Legislation has been enacted to clarify that the cash flow boost is available to eligible small and medium businesses that are required to pay an amount to the ATO because they receive an alienated personal services payment. Broadly, this is a payment received by a personal services entity (eg a company or trust) that is ultimately treated as forming part of the income of an individual under the personal services income rules and has not been promptly paid to the individual as salary or wages.

Payment of an amount to the ATO in these circumstances gives rise to an entitlement to the cash flow boost in the same way as payment to the ATO of an amount withheld from an employee’s salary or wages.

As discussed in the April 2020 edition of TaxWise News, the cash flow boost allows eligible small and medium businesses to receive up to a maximum of $100,000 in total in cash flow boost amounts by lodging their activity statements up to the month or quarter of September 2020.

Cash flow boosts are tax-free and not subject to GST. However, this can give rise to later tax consequences when the tax-free amounts are paid out of companies and unit trusts. This is complicated so talk to your tax adviser.

Read our complete September 2020 Taxwise Business Newsletter here