Cash

The “Boosting Cash Flow for Employers” payment (PAYGW Boost Credit)

As part of the economic stimulus triggered by the Corona Virus pandemic, the Federal Government has introduced the “Boosting Cash flow for Employers” measure or as we like to call it, the PAYGW Boost Credit. This measure promises to “refund” the PAYG withholding reported on the BAS or IAS by employers back into their integrated client accounts (ICA) as an offset against any existing BAS/IAS debt. To be clear, this is not a supply of cash to employers into their banks. This is simply crediting PAYGW back into the ICA to effectively reduce BAS/IAS debt. The only time an employer will see any cash is when a refund is created because the PAYGW credit is more than the whole activity statement debt. So who gets these payments, how much do they get and how do they get it? Read on to find out!


WHO IS ELIGIBLE?

Businesses will be eligible for this stimulus measure if they:

  • Held an ABN on 12 March 2020 and continue to be active
  • Are a small or medium business including NFP, sole trader, partnership, company and trust entities.
  • Have an aggregated turnover under $50M
  • Have made payments from which they have been required to withhold (even if this a zero amount). Such payments may include salary and wages, director’s fees, eligible termination payments, compensation payments and withholding from contractor fees.
  • Have made GST taxable, GST free or input taxed sales in a previous tax period since 1 July 2018 and lodged a relevant BAS on or before 12 March 2020.

HOW MUCH IS PAID?

PAYG withholding amounts will be credited back to the integrated client account (ICA) of between $20K and $50K. These credits are not income and as such will not be taxed. The do not have to be repaid ever. The good thing is that the PAYG withholding you report on your BAS will still be tax deductible. Note, if you have a tax debt on your ICA, the credit boost amount will simply pay down that debt.


HOW IS IT PAID?

These credits will be applied in two stages to integrated client accounts after 28th April 2020 and after the March 2020 quarter or monthly BAS is lodged. You do not have to apply for this measure, AND you do not receive any actual cash – this is credit only, not cash paid to your bank. The second stage credit will be applied in quarter 1 of 2020-21.


HOW DO THE PAYMENTS WORK?

Put simply, there are 2 payment stages for this measure. The first stage is a payment of up to $50K based on the amount of PAYGW reported on the March 2020 BAS. Examples below:

Quarterly Lodgers

If your March 2020 BAS shows a PAYGW amount of $12,000, this amount will be credited back to your ICA. In your June 2020 BAS, if a $14,000 PAYGW is reported, then this will also be sent back to the ICA. So far, a total of $26,000 has been credited. This is the first stage amount. The second stage amount will be the same as the first one i.e. $26,000 and will be credited to your ICA split evenly across June to September 2020.

Monthly Lodgers

If your March 2020 BAS shows a PAYGW amount of $12,000, this amount is multiplied by 3 (to take up amounts for January and February 2020) to give you a credit of $36,000. April, May and June 2020 BAS’s will continue to be lodged which may or may not total more than $50K. For this example, let’s say April was $10,000, May was $8,000 and June was $6,000. This will be a total PAYGW of $60,000. As the first stage payable can be no more than $50K, then $50K is all that will be credited to your ICA. The second stage payment will also be $50K.

What if my PAYGW is less than $10K or zero in my March 2020 BAS?

In this case, you will be credited $10K in the first stage of credits and another $10K in the second stage for a total of $20K.

PAYGW Boost Credit Calculator

Here is a great calculator to assist you to work out how much your PAYGW boost credit might be: https://digit.business/payg-cashflow-boost-calculator-advanced


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Don’t Forget Those Cash Receipts!

Do you buy business items with your own non-business funds i.e. your cash? Do you include these purchases in your accounts? Surprisingly, some of our clients don’t think that they can or should include cash receipts in their books. This is not the case!

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The GST treatment of a Hire Purchase agreement

hire-purchase-agreement-10100269

Last week’s blog was all about Chattel Mortgages, what they are and how to account for them in your general ledger. This week I am going to cover Hire Purchase agreements and especially how GST relates to them. A Hire Purchase agreement is a financial contract that allows the buyer to pay for goods over a certain period of time rather than paying the full amount upfront. Hire purchase agreements allow the buyer to:

  • Pay for the goods via instalments over an agreed amount of time
  • Use the goods while still paying for them
  • Take ownership of the goods once the final payment is received by the lender

Regarding GST and Hire purchase agreements, there are differences in the way in which it is accounted for depending on the date the Hire Purchase was established.

Before 1 July 2012

Hire Purchase agreements are composed of both principal and interest components. Before 1 July 2012, if the lender did not disclose the interest component amount to the buyer, then GST was applied to the total cost of the agreement. If, however, the lender did disclose the interest figure, then GST was only applied to the principle component. In terms of accounting for GST, how much and when you can claim is dependent on if you account for GST on a cash or accrual basis. If you account via the accrual basis, then you may claim the full amount of GST charged on the agreement when you either make the first payment or receive a tax invoice. Those who account via the cash method may only claim the GST paid on the principal component of each instalment in the period in which it is paid.

After 1 July 2012

After this date, all components of a new Hire Purchase agreement, including the principal, interest and any other fees and charges are taxable i.e. include GST, whether or not the lender discloses the interest component. All buyers, regardless of whether they account for GST via the accrual or cash method, can claim the full amount of the GST charged either when the first payment is made or a tax invoice is received.

Here are some examples provided by the ATO regarding how to account for GST for a Hire Purchase agreement:

Hire Purchase agreement entered into BEFORE 1 July 2012

Hire Purchase agreement entered into AFTER 1 July 2012

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