There has finally been some clarity put forward by the ATO so I have included a few points below. When we lodge your quarterly BAS for March 2020, June 2020 and September 2020 we can review everything in more detail.
The ATO will provide tax-free cash flow boosts of between $20,000 and $100,000 to eligible businesses, delivered through credits in the activity statement system, when eligible businesses lodge their activity statements. If you are eligible, you do not need to separately apply and upon lodgement of your activity statement, your first amount will automatically be credited to your account but no earlier than 28 April 2020.
Eligible entities who received initial cash flow boosts will receive additional cash flow boosts, for the periods June to September 2020, equal to the total amount of initial cash flow boosts received. This will be delivered in either two or four instalments depending on your reporting period.
Eligible businesses must have held an ABN on 12 March 2020 and lodge your activity statement to receive the credit.
Eligible payments include: salary and wages, director fees, voluntary withholding from payments to contractors etc.
In addition, you must also have either:
- Derived business income in the 2018–19 income year and lodged your 2019 tax return on or before 12 March 2020.
- Made GST taxable, GST-free or input-taxed sales in a previous tax period (since 1 July 2018) and lodged the relevant activity statement on or before 12 March 2020.
- However, you may still be eligible where you don’t have any income tax assessment for prior year.
Initial cash flow boost
Eligible businesses that withhold tax on their employees’ salary and wages will receive a credit equal to 100% of the amount withheld, up to a maximum of $50,000. The minimum credit will be $10,000, even if the amount required to be withheld is zero. However you will not be eligible to receive any more cash flow boosts until your PAYG withholding exceeds $10,000 over the relevant periods.
Monthly lodgers will receive a credit that is calculated at three times the rate (300 per cent) in the March 2020 activity statement, to align with quarterly lodgers.
The total of all initial cash flow boosts across all of the relevant periods cannot exceed the maximum limit of $50,000. This is a little vague but it looks like the ATO will do a second payment up to $50,000 which will then equal the total of $100,000 overall (as above).
- If you pay a salary of $1,000 for the March 2020 Quarter with $0 withholding on the BAS. The ATO will still provide a credit to you on $10,000 as the minimum payment.
- If you pay a salary of $160,000 for the March 2020 Quarter with $50,000 withholding on the BAS. The ATO will provide a credit to you on $50,000 as the maximum payment. There would be no additional tax payable when you lodge your personal tax return with a salary of $160,000 as the company would have withheld the $50,000 PAYG. You can therefore take money out of the company tax free.
- Superannuation would still be payable on all salaries made.
- Business still need to report the salaries through STP.
- Paying a salary can be more tax effective then paying a dividend (to get the credit).
- If the salary generate a tax loss, that loss would carry forward to FY2020 which would also be beneficial for the 2020 tax returns.
There is further information here: https://www.ato.gov.au/Business/Business-activity-statements-(BAS)/In-detail/Boosting-cash-flow-for-employers/
In the meantime please let me know if you have any questions.