The PAYG cashflow boost calculator was built after the second stimulus package was released. We noticed that the periods of calculation for the first cashflow boost payment, and the second cashflow boost payment overlapped for June. We wanted to visualise what that meant for customers and clients from a payment timing perspective. We read over the treasury notes, ATO website, and the bill to build a model in Excel - before translating it to an online version when Excel didn't cut the mustard!
We figure this will be useful to help others looking to understand the same thing we were, so we released it into the wild for free. Businesses are doing it tough right now, and this is our way of supporting Australian small businesses and the bookkeeping and accounting industry 😊
The goal of the tool is to broadly forecast the cashflow timing. A core assumption here is that your entity is eligible for all the payments. To understand eligibility and your own individual circumstances is a great discussion to have with your tax accountant. We know some great accountants if you want an introduction →
There are two distinct periods for the cash flow boosts. The initial (or first) cashflow boost payments, and the additional (or second) cashflow boost payments.
The first period is the 4 months inclusive of -
The second period is the 4 months inclusive of -
Hold on, you've listed June twice?! 🤯
Sure did! and it's what sent us on this merry adventure to begin with
Our understanding is that the intention of the legislation is to provide a credit to businesses in line with the lodgement of their activity statements in two distinct periods - the 'first cash flow boost payments' and the 'second cashflow boost payments'. The credit amount during the first period is for 100% of the PAYG, with a minimum of 10K and capped at 50K. The second cashflow boost payments - assuming that the business is still eligible is simply a % of the total amount paid during the first period
To help explain the rules we've used to build it - we've provided the source information from the ATO, treasury and the bill itself so that you can make you own call on our workings 🧠
3.46 It is expected that for most entities the approved form for this notification will also be the existing business activity statement or instalment activity statement that contains their GST return. In practice this means that entities will be entitled to payment once they lodge their activity statement for the relevant period.
3.49 Special rules apply if an entity changes from an entity that withholds monthly to an entity that withholds quarterly (or vice versa) during a quarter and outside of a quarter.
3.50 To ensure that there can be no excess or missed payments, for changes within a quarter -• if the period for the entity in the first month they were eligible was a quarter → the payment period for the entity remains the quarter; and
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.ATO - Boosting cashflow for employers
The minimum payment will be applied to the entities' first lodgmentTreasury Fact Sheet - Cash flow assistance for businesses
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.ATO - Boosting cashflow for employers
(3) For the purposes of subsections (1) and (2), treat an entity's withholding period total for a period that is the month of March 2020 as being 3 times the actual amount of that withholding period totalBoosting Cash Flow for Employers Bill
3.39 However, if the payment is for the month of March 2020, the entity is entitled to a payment of an amount equal to 300 per cent of the amount that has been withheldExplanatory Memorandum - referencing Subsection 7(3) of the Cash Flow Boost Bill
3.44 The Cash Flow Boost Bill also provides for second cash flow boost payments of a total amount equal to the full amount of the first cash flow boost payments to which the entity was entitled.Explanatory Memorandum - referencing Section 6 and subsection 7(4) of the Cash Flow Boost Bill
If you lodge quarterly business activity statements you will receive 50% of your total initial cash flow boosts for each activity statement
If you lodge monthly business activity statements you will receive 25% of your total initial cash flow boosts for each activity statementATO - Boosting cashflow for employers
3.47 Payments of the second cash flow boost are made in four equal amounts for the months of June 2020, July 2020, August 2020 and September 2020 for entities that are large or medium withholders for those months
3.48 For all other entities, the second cash flow boost payments are made in two equal amounts for the quarters ending June 2020 and September 2020.Explanatory Memorandum - referencing Subsections 6(2) and (3) of the Cash Flow Boost Bill
This is an interesting one!
The treasury notes, and the ATO documentation don't currently provide an example of what happens when you report less than 10K in the first period, and then in subsequent periods report more than 10K over the first cashflow boost period
We've relied on section 7 of the bill and the explanatory memorandum to provide hints at how to interpret it
Our interpretation is that you get a minimum of 10K, otherwise you get 100% of the PAYG, and the total amount for the first cashflow boost period is the lessor of 50K or 100% of the PAYG across the entire period. In the case where you have lodged less than the 10K total, you won't receive more than 10K until the total amount withheld over the initial period exceeds 10K 🤯
You will not be eligible to receive any more cash flow boosts until your PAYG withholding exceeds $10,000 over the relevant periodsATO
3.42 As a result, all eligible entities will receive a minimum total first cash flow boost payment of $10,000, with this amount provided in the first period they are eligible. No further amount will be paid to an entity until, but for the minimum payment of $10,000, the amount the entity is entitled to receive exceeds the minimum payment.Explanatory Memorandum
It's definitely a case of do your own research - by linking the source bills we hope that people can confirm our workings or challenge them
No. We're BAS agents. We've simply read the legislation and put together a model that best reflects our interpretation of its intent and purpose to help us talk to our clients. Again it's important to understand that without concrete examples of how this will play out (or confirmation from the ATO on the use cases) this model is to be taken with a grain of salt.
We've provided the basis of our calcs for you here, do your own research 🧐