The Tax-Free Payments to Employers

The tax-free payments to employers, officially called the Boosting Cash Flow for Employers measure, are part of the Federal Government‘s economic response to COVID-19. They are designed to support small and medium businesses that employ staff and to improve business confidence. The measure also supports not-for-profits, including charities, at a time when they are facing increased demand for services.

On 12 March 2020, the Government announced the cash flow grant for employers measure and initially provided up to $25,000 with a minimum payment of $2,000 for eligible businesses. Small and medium sized business entities that employ workers with aggregated annual turnover less than $50 million are eligible.

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

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

An additional payment is also being introduced in the July to October 2020 period. Eligible entities will receive an additional payment equal to the total of all of the cash flow grant 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. The cash flow grant for employers is tax-free payment with no new forms required and automatically calculated by the ATO

This additional payment continues to support businesses over a longer period to help them maintain staff, improve confidence, continue operating and at the same time stimulating the economy. It’s crucial for the government to help small businesses because they are the backbone of the economy.

Who is eligible and what is the timing?

SME business entities and NFPs that employ workers, with aggregated annual turnover less than $50 million will be eligible with the eligibility generally be based on prior year turnover.

• The payment will be an automatic credit in the activity statement system from 28 April 2020 upon employers lodging eligible upcoming activity statements.
• Eligible employers that withhold tax 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 except 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.

The cash flow grant for employers payment will be applied to a limited number of activity statement lodgements. The ATO will send the payment as a credit to the entity upon lodgement of their activity statements. The ATO will send the refund within 14 days if the entity is entitled to a refund.

Type of lodger	Eligible period	Lodgement 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

If you lodged quarterly, you will be eligible to receive the payment for the quarters ending March and June 2020.

If you lodged monthly, you will be eligible to receive the payment for the March, April, May and June 2020 lodgements. To provide a similar treatment to quarterly lodgers, the payment for monthly lodgers will be calculated at three times the rate (which is 300 per cent) in the March 2020 activity statement with the minimum payment will be applied to the entities’ first lodgement.

Additional payment eligibility and timing

Your entity must remain active in order to qualify for the additional payment from the Government.

If you lodged activity statements monthly, 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 cash flow grant for employers payment following the lodgement of their June, July, August and September 2020 activity statements up to a total of $50,000.

If you lodged activity statements quarterly, the additional payments will be sent as an automatic credit in the activity statement system. This will be equal to half of their total initial cash flow grant for employers payment following the lodgement of their June and September 2020 activity statements up to a total of $50,000.

The additional payment will be applied to a limited number of activity statement lodgements. The ATO will send the payment as a credit to the entity upon lodgement of their activity statements. The ATO will send the refund within 14 days if the entity is entitled to a refund.

Type of lodger	Eligible period	Lodgement 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 22 September 2020 21 October 2020

If you lodged quarterly, you 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 cash flow grant for employers payment with up to a total of $50,000.

If you lodged monthly, you will be eligible to receive the additional payment for the June, July, August and September 2020 lodgements. Each additional payment will be equal to a quarter of their total initial cash flow grant for Employers payment with up to a total of $50,000.

Examples of Tax-Free Payment to Employers

Example 1 – John’s Removalist Business

John owns and runs a removalist business in Western Australia and employs 10 workers on average full-time weekly earnings, who each earn $90,750 per year. John reports withholding of $15,600 for his employees on each of his monthly Business Activity Statements (BAS).

Under the Government’s measure, John will be eligible to obtain the payment on lodgement of his BAS. John’s business receives:

• A credit of $46,800 for the March period
• A credit of $3,200 for the April period, before he reaches the $50,000 cap.
• No payment for the May period, as he has now reached the $50,000 cap.
• An additional payment of $12,500 for the June, July, August and September period, respectively

Under the Government’s enhanced cash flow grant for employers measure, John’s business will receive $100,000.

Example 2 – Tony’s Barber Shop

Tony owns a barber shop on the Surfers Paradise. He employs 10 employees, with average salary of $45,000 per year. Tony reports withholding of $8,601 for his employees in each of his monthly BAS. Under the measure, Tony will be eligible to receive the payments on lodgement of his relevant BAS.

Tony’s business will receive:

• A credit of $25,803 for the March period
• A credit of $8,601 for the April and May period, respectively
• A credit of $6,995 for the June period, before he reaches the $50,000 cap. Tony will also receive an additional payment of $12,500 for the June, July, August and September period, respectively

Under the Government’s enhanced cash flow grant for employers measure, Tony’s business will receive $100,000.

Example 3 – Todd’s Courier Run

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

Under the Government’s measure, Todd will be eligible to receive the payment on lodgement of his BAS.

Todd’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 and September quarter, respectively

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

Under the Government’s enhanced cash flow grant for employers measure, Todd’s business will receive $20,000.

If you know anyone in your circle who need any assistance during these times, please reach out to them because “We can’t help everyone, but everyone can help someone”and “Together We Can Make A Difference”

Need Help?

If you are unsure whether your business or charity qualifies for the cash flow grant for employers, or how much you will receive from each lodgement, Pitt Martin Group can help you review and document your withholding, weigh up eligibility, reporting periods and additional payments, and prepare accurate statements that maximise your entitlement.

As Sydney tax accountants, we assist employers with BAS lodgement, cash flow grants and practical compliance advice.

Pitt Martin Group is a firm of Chartered Accountants, providing services including taxation, accounting, business consulting, self-managed superannuation funds, auditing and mortgage & finance. We spend hundreds of hours each year on training and researching new tax laws to ensure our clients can maximize legitimate tax benefit. Our contact information are phone +61292213345 or email info@pittmartingroup.com.au. Pitt Martin Group, Sydney tax accountants, is located in the convenient transportation hub of Sydney’s central business district. Our honours include the 2018 CPA NSW President’s Award for Excellence, the 2020 Australian Small Business Champion Award Finalist, the 2021 Australia’s well-known media ‘Accountants Daily’ the Accounting Firm of the Year Award Finalist and the 2022 Start-up Firm of the Year Award Finalist, and the 2023 Hong Kong-Australia Business Association Business Award Finalist.

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This content is for reference only and does not constitute advice on any individual or group’s specific situation. Any individual or group should take action only after consulting with professionals. Due to the timeliness of tax laws, we have endeavoured to provide timely and accurate information at the time of publication, but cannot guarantee that the content stated will remain applicable in the future. Please indicate the source when forwarding this content.