Please find below an updated summary of the measures.
You need to meet ALL of the following criteria:
Active eligible employer
This is a new requirement that could be critical. Our concern is that this requirement may limit the stimulus payment to those entities that were registered for PAYG withholding tax as at 12 March 2020. We will need to wait on the legislation to understand if this requirement prevents entities that register for PAYG withholding tax now from qualifying for a stimulus payment.
Continue to be active
We will need to see the legislation to understand how the term “active” is defined and determine if this requirement creates any eligibility issues.
There is no application process. Payments will be administered by the Australian Taxation Office and will be based on the lodgement of activity statements.
It is important to understand that payments will be made by the ATO as a credit to the activity statement account. Payments will not be paid in cash directly to eligible businesses.
The maximum payment you can receive is $100,000; the minimum payment is $20,000.
It is worth noting that the minimum payment has increased from $2,000 to $20,000.
The stimulus payment is split into two parts:
The calculation will depend on whether the employer reports monthly or quarterly.
Quarterly reporting
If you report PAYG withholding tax quarterly, you will receive the following payments:
(A) Initial Payment
The payments above are subject to a COMBINED cap of $50,000. This means if you receive a $40,000 payment for the March activity statement the maximum payment you can receive for the June activity statement is $10,000.
Minimum payment: if you pay wages but are not required to withhold tax you will receive a stimulus payment of $10,000. Note, the wages would need to be reported in either the March 20 or June 20 activity statement.
(B) Additional Payment
This means if the Initial Payment total $36,000, the Additional Payments would be $18,000 upon lodgement of the June 20 activity statement and $18,000 upon lodgement of the September 20 activity statement.
Monthly reporting
If you report PAYG withholding tax monthly, you will receive the following payments:
(A) Initial Payment:
The payments above are subject to a COMBINED cap of $50,000. This means if you receive:
Minimum payment: if you pay wages but are not required to withhold tax you will receive a stimulus payment of $10,000. Note, the wages would need to be reported in either the March 20, April 20, May 20 or June 20 activity statement.
(B) Additional Payment
This means if the Initial Payment total $48,000, the Additional Payments would be $12,000 for each of the June 20, July 20, August 20 and September 20 activity statement lodgements.
Points to note
We draw your attention to the payment calculation for the March 20 activity statement; this is calculated as 300% of the PAYG withholding tax reported. This is to provide a similar treatment to quarterly lodgers. Interestingly this could lead to a scenario where the payment made by the ATO for March exceeds the PAYG withholding tax reported. For example, if the PAYG withholding tax reported for March was $15,008 the ATO payment would be: $15,008 X 300% = $45,024.
The amount of the Additional Payment is based entirely on the PAYG tax reported in the March 20 to June 20 activity statements. While there is an obligation to lodge activity statements for the July 20 to September 20 period there does not appear to be any minimum requirements in relation to the amount of PAYG withholding tax to be reported in this period. We will need to wait on the legislation for more details.
If you are currently employing workers and your PAYG withholding tax is at least $25,000 per quarter (for quarterly reporters) or $8,333 per month (for monthly reporters) you should receive the maximum stimulus payment of $100,000 without doing anything.
However, we know a lot of small businesses do not fall into this category. It is common for small businesses to pay working directors/owners a relatively small salary (or no salary) and distribute profits as dividends and trust distributions. While we would generally support this type of strategy it may result in a reduced stimulus payment or even no stimulus payment.
We have outlined our recommendations below for maximising your stimulus payment.
ALL CLIENTS We strongly recommend that any outstanding taxation obligations (including activity statements, income tax returns, FBT returns etc) be finalised as soon as possible. It is not uncommon for the ATO to delay payments until outstanding taxation obligations are met. If you need any assistance in meeting your outstanding tax obligations, please do not hesitate to contact us.
What is the definition of a business?
The definition of a business has been the subject of much debate in recent years. Until we see the legislation for the stimulus package we do not know how broadly or narrowly the term business will be defined. Legislation to give effect to these measures will be introduced into Parliament, which resumes on 23 March 2020. It is expected that it will be passed urgently.
Your Situation | Our Recommendation |
---|---|
You are 100% certain that you will receive the maximum stimulus payment based on your expected PAYG withholding tax obligations. | Lodge activity statements as normal; no action required. |
You are employing staff but you are not sure if you will receive the maximum stimulus payment based on your expected PAYG withholding tax obligations. | Contact us before lodging your next activity statement. |
You are registered for PAYG withholding tax but report nil wages in your activity statements. | Contact us before lodging your next activity statement. |
You are running a business but you are NOT registered for PAYG withholding tax. | Contact us immediately. You may need to register for PAYG withholding tax before 31 March. |
You have an ABN but you are not sure if you are running a business e.g. you run a company that holds investments | Contact us immediately. You may need to register for PAYG withholding tax before 31 March. (See discussion below on the definition of a business). |
You do not have an ABN. | It is unlikely you are running a business. However, if you are not sure contact us immediately to discuss. |
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