If you’re a small to medium business or not-for-profit organisation that has been hit by COVID’s financial debris, then one final Government Cash flow boost payment may be your ticket to riding out the storm.
Were you previously rejected a Cash Flow Boost payment, or weren't even aware you might be eligible for such a payment? We explain how you could be one of the thousands of employers, businesses or charities in line to receive an out-of-the-blue boost to your bottom line.
What is the COVID cash flow boost?
When COVID-19 inflicted its first blow to Australia’s economy in March 2020, the federal government established a $35 billion program to help keep small and medium-sized businesses turning over. Largely ignored by the news in favour of spruiking the JobKeeper program, the Cash Flow Boost enabled eligible businesses and charities to receive anywhere from $20,000 to a maximum of $100,000 towards their cash flow.
One of the first major initiatives that the Government deployed in response to the financial impact caused by COVID, the Cash Flow Boost provided support to every employing entity that had turnover under a certain threshold.
The boost was delivered to employers as credits in the activity statement system across two waves. It was equivalent to the amount those companies would have withheld from their employees' salaries (their PAYG withholding). The first wave was applied for the period March to June 2020, and the second was from June to September 2020. These were known as the 'initial cash flow boost' and 'additional cash flow boost'.
Why are we now hearing more about the Cash Flow Boosts?
While the ATO confirmed that the Cash Flow Boost scheme would be immediately cut off once businesses lodged their September 2020 monthly or quarterly activity statements, only now are some businesses receiving an unexpected boost payment.
Both surprising and delighting, the ATO has been issuing letters over the previous month notifying businesses and charities that their previously rejected cash flow boosts would now be paid as the result of a Federal Court ruling on 24 March 2021.
Because of misinterpretation of eligibility criteria at the time, the ATO has now been writing to entities informing them of the good news; their cash flow boosts will be paid! Essentially, the ruling found that the Tax Commissioner did not exercise the discretion authorised to them when assessing applications. As a result, the ATO is now reviewing any application that was rejected for not meeting the 'point-in-time-test'.
Was I eligible for the Cash Flow Boost payments?
We have made it easy to double-check if you are eligible to receive the Cash Flow Boost payments below:
Businesses and NFP organisations in Australia (including sole traders, companies, partnerships or trusts) were eligible to receive the cash flow boost providing the following applied:
- they held an Australian Business Number (ABN) on 12 March 2020 (this is the 'point-in-time-test' which was the subject of the ATO review).
- they were a small or medium business entity (or NFP) whose aggregated annual turnover was less than $50 million.
- they either:
- made payments to employees subject to Pay As You Go withholding (PAYG Withholding) tax (even if that amount was zero). Examples of these include:
- compensation payments
- voluntary withholding from payments to contractors
- director fees
- eligible retirement or termination payments
- salary and wages
- they were required to pay an amount related to alienated personal services income they received (even if this amount was zero)
- on or before 12 March 2020, they lodged at least one of these two things:
- a 2019 tax return that showed they had an amount included in their assessable income related to carrying on a business.
- an activity statement of GST returns for any tax period that started after 1 July 2018 and ended before March 12 2020, which showed that they made a taxable, GST-free input-taxed sale.
Cash Flow Boosts Frequently Asked Questions
Why was there a Federal Ruling?
You can read more on the Full Federal Court (FFC) decision here.
What if I was a new business and couldn't meet the standard eligibility of cash flow boost?
Special eligibility applied under certain circumstances for new businesses that didn't have income through the 2018-19 financial year. Those businesses were still eligible to receive the payment provided they made supplies (or sales) in a tax period that ended before 12 March 2020.
Who is not eligible for the cash flow boost?
Businesses that are not eligible are mostly those with an annual turnover of more than 50 million dollars per year.
The FFC's decision meant that the ATO is revisiting decisions where they considered the outcome of your cash flow boost application might have been different if the court's reasoning applied.
How will I know I'm getting paid the cash flow boost?
If you're eligible for the cash flow boost payment, you can expect a letter from the tax office.
Will I receive the cash flow boosts in my bank?
The cash flow boosts are delivered as credits in your online activity statement system. You had to have lodged your activity statement for the qualifying periods to trigger the payments.
Will I receive both the cash flow boost payments?
To receive the additional boost payment (for the period June 2020 to September 2020), you needed to have been eligible for the initial cash flow boost payment (March 2020 to June 2020).
How was the cash flow boost calculated?
The amount was based on your employees and their PAYG holdings. The credits that applied are equal to 100% of the tax withheld. The maximum amount was $100,000 for both periods.
What was the minimum cash flow boost payment amount?
The minimum payment was $20,000.
What if I run a small business with only a handful of employees?
You may be eligible for a minimum initial credit amount of $10,000 as an initial credit. However, you wouldn't receive any additional cash flow boosts until your business's PAYG withholding balance was over $10,000.
Do I need to be registered for GST to meet the eligibility criteria?
To be eligible under the scheme, you don't need to be registered for GST.
What is the tax treatment of the cash flow boosts?
You'll need to report any cash flow boosts on your business tax return as they qualify as non-assessable non-exempt (NANE) income. Thankfully, eligible businesses are offered additional support by the ATO by refunding extra credits rather than offsetting tax debts with them.
Important to note: If your business has outstanding government debt, your excess cash boost amounts may be used to pay these off.
When will I be refunded my extra credits?
You can expect to be paid your refund of any extra credits on your activity statement within 14 days. A refund is only applicable once the cash flow boost has been used to reduce liabilities arising from the same activity statement that the cash flow boost applies to.
I think I'm getting the cash flow boost payment; what next?
Congratulations, not only were you able to keep your small business or company afloat through our toughest COVID-19 times, but now you're receiving a healthy injection to your cash flow. This presents an ideal opportunity to make your pipe dreams a reality by utilizing the healthy cash balance to secure your next big expansion venture.
What if I don't get a cash flow boost payment?
If you are not one of the fortunate entities which had their ineligibility reversed, or you were not eligible for the cash flow boost scheme in the first place, there are still options to help with boosting cash flow.
Earlypay can help
Earlypay offers a range of financing solutions for businesses that are looking for a much needed cash flow boost.
Invoice Financing (also known as Debtor Financing) helps you turn your unpaid or outstanding customer invoices into a source of readily available funding. You can access an immediate cash injection to increase cash flow and cover new opportunities, or costs such as wages and suppliers.
Sale-Back Asset Finance can help you access the cash tied up in your existing assets. These arrangements are a win-win for businesses who need an injection of cash or to free up their cash flow, but still need the use of the equipment to keep the business ticking along.
Eligible assets include vehicles or manufacturing equipment.
Our Invoice Finance, Equipment Finance and Trade Finance solutions have the flexibility to support businesses of all shapes and sizes. Big or small, early-stage or established - we'd love to help. Contact us today on 1300 760 205 to find out how!