By now you would have heard about the government stimulus package that has been released in response to the coronavirus situation. Although there are potentially many parts of this package that may affect you in some way, we wanted to highlight some points that directly relate to the cashflow for employer’s boost. This is an initiative that will provide up to $25,000 in tax free payments to eligible employers.
Details released for this package so far:
- The amount you are eligible for is calculated as 50% of your PAYG withholding declared on your March BAS
- There will be an adjustment for monthly IAS lodgers to increase their first payment (because the March BAS will only include one month of PAYG)
- The scheme will also apply to the June 2020 quarter. This means, if you do not receive the full benefit after the March quarter, you will be eligible for an additional payment after lodging the June 2020 quarter (and the April and May monthly IAS)
- If the PAYG that you withhold during this time is less than $4,000, you will still be eligible for a minimum credit of $2,000 if you are an employer (for example if you have no staff PAYG you will still get a $2,000 credit)
What you need to consider
Where you are already paying staff wages, there will be nothing additional you need to do to qualify for this benefit. The other situation that needs to be considered here though relates to personal wages for owners and directors. It would be prudent to consider whether you are able to allocate owner’s and director’s wages on the March BAS. Often, these type of allocations are declared at year end, or even by trust distribution, rather than by wages. If you were to decide to allocate additional wages in the March quarter, it is important to also understand that the correct amount of superannuation would need to be remitted by around mid April as well. The required contribution is 9.5% of any wages declared, and the ATO has a high compliance focus on ensuring all contributions are remitted correctly. Significant penalties can apply for non-compliance with these super requirements. Any owner’s wages processed in these quarters should also have the correct amount of PAYG withheld to ensure compliance on a PAYG withholding level as well.
While we are waiting for the quarter to come to an end, we would like you to take the time now to consider how much you might be able to pay for your personal superannuation contribution before mid April. Before making any superannuation payment though, please get in contact with us to determine the most appropriate way for this payment to be processed. For example, there are times when a superannuation payment will be treated as a personal member contribution and times when it will be treated as an employer contribution. These are 2 very different things and a member contribution cannot be used to meet the superannuation requirements for a wage payment made. It may also be the case that how you have remitted superannuation in the past could be different to how it needs to be remitted now – to enable compliance with this employer’s boost package, as well as with superannuation legislation and Single Touch Payroll reporting.
We are here to help
We anticipate that many business will be keen to get their March BAS lodged earlier rather than later, so please bear this in mind when you are asking us for advice or forwarding your information to us. We will work as quickly as we can to get the data processed, but we do know that no credits will be applied or refunded by the ATO earlier than April 28, 2020. If the credit creates a refund situation for your business, the ATO expects to pay the refund within 14 days of lodgement (but still no earlier than April 28).
There is some additional information about the package on the ATO website here: https://www.ato.gov.au/General/New-legislation/The-Australian-Government-s-Economic-Response-to-Coronavirus/. This is obviously an evolving situation with legislation not yet finalised, so some of the technical details are not necessarily available at the moment, and will be released in due course.
Tim, Warren and Josh.