Cash flow boost payments – the second wave

Cash flow boost payments – phase 1

The first phase of the Cash Flow Boost payments came in a variety of forms:

• a Cash Boost amount equal to three times the PAYG Withholding amount lodged for the month of March 2020, up to a total of $50,000 for monthly activity statement lodgers.
• a Cash Boost amount equal to the PAYG Withholding amount lodged for the quarter of March 2020 for quarterly activity statement lodgers, again up to a total of $50,000; or
• a minimum $10,000 cash payment for eligible businesses with PAYG Withholding liabilities of less than $10,000.

Cash flow boost payments – phase 2

The second round of Cash Boost payments will prove to be beneficial as businesses not only receive payments from the second phase, but also potentially ongoing payments in connection with the first phase Cash Flow Boost if the $50,000 cap has not been met.

In the June quarter, businesses will still be eligible for further first phase payments, equal to their PAYG Withholding liability for June, provided that this amount, combined with the amount received in March, April and May, does not exceed either:

• their $50,000 cap in total between March and June.
• the total amount for March and June PAYG Withholding in aggregate (applicable to businesses that received the minimum $10,000 Cash Boost in March).

Example 1:

Business A has PAYG Withholding of $7,500 in March and $8,000 in June. It will receive a total first phase Cash Flow Boost payment of $15,500, being $10,000 in March (minimum payment) and $5,500 in June.

Example 2:

Business B has PAYG Withholding of $9,000 in March, April, May, and June. It will receive a total first phase Cash Flow Boost payment of $50,000 (maximum cap), being $27,000 in March, $9,000 in April, $9,000 in May and $5,000 in June.

In the second phase, businesses that received the first phase payment, will receive further payments equal to the those amounts they received in the first phase.  The second phase payments are also capped at a maximum of $50,000, making the maximum total Cash Boost payment $100,000.

For monthly PAYG Withholding lodgers this will be 25% of the phase one payments paid, offset against the lodgements for the months of June, July, August, and September in equal amounts.  For quarterly PAYG Withholders their further payments equal to 50% of their first phase amount in their June 2020 Quarter BAS, and another 50% in their September 2020 Quarter BAS.

Example 1:

Returning to the Example 1, the second phase payment would be $15,500, which is split over the June and September quarters, with $7,750 payable in each quarter. This means that in the June quarter, the business would receive a first phase amount of $5,500, plus a second phase amount of $7,750, totalling $13,250. The balance of $7,750 would be credited in the September quarter BAS. Total Cash Flow Boost payments from March to September will total $31,000.

Example 2:

Similarly, in Example 2, the second phase payment would be $50,000, which is split over the June, July, August and September monthly, with $12,500 receivable in each month. This means that in the June month, the business would receive a first phase amount of $5,000, plus a second phase amount of $12,500 totalling $17,500.

Total Cash Flow Boost payments from March to September would be $100,000.

Businesses will continue to receive second phase payments even if there is reduced or no PAYG Withholding in later activity statements. To date, the ATO has provided no further restrictions or integrity provisions to prevent a second phase payment from being received in these circumstances.

Conversely, some businesses may not have yet received any Cash Flow Boost payments in connection with their March BAS lodgements due to the ATO having information that leads them to believe the entity is ineligible.  For example, the business not meeting the aggregated turnover requirement, or due to other outstanding lodgement obligations. If you believe you are eligible and have not received any Cash Flow Boost Credits for March, we urge you to contact the ATO or your tax adviser to clarify and resolve the matter to ensure that your business receives its entitlement to both the first phase and second phase payments.