Earlier this week, the ATO noted that entities that lodged their activity statement before 28 April would see their cash-flow boost amount used to offset tax debts from previous periods, while those who lodged on 28 April would not see those credits used to pay outstanding liabilities.
The ATO has now withdrawn that guidance on the importance of timing the lodgement, and its relevant example.
Instead, it will no longer discriminate based on when the BAS is lodged.
Entities will now see the cash-flow boost applied to reduce liabilities arising from the same activity statement, but any excess credits will not be used to offset outstanding liabilities from previous months.
While the cash-flow boost credits were due to flow from 28 April, it is understood that the ATO has now begun issuing the payments, hence a change in its stance.
Speaking to Accountants Daily, Tax & Super Australia senior tax counsel John Jeffreys said the ATO’s clarification meant that the timing of a BAS lodgement would now not have any impact on the cash-flow boost.
“It’s good that the Tax Office has now clarified the point,” Mr Jeffreys said.
“We appreciate that the ATO is working hard with very complex matters and we can now proceed on the basis to lodge the activity statements as soon as we’d like.
“Although not specifically said, we take this to mean that if a person had a pre-existing debt with the ATO before lodging their March activity statement, the credit of the cash-flow boost will not be set off against that pre-existing debt. In practice, we understand that this is what is occurring.”
The ATO’s current example:
When Sarah lodges her activity statement for the month of March 2020, she owes:
- PAYG withholding of $15,008
- GST of $9,704
She also owes $4,500 from her February 2020 activity statement.
Sarah’s initial cash-flow boost for the March activity statement is $45,024. This is used to pay the March activity statement liabilities of $24,712 ($15,008 + $9,704). She will be left with a remaining cash-flow boost of $20,312.
To support Sarah’s business during this period, the cash-flow boost of $20,312 will not be used to pay her outstanding liability of $4,500 from the February activity statement. Instead it will be paid to Sarah as a refund.
View the ATO’s guidance here.
Jotham Lian is the editor of Accountants Daily, the leading source of breaking news, analysis and insight for Australian accounting professionals.
Before joining the team in 2017, Jotham wrote for a range of national mastheads including the Sydney Morning Herald, and Channel NewsAsia.