Landlords

 

The tax treatment of rental waivers for landlords depends on the accounting method used (ie cash or accruals accounting). For landlords that use cash accounting, rental waivers mean that you never collect the waived amount of rent and therefore you don’t have to pay any income tax on that amount.

 

For landlords that use the accruals accounting method, if the waived rent relates to past periods of occupancy and has already been included in your assessable income, you may be entitled to a deduction. If the rental waiver relates to future periods of occupancy, the assessable income that you account for should only include the reduced rent that you have agreed to receive and therefore cannot claim a deduction for the waived rent (which would relate to the future period of occupancy).

 

There’ll be no tax effects for landlords that give rental deferrals and uses the cash accounting method as the rent only becomes taxable when it is received. However, those that use the accruals accounting method will need to pay income tax on the accrued but deferred rent even if there is a change to the pattern of receiving the payments (ie rent not paid until a later date). In those circumstances, if you as a landlord have included the deferred rent in your assessable income, but do not later receive the accrued rent from your tenant, you may be able to claim a deduction for the amount.

 

Rental deferral or waiver question?

 

If your business has given or received a rental deferral or waiver and are not sure of the specific amounts to include in your assessable income or to deduct, we can help you work figure it out. Call us today to get it right and save yourself the hassle at tax time.  

ATO Turns Its Attention To Crypto

The meteoric rise of cryptocurrency (crypto) and NFTs (non-fungible tokens) has raised many eyebrows and has now also caught the attention of the ATO. Whether you’re trading crypto or NFTs as an individual or business, capital gains tax (CGT) applies to any gains you make regardless of whether the gain is in foreign currency or Australian dollars.

 

Most people are now familiar with cryptocurrency, which is a type of digital money created from code and usually takes the form of tokens or coins. The most well-known of which include Bitcoin, Ethereum, and Dogecoin. Non-fungible tokens are a comparatively more recent development which basically consists of a unit of data stored on a ledger to certify that a digital asset is unique. This has mostly been applied to artwork but can also include photos, videos and other types of digital files.

 

Based on its data holdings, the ATO will be writing to around 100,000 taxpayers with crypto assets explaining their tax obligations and urging them to review their previously lodged returns. It will also prompt another 300,000 taxpayers as they lodge their 2021 tax return to report their crypto capital gains or losses.

 

Individuals or businesses that dispose of crypto must work out if they made a capital gain or loss and report the resulting gain or loss in their tax return. Disposal of crypto can include exchange of one cryptocurrency for another cryptocurrency, trading, selling or gifting cryptocurrency, converting cryptocurrency to a government issued currency (ie Australian dollars).

 

Transfers of cryptocurrency from one wallet to another while maintaining ownership is not considered to be a disposal, however, if your crypto holding reduces during this transfer to cover a transaction fee, this fee is a disposal and has CGT consequences. In addition, if you acquire a small amount of crypto and use it within a short time to make personal purchases, the crypto may be considered to be a personal use asset and not subject to CGT.

 

In conjunction with contacting taxpayers, the ATO is also conducting a data-matching program which will consist of account identification and transaction data from cryptocurrency designated services providers from the 2021-2023 financial years. These details include the usual client identification information such as name, address, date or birth, phone number and email, but interestingly, now also includes social media account details. Transaction details will also be obtained which includes bank account details, wallet addresses, transaction dates/time/type, deposits, withdrawals, transaction quantities, and coin type.

 

It is estimated that records relating to approximately 400,000 to 600,000 individuals will be obtained each financial year under the program.

 

According to the ATO, while crypto appears to operate in an anonymous digital world, it closely tracks where crypto interacts with the real world through data from banks, financial institutions as well as online cryptocurrency exchanges to trace the money back to taxpayers. It will then match the data obtained from cryptocurrency designated service providers to either individual or business tax returns to ensure that the right amount of tax is being paid.

 

Need help to work out whether you need to pay CGT?

 

If you or your business has been dabbling in crypto and need help to work out whether those transactions are subject to CGT, we can help. The ATO is keeping a close eye on this relatively new financial area and it pays to get it right. Contact us today for expert help and advice.

 

Financial Help For Relocating Job Seekers

Job seekers can now take advantage of the government’s relocation assistance of up to $9,000 when they relocate to take up an on-going work, including an apprenticeship, provided the position (both work and apprenticeship) is for more than 20 hours a week with a duration of more than 6 months. The scheme commenced 1 May 2021 and is designed to help job seekers with the cost of relocating to take up vacant job positions.

 

Job seekers who are participating in employment service programs such as jobactive, Disability Employment Services, ParentsNext, Transition to Work, or Community Development Programs may be immediately eligible for help with their moving costs.

 

Where you relocate to take up ongoing work, the new location must be within Australia, be at least 90 minutes away from where you currently live (based on your normal mode of transport), and not be within the same capital city. Those individuals that relocate to a regional area may be eligible for up to $6,000 with an extra $3,000 available if a dependent is also relocating. For those relocating to another capital city, $3,000 of relocation assistance may be available with an extra $3,000 if relocating with a dependent.

 

However, relocation assistance for capital cities are only available if the destination city has a lower unemployment rate than the capital city you’re relocating from. For example, according to the latest unemployment rate published by Australian Bureau of Statistics, the NSW unemployment rate is 5.4% and Victoria is 6.1%. So, it is likely that an individual moving from Melbourne to Sydney would get the relocation assistance although they would not receive the assistance if they were moving from Sydney to Melbourne.

 

The relocation assistance received can be used for a variety of costs including rent, travel costs, and some employment-related expenses. The assistance can be received either as a reimbursement or the employment services provider can make payments directly to the supplier. Individuals experiencing hardship may also be able to obtain $2,000 up front to help with the cost of relocating. In addition, only one member of a couple may apply for relocation assistance.

 

To apply for the relocation assistance, individuals are encouraged to contact either their local employment services provider or the employment services information line. Evidence that you’ve received an accepted an offer for an eligible job in an eligible location will be required. Furthermore, you must also sign a relocation assistance agreement with an employment services provider and make available any quotes, invoices, and receipts of relocation costs.

 

If after accepting relocation assistance, you leave your job without valid reason, or you don’t commence employment or relocate, penalties may apply. However, in instances where you lose the job through no fault of your own, for example, a redundancy or a business closure, penalties would not apply.

 

Want to apply?

 

If you’re relocating by yourself or with your family for a job, we can help you work out whether you’re eligible for this assistance to reduce the up front costs associated with the move. Remember this assistance is also available for individuals on apprenticeships. Contact us today for expert help and advice.

 

Boosting Super: Low And Middle Income Earners

 

If you’re a low or middle-income earner, you can take advantage of the government super co-contribution scheme to boost your super. The scheme works like this, for eligible individuals, depending on the amount of personal contributions you make to your super account, the government will contribute a maximum of $500 to your super account.

 

For the 2021-22 income year, you are able to get the maximum $500 government co-contribution if you earn less than $41,112 for the financial year and make a personal contribution of $1,000 to your super account (provided you satisfy the other criteria). The $41,112 threshold includes your assessable income, reportable fringe benefits and total reportable super contributions for the year, less any allowable business deductions.

 

Remember, personal contributions do not include the compulsory super contributions that your employer makes on your behalf or contributions made through a salary sacrifice arrangements, and are typically made from your after-tax income.

 

Those individuals that have a total income of more than $41,112 but less than $56,112 for the 2021-22 income year are still able to get a co-contribution, although not at the maximum $500 amount. The entitlement to the co-contribution reduces progressively as income rises with a minimum contribution amount of $20 (if the co-contribution is worked out to be less than $20, the minimum amount of $20 will be paid).

 

In order to be eligible for the scheme, individuals must also satisfy the 10% test, which requires that 10% or more of your income be from either employment-related activities, carrying on a business, or a combination of both. The ATO notes that for this test, your total income is not reduced by allowable business deductions to ensure that self-employed individuals are not disadvantaged if they have low income/profit in any financial year.

 

  1. In addition to the two income tests above, there are also other eligibility criteria including:
  2. being an Australian resident or permanent visa holder (with the exception of New Zealand citizens on a prescribed visa);
  3. being under 71 years of age at the end of the financial year;
  4. have a total super balance less than the general transfer balance cap at the end of 30 June of the previous financial year (($1.6m before 1 July 2021 and $1.7m on or after 1 July 2021);
  5. have not contributed more than the non-concessional contributions cap ($110,000 for 2021-22 income year); and
  6. have not claimed a tax deduction for the personal contribution you have made.

 

Where you meet the eligibility criteria, the government co-contribution is automatically determined by the ATO when you lodge your tax return. In most cases, the amount is paid directly to the super fund to which the personal contributions were made. There are exceptions however, including situations where you’re retired and no longer have a super account, in those instances, the co-contribution will be paid directly to you.

 

If you think you’re eligible for super co-contribution but have not received a payment, you can contact the ATO either via phone or in writing to request and explanation. Where you’re eligible to the co-contribution and it has not been paid within 60 days of receiving all the required information, the ATO will pay interest as a way of compensation.

 

Want to take advantage?

 

If you’re a low or middle income earner and would like to take advantage of the government co-contribution, we can help you work out the optimal amount of personal contribution to boost your super. We can also help if you think you’re eligible and have not received a co-contribution. Contact us today.

  How To Make Most Of Your Salary

With real wages not tipped to grow for a while, there is still a way that you can make the most of your money by salary packaging or through salary sacrifice arrangements if your employer has systems in place that allow for these types of arrangements.

Essentially, a salary sacrifice arrangement (sometimes also referred to as total remuneration packaging) is a formal agreement between an employer and employee whereby the employee agrees to receive a lower amount of pay each payday in return for the employer providing them with benefits of a similar value to the reduction in pay.

You may be thinking why it would be advantageous to receive less pay, the answer lies in the pre-tax and post-tax salary amounts. The amount that ends up in the bank every payday is your post-tax salary, that is the amount that you get after the tax is taken out. When you enter into salary sacrifice arrangements you may be able to pay for certain things from your pre-tax salary, which means your money goes further and you end up paying less tax.

 

Example

 

Ian receives a monthly pay of $1,000 before tax (pre-tax), say he pays 30% tax on the pay, that would mean his post-tax pay (the amount he receives in the bank) is $700 and $300 is withheld in tax. Ian has to pay for a course of study related to his work costing $200 each month, if he uses his after-tax pay to pay for the course he would only have $500 left. However, if his employer allows him to salary package the course of study and pay for it using his pre-tax salary, the scenario would be as follows:

Salary and wages before tax

$1,000
Salary sacrifice amounts

-$200
Salary and wages after salary sacrifice

$800
Tax at 30%

-$240
Post-tax salary (the amount received in the bank)

$560

 

 

 

 

 

 

 

 

 

 

  • Therefore, as can be seen in this simple example, Ian would get $60 more per pay cycle just by taking advantage of a salary sacrifice arrangement.If you think salary sacrifice may benefit you, note there are some requirements for it to be effective including:the arrangement should be entered into before the work is performed (ie salary and wages, entitlements, bonuses etc that accrued before the arrangement was entered into cannot be a part of an effective salary sacrifice arrangement);

 

  • the arrangement should be in writing between you and your employer (but may be verbal in some instances);

 

  • there should be no access to the sacrificed salary (ie the sacrificed salary must be permanently forgone for the period of the arrangement).

 

Once the requirements are satisfied, there are no restrictions on the types of benefits that can be sacrificed, the most important thing is that the benefits form part of your remuneration, replacing what would otherwise be paid as salary. Probably the most common types of salary sacrifice arrangements would relate to superannuation and costs of study. However, depending on the industry and employer there may be many other types of benefits that could be included.

 

Want more money in your pocket?

If you want to get more out of your wages and would like to find out how to structure and negotiate and effective salary sacrifice arrangement based on your unique situation, we have the expertise to help. Contact us today.  

 

New Corporate Residency Test: More Details

In the 2020 Federal Budget, the government announced that it intended to make technical amendments to clarify the corporate residency test. While the government has not provided further details, the Board of Taxation has recently released its review of corporate tax residency, the details of which appear to be consistent with the government’s intentions. This report contains more information on various aspect of the government’s announcement including the concept of sufficient economic connection.

 

Under the current rules, a company will be an Australian tax resident if:

 

  • the company is incorporated in Australia; or
  • the company “carries on business” in Australia and has either it’s central management and control in Australia OR its voting power controlled by shareholders who are residents of Australia.

However, in Bywater Investments Ltd & Ors v FCT; Hua Wang Bank Berhad v FCT [2016] HCA 45, the High Court decided that having boards of directors of various companies located in overseas countries were insufficient to make the companies “foreign residents”. This overturned much of the accepted understanding of corporate residency of a foreign incorporated company and caused confusion and red tape for many in the business community.

 

In its review, the Board indicated that a majority of submissions supported its proposal to modify the “central management and control test” to ensure that a foreign incorporated company will only be an Australian tax resident if it has sufficient economic connection with Australia.

 

According to the report, “sufficient economic connection” could be determined using a two-step process. Firstly, to determine whether core commercial activities of a foreign incorporated company are undertaken in Australia. Only if the answer if affirmative, does it move to step 2 which involves looking at the central management and control of the foreign incorporated company.

 

The Board considers that overarching guidance on the meaning of “core commercial activity” should be provided in either the legislation or an explanatory memorandum and be supplemented by accompanying ATO practical compliance guidance. Further, it notes that additional ATO administrative guidance may be required on the meaning of the term “central management and control in Australia” in the context of modern corporate board practices.

 

Factors considered by the Board to be relevant when assessing whether the core commercial activities of a foreign incorporate company include:

 

the nature of the business carried on by the company;

 

the  location of staff and assets  employed in the conduct of  the core business activity of the company in both Australia and abroad;

 

  • the size of the company;
  • the sophistication of the company’s corporate governance practices;
  • any separation between strategic management and operational control of the business;
  • the  composition of the company’s board and any additional roles held by directors; and
  • the distinction between activities that are core to the conduct of the business and those that are preliminary or ancillary, such as general support functions.

 

In the Budget, the government announced the measure will have effect from the first income year after the date of the enabling legislation receives assent, but taxpayers will have the option of applying the new law from 15 March 2017 (the date on which the ATO withdrew Ruling TR 2004/15: residence of companies not incorporated in Australia — carrying on a business in Australia and central management and control).

 

How will it affect your business? If you have a foreign incorporated business and are not sure how this change will affect the conduct of operations in Australia, speak to us today. If you have other questions about the interaction of the potential new sufficient economic connection test, and central management and control, we can also help.

Illegal Phoenixing: ATO Retaining Refunds

 

 

 

 

A new administrative approach has been released by the ATO in relation to the exercise of the Commissioner’s discretion to retain tax refunds where a taxpayer has an outstanding notification. Previously, the ATO was able to retain refunds where a taxpayer has an outstanding notification in relation to BASs or PRRT (petroleum resource rent tax), but this power has been extended to encompass all outstanding notifications in an effort by the government to combat illegal phoenixing.

 

“[The ATO] recognises that the Commissioner’s exercise of this extended discretion will not be taken lightly. In particular, the exercise of the discretion will be considered in circumstances where taxpayers are identified as engaged in high-risk behaviour (including those engaging in illegal phoenix activity).”

 

According to the ATO, in deciding whether a refund should be retained, consideration of seriousness of the taxpayer’s behaviour ought to be weighed against potentially adverse consequences for the taxpayer. It notes some of the indicators of high-risk behaviour by taxpayers include the following:

 

  • poor past and current compliance with tax and super obligations (ie registration, lodgment, accuracy of reporting, record keeping, and making on-time payments);
  • poor behaviours and governance in managing tax and super risks;
  • the number of and the circumstances surrounding any bankruptcies or insolvencies;
  • tax-related penalties and sanctions imposed (ie director penalty notices or having committed an offence in failing to give security);
  • connection with advisers who are subject to disciplinary actions or sanctions relating to taxation of super laws (ie promotion of schemes);
  • past information which reasonably indicates fraud or evasion, intentional disregard of a tax law, or recklessness as to the operation of a tax law; or
  • the likelihood of participation in or promotion of aggressive tax planning arrangements, schemes, fraud or evasion and criminal activity.
  • Other circumstances where the Commissioner may consider retaining a refund include instances where phoenix behaviour has been displayed by the taxpayer, its associates or controllers. The ATO outlines features of phoenixing as involving cyclically establishing, abandoning or deregistering companies to avoid legal and financial obligations, insolvencies, stripping assets from a company and transfer of assets at an undervaluation.

 

If the ATO suspects phoenixing or where a taxpayer has been identified as high risk, the Commissioner has the power to retain the refund until the taxpayer has given the outstanding notification or an assessment of the amount is made, whichever happens first. The ATO notes that while it is not required by law, it will send written communication explaining that the refund has been retained, the amount retained, and the outstanding notifications required to be lodged.

 

The ATO notes the communication will also explain to the taxpayer why retaining the refund was considered necessary and the reasons why the decision has been made. Additionally, the actions that the taxpayer can take to prevent their refunds from being retained in the future will be outlined. If you’re affected by the Commissioner retaining your refund, remember the decision is externally reviewable, and where the Commissioner makes an assessment of the underlying amount, you are able to object to the assessment.

 

Individuals that can demonstrate that the retention of the refund will cause serious financial hardship (ie being unable to afford the basic necessities of life), may be refunded the retained amount. Non-individuals may also apply for the retained amount to be refunded if they can show that the inability to give the outstanding notification by the original due date was directly caused by circumstances beyond their control.

 

Make sure it doesn’t happen to you!

 

The easiest way to ensure that your refund isn’t retained under these new broader powers is to make sure all your outstanding notifications are lodged and you’re compliant with your tax and super obligations. If you need a helping hand with bringing lodgments up to date, contact us today.

Cash flow assistance to business

  • March 23, 2020
  • by:  Deepak Saboo 
  • note:  0 Comments 

BOOSTING CASH FLOW FOR EMPLOYERS

 Summary

The Government is providing up to $100,000 to eligible small and medium sized businesses, and not-for-profits (including charities) that employ people, with a minimum payment of $20,000. These payments will help businesses’ and not-for-profits’ cash flow so they can keep operating, pay their rent, electricity and other bills and retain staff.

 

On 12 March 2020, the Government announced the Boosting Cash Flow for Employers measure. The measure initially provided up to $25,000 to business, with a minimum payment of $2,000 for eligible businesses. Small and medium sized business entities with aggregated annual turnover under $50 million and that employ workers are eligible.

 

The Government has enhanced this measure as part of the second economic response package. Not-for-profit entities (NFPs), including charities, with aggregated annual turnover under $50 million and that employ workers will now also be eligible. This will support employment activities at a time where NFPs are facing increasing demand for services.

 

Under the enhanced scheme, employers will receive a payment equal to 100 per cent of their salary and wages withheld (up from 50 per cent), with the maximum payment being increased from $25,000 to $50,000. In addition, the minimum payment is being increased from $2,000 to $10,000.

 

An additional payment is also being introduced in the July – October 2020 period. Eligible entities will receive an additional payment equal to the total of all of the Boosting Cash Flow for Employers payments they have received. This means that eligible entities will receive at least $20,000 up to a total of $100,000 under both payments. This additional payment continues cash flow support over a longer period, increasing confidence, helping employers to retain staff and helping entities to keep operating.

 

The cash flow boost provides a tax free payment to employers and is automatically calculated by the Australian Taxation Office (ATO). There are no new forms required.

 

Eligibility – Boosting Cash Flow for Employers payments

Small and medium sized business entities and NFPs with aggregated annual turnover under $50 million and that employ workers will be eligible. Eligibility will generally be based on prior year turnover.

 

The payment will be delivered by the ATO as an automatic credit in the activity statement system from 28 April 2020 upon employers lodging eligible upcoming activity statements.

 

Eligible employers that withhold tax to the ATO on their employees’ salary and wages will receive a payment equal to 100 per cent of the amount withheld, up to a maximum payment of $50,000.

 

Eligible employers that pay salary and wages will receive a minimum payment of $10,000, even if they are not required to withhold tax.

 

The payments will only be available to active eligible employers established prior to 12 March 2020. However, charities which are registered with the Australian Charities and Not-for- profits Commission will be eligible regardless of when they were registered, subject to meeting other eligibility requirements. This recognises that new charities may be established in response to the Coronavirus pandemic.

 

Eligibility – Additional payment

 

To qualify for the additional payment, the entity must continue to be active.

 

For monthly activity statement lodgers, the additional payments will be delivered as an automatic credit in the activity statement system. This will be equal to a quarter of their total initial Boosting Cash Flow for Employers payment following the lodgment of their June 2020, July 2020, August 2020 and September 2020 activity statements (up to a total of $50,000).

 

For quarterly activity statement lodgers the additional payments will be delivered as an automatic credit in the activity statement system. This will be equal to half of their total initial Boosting Cash Flow for Employers payment following the lodgment of their June 2020 and September 2020 activity statements (up to a total of $50,000).

 

Timing – Boosting Cash Flow for Employers payments

 

The Boosting Cash Flow for Employers payment will be applied to a limited number of activity statement lodgments. The ATO will deliver the payment as a credit to the entity upon lodgment of their activity statements. Where this places the entity in a refund position, the ATO will deliver the refund within 14 days.

 

 

Type of lodger Eligible period Lodgment due date
Quarterly Quarter 3 (January, February and March 2020)

 

Quarter 4 (April, May and June 2020)

 28 April 2020

 

 

28 July 2020

 
Monthly March 2020

 

April 2020

 

May 2020

 

June 2020

 21 April 2020

 

21 May 2020

 

22 June 2020

 

21 July 2020

 

Quarterly lodgers will be eligible to receive the payment for the quarters ending March 2020 and June 2020.

 

Monthly lodgers will be eligible to receive the payment for the March 2020, April 2020, May 2020 and June 2020 lodgments. To provide a similar treatment to quarterly lodgers, the payment for monthly lodgers will be calculated at three times the rate (300 per cent) in the March 2020 activity statement.

 

The minimum payment will be applied to the entities’ first lodgment.

 

Timing – Additional payment

 

The additional payment will be applied to a limited number of activity statement lodgments. The ATO will deliver the payment as a credit to the entity upon lodgment of their activity statements. Where this places the entity in a refund position, the ATO will deliver the refund within 14 days.

 

 

Type of lodger Eligible period Lodgment due date
Quarterly Quarter 4 (April, May and June 2020)

 

Quarter 1 (July, August and September 2020)

 28 July 2020

 

 

28 October 2020
Monthly June 2020

 

July 2020

 

August 2020

 

September 2020

 21 July 2020

 

21 August 2020

 

21 September 2020

 

21 October 2020

 

Quarterly lodgers will be eligible to receive the additional payment for the quarters ending June 2020 and September 2020. Each additional payment will be equal to half of their total initial Boosting Cash Flow for Employers payment (up to a total of $50,000).

 

Monthly lodgers will be eligible to receive the additional payment for the June 2020, July 2020, August 2020 and September 2020 lodgments. Each additional payment will be equal to a quarter of their total initial Boosting Cash Flow for Employers payment (up to a total of $50,000).

 

Bill’s Construction Business

 

Bill owns and runs a building business and employs 8 construction workers on average full-time weekly earnings, who each earn $89,730 per year.  Bill reports withholding of $15,008 for her employees on each of her monthly Business Activity Statements (BAS).

 

Under the Government’s changes, Bill will be eligible to receive the payment on lodgment of her BAS. Bill’s business receives:

 

  • A credit of $45,024 for the March period, equal to 300 per cent of her total withholding.

 

  • A credit of $4,976 for the April period, before she reaches the $50,000 cap.

 

  • No payment for the May period, as she has now reached the $50,000 cap.

 

  • An additional payment of $12,500 for the June period, equal to 25 per cent of her total Boosting Cash Flow for Employers payments.

 

  • An additional payment of $12,500 for the July period, equal to 25 per cent of her total Boosting Cash Flow for Employers payments.

 

  • An additional payment of $12,500 for the August period, equal to 25 per cent of her total Boosting Cash Flow for Employers payments.

 

  • An additional payment of $12,500 for the September period, equal to 25 per cent of her total Boosting Cash Flow for Employers payments.

 

Under the previously announced Boosting Cash Flow for Employers measure, Bill’s business would have received a maximum payment of $25,000. Under the Government’s enhanced Boosting Cash Flow for Employers measure, Bill’s business will receive $100,000. This is an additional $75,000 to support her business and help her retain her staff.

 

Sean’s Hairdresser Salon

 

Sean owns a hairdresser’s salon. He employs 12 hairdressers, with average salary of $50,000 per year.  Sean reports withholding of $8,788 for his employees in each of his monthly BAS.

 

Under the Government’s changes, Sean will be eligible to receive the payments on lodgment of his relevant BAS. Sean’s business will receive:

 

  • A credit of $26,364 for the March period, equal to 300 per cent of his total withholding.

 

  • A credit of $8,788 for the April period.

 

  • A credit of $8,788 for the May period.

 

  • A credit of $6,060 for the June period, before he reaches the $50,000 cap. Sean will also receive an additional payment of $12,500 for the June period, equal to 25 percent of his total Boosting Cash Flow for Employers payments.

 

  • An additional payment of $12,500 for the July period, equal to 25 per cent of his total Boosting Cash Flow for Employers payments.

 

  • An additional payment of $12,500 for the August period, equal to 25 per cent of his total Boosting Cash Flow for Employers payments.

 

  •  An additional payment of $12,500 for the September period, equal to 25 per cent of his total Boosting Cash Flow for Employers payments.

 

Under the previously announced Boosting Cash Flow for Employers measure, Sean’s business would have received a total payment of $25,000. Under the Government’s enhanced Boosting Cash Flow for Employers measure, Sean’s business will receive $100,000. This is an additional $75,000 to support his business.

 

Tim’s Courier Run

 

Tim owns and runs a small paper delivery business, and employs two casual employees who each earn $10,000 per year.  In his quarterly BAS, Tim reports withholding of $0 for his employees as they are under the tax-free threshold.

 

Under the Government’s changes, Tim will be eligible to receive the payment on lodgment of his BAS.

 

Tim’s business will receive:

 

  • A credit of $10,000 for the March quarter, as he pays salary and wages but is not required to withhold tax.

 

  • An additional payment of $5,000 for the June quarter, equal to 50 per cent of his total Boosting Cash Flow for Employers payments.

 

  • An additional payment of $5,000 for the September quarter, equal to 50 per cent of his total Boosting Cash Flow for Employers payments.

 

If Tim begins with- holding tax for the June quarter, he would need to withhold more than $10,000 before he receives any additional payment.

 

Under the previously announced Boosting Cash Flow for Employers measure, Tim’s business would have received a total payment of $2,000. Under the Government’s enhanced Boosting Cash Flow for Employers measure, Tim’s business will receive $20,000. This is an additional $18,000 to support his business.

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