Small and medium business employers to receive cash flow relief
Businesses with turnover under $50m will benefit from a cash flow boost over a six month period as part of a Government stimulus package. This package, designed to reduce the economic effects of a pandemic-based downturn, will encourage employers to keep staff by providing refunds of PAYG tax withheld.
Eligibility criteria
Business with turnover under $50m
Employ staff where PAYG tax is withheld from gross payments
Lodge Activity Statements during the period 1 January 2020 to 30 June 2020
Form of cash flow boost
The government announcement is to help businesses cover the cost of employee wages. The stimulus package does this by “covering” up to 50% of PAYG withheld over the six month period.
The minimum amount an employer would be able to receive is $2,000, to a maximum of $25,000. Presumably, this would mean a refund credit would apply in the taxpayer’s ATO Running Balance Account should a March or June quarterly PAYG tax withheld be above $2,000.
Timing of Activity Statement “credits”
On lodgement on the March and June quarter Business Activity Statements, the ATO will automatically apply a credit to the Running Balance Account in the amount of the PAYG tax withheld reduction (ie. 50% in most cases).
For employers with monthly Activity Statement lodgements, the March 2020 credit will be calculated at three times the rate, to cover for the January and February months.
The ATO has advised that, where these credits end up with the business having a net refundable amount, these refunds will be paid within 14 days to a nominated bank account.
Example
Your client runs a business which employs staff and lodges monthly activity statements. All staff are on salary, and a monthly withholding of $15,000 is declared each activity statement.
On the March 2020 activity statement, the $15,000 is claimed in W2. The ATO will automatically apply a credit in the Running Balance Account of $22,500 ($15,000 × 50% × 3 times).
On the April 2020 activity statement, the $15,000 is claimed in W2. The ATO will automatically apply a credit of $2,500, being the balance of the amount receivable under the announcement. (ie $15,000 × 50% = $7,500. $25,000 – $22,500 (already credited) = $2,500)
On the May and June 2020 activity statements, the $15,000 is claimed each month. There will be no credit to the Running Balance Account in these months as your client has already “received” the maximum allowable benefit.
Small business employers of apprentices to get the stimulus package
Small businesses who employ less than 20 people, will receive up to $7,000 per quarter for three quarters to keep their apprentices. This payment is a stimulus payment as a result of an expected national economic downturn in the first half of 2020.
Eligible small business employers, with less than 20 employees on their payroll, can apply for a wage subsidy of 50 per cent of their apprentice’s wage, up to $7,000 per quarter per eligible apprentice. The subsidy will be in effect for up to 9 months, from 1 January 2020 to 30 September 2020. To be eligible, the apprentice is required to be on the employer’s books on 1 March 2020.
This new subsidy will not affect the existing Australian Apprenticeships Incentives Program in place and will operate on top of the existing program. The existing program gives an eligible employer between $750 and $4,000 for the hiring of an apprentice.
The eligibility details are being finalised by the Government and will be made available through the Australian Apprenticeship Support Network (AASN) providers.
It is expected that the subsidy payments will be received via the Australian Apprentices Incentives Program which currently provides cash payments to employers on apprentices meeting certain targets. Payments will be expected to be processed via the completion of claim SmartForms issued by the Government through an AASN provider.
Employers can register for the subsidy from 31 March 2020, and final claims of payment must be lodged by 31 December 2020.
Suggested Actions
Accountants with small business clients that have previously employed or apprentices or trainees, should be in a position to inform their clients on this subsidy offered by the Government. While the details of the eligibility for the subsidy has yet been finalised, the subsidy will most probably be made available to small businesses with less than 20 employees.
Clients affected by this subsidy will be keen to know how they can access the full $21,000 from the Government for each apprentice. The accountant should make it clear that the subsidy is for 50 per cent of apprentice wages, capping at $21,000 for the nine months it is in effect.
