The Federal Budget will be delivered on Tuesday, March 29, at 7.30pm (AEDT) by Treasurer Josh Frydenberg, but an $800 cash flow boost for businesses has already been revealed as one of the measures it will contain.
It’s likely to be one of many sweeteners announced in the Budget, given that there’s a Federal election looming, most likely in May. But of course, there’s no guarantee that anything announced will see the light of day if the government loses the election.
Opposition leader Anthony Albanese will give his reply speech two days after the Federal Budget is delivered. His reply indicates which measures Labor will support if they win the election. Hopefully, the business cash flow boost will be one of them.
What is the proposed business cash flow boost?
The business cash flow boost won’t be a direct payment from the government. Instead, it will be an overhaul of how GST and PAYG (pay as you go) tax payments need to be made.
At the moment, Australian businesses with a turnover of $75,000 or more must pay 10% GST on the sale of their products and services. This will still be the case, however, in the 2022/203 financial year, businesses will now have the flexibility to only pay 2% via their monthly or quarterly business activity statements (BAS). The shortfall can be made up at the end of the financial year.
In addition, this 2% cap will also apply to PAYG installments.
It’s estimated that these measures will boost the cash flow of the average Australian business by $800 during the 2022/2023 financial year.
Longer-term proposals to boost business cash flow
The Budget will also propose measures to enable companies to get automatic PAYG refunds if their financial performance declines. At the moment, over 500,000 companies in Australia pay their expected PAYG tax upfront quarterly, and aren’t entitled to a refund until the end of the tax year if they have overestimated the amount due and overpaid.
The proposed new system will enable them to get refunds faster when they need it to boost their cash flow. It is flagged to be implemented from 1 January 2024.
In addition, the federal government is proposing to share single touch payroll data with State and Territory governments by late 2023. This will save time for more than 170,000 Australian small businesses that have payroll tax obligations with their State or Territory government. It will enable their payroll tax returns to be pre-filled with single touch payroll data, reducing the time and cost involved in preparing payroll tax returns.
The bottom line
It’s important to take advantage of any tax concessions to help you boost your cash flow, especially if your business is still recovering from the effects of COVID-19 lockdowns and restrictions.
Talk to your business accountant or financial adviser to get the latest professional advice on how you can legally minimise your business tax obligations. Always remember that tax minimisation is a smart business strategy. Tax avoidance, on the other hand, is illegal and carries heavy penalties from the Australian Taxation Office.
Earlypay has supported Australian SMEs with fast and flexible alternative funding solutions for more than 20 years. Our invoice finance, business line of credit, asset finance and trade finance products allow business owners to proactively manage their cash flow, freeing up your working capital for investing in growth. To chat about whether our solutions could be right for your business, call us on 1300 760 205. If your business has been impacted by COVID-19, our participation in the SME Recovery Loan Scheme could be of interest.