House of Representatives

Explanatory Memorandum

(Circulated by authority of the Minister for Housing and Assistant Treasurer, the Hon. Michael Sukkar MP)

Chapter 6 Cash flow boost

Outline of chapter

6.1 Schedule 6 to the Bill makes minor amendments to the Boosting Cash Flow for Employers (Coronavirus Economic Response Package) Act 2020 to clarify that the payments for which an entity can receive a cash flow boost payment include payments for which an amount must be paid to the Commissioner under the special obligations applying to certain personal service income payments under Division 13 in Schedule 1 to the TAA 1953.

Context of amendments

6.2 The cash flow boost payments under the Boosting Cash Flow for Employers (Coronavirus Economic Response Package) Act 2020 are made to employers to provide support by boosting their cash flow during periods from March 2020 to September 2020.

6.3 There are two rounds of cash flow boost payments, paid in relation to different periods.

6.4 Employers are eligible to receive the first cash flow boost for periods from March 2020 to June 2020 if, among other things, they made a payment during the period that was subject to withholding under Subdivisions 12-B, 12-C or 12-D in Schedule 1 to the TAA 1953 (broadly, a payment of wages or salary or equivalent remuneration). The amount of the first cash flow boost is then determined based in part on the amount withheld from these payments.

6.5 The second kind of cash flow boost payment is then payable for periods from June 2020 to September 2020 to entities that received the first cash flow boost, of an amount equal to the amount of the first cash flow boost the entity received. It is payable in either two or four instalments depending on the entity's reporting cycle.

6.6 These payments that entitle an entity to the first cash flow boost largely correspond with the payments for which the ATO requires that any amount withheld from the payment must be reported on a specified field on the activity statement for the relevant period.

6.7 However, eligibility and the amount of the cash flow boost is not linked to amounts of tax that must be paid to the Commissioner on receipt of alienated personal services payments under Division 13 in Schedule 1 to the TAA 1953 (broadly, payments received by a personal services entity that are ultimately treated as forming part of the income of an individual and have not been promptly paid to the individual as wages or salary). Payments under Division 13 are unusual because the liability to pay amounts to the Commissioner is not linked to the entity making a payment from which an amount is withheld, but instead arises from the receipt of personal services income that will ultimately be included in the income of the relevant individual.

6.8 The amount of tax required to be paid to the Commissioner for payments made under Division 13 in Schedule 1 to the TAA 1953 must be reported to the ATO in the same field on the activity statement as amounts withheld under Subdivisions 12-B, 12-C or 12-D in Schedule 1 to the TAA 1953.

Summary of new law

6.9 Schedule 6 amends the Boosting Cash Flow for Employers (Coronavirus Economic Response Package) Act 2020 to provide that amounts that an entity must pay the Commissioner under Division 13 in Schedule 1 to the TAA 1953 are to be treated in the same way as amounts subject to withholding under Subdivisions 12-B, 12-C or 12-D in Schedule 1 to the TAA 1953 for the purpose of determining entitlement to and the amount of the cash flow boost.

Comparison of key features of new law and current law

Detailed explanation of new law

6.10 Schedule 6 amends the Boosting Cash Flow for Employers (Coronavirus Economic Response Package) Act 2020 to change how payments required to be made under Division 13 in Schedule 1 to the TAA 1953 as a result of the receipt of alienated personal services income payments in a period affect:

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the entitlement of an entity to the first cash flow boost for that period; and

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the amount of any payment of the first cash flow boost for the period.

6.11 The effect of these amendments is to treat amounts required to be paid to the Commissioner under the special rules for alienated personal services income payments in the same way as amounts withheld under Subdivisions 12-B, 12-C or 12-D in Schedule 1 to the TAA 1953. This is consistent with the overall purpose of Division 13, which results in arrangements applying to personal services income that has not been promptly paid as salary and wages in a way that is equivalent to the treatment of salary and wages under Division 12.

Entitlement

6.12 Under the prior law, paragraphs 5(1)(a) and (b) of the Boosting Cash Flow for Employers (Coronavirus Economic Response Package) Act 2020 provide that an entity must make a payment from which the entity must withhold an amount from a payment under Subdivisions 12-B, 12-C or 12-D in Schedule 1 to the TAA 1953 during a period in order to be entitled to the first cash flow boost for that period.

6.13 Schedule 6 amends these requirements so that the requirements are also satisfied if an entity must pay an amount to the Commissioner under Division 13 in Schedule 1 to the TAA 1953 in relation to an alienated personal services payment that is received during the period. [Schedule 6, item 3, paragraph 5(1)(a) and (b) of the Boosting Cash Flow for Employers (Coronavirus Economic Response Package) Act 2020]

6.14 For this purpose, Schedule 6 defines alienated personal services payment as having the same meaning as in section 13-10 in Schedule 1 to the TAA 1953. [Schedule 6, item 1, the definition of 'alienated personal services payment' in subsection 4(1) of the Boosting Cash Flow for Employers (Coronavirus Economic Response Package) Act 2020]

Amount

6.15 Similarly, Schedule 6 also amends the definition of withholding period total.

6.16 Under the prior law an entity's withholding period total for a period was the total of the amounts they withheld from payments under Subdivisions 12-B, 12-C and 12-D in Schedule 1 to the TAA 1953 in the period. As a result of the amendments an entity's withholding period total also includes amounts required to be paid to the Commissioner under Division 13 in Schedule 1 to the TAA 1953 in relation to payments of alienated personal services received during the period. [Schedule 6, item 2, subsection 4(4) of the Boosting Cash Flow for Employers (Coronavirus Economic Response Package) Act 2020]

Application and transitional provisions

6.17 These amendments commence on the day after the Bill containing the amendments receives Royal Assent. [Clause 2]

6.18 These amendments apply to all payments of the cash flow boost, including those for periods before the commencement of the amendments. [Schedule 6, item 4]

6.19 This ensures that entities that are required to pay amounts under Division 13 in Schedule 1 to the TA 1953 in relation to alienated personal services payments received in these periods are entitled to the cash flow boost. It also ensures that entities that may have received a cash flow boost payment from the ATO on the basis of reporting that does not distinguish between amounts withheld under Subdivisions 12-B, 12-C and 12-D in Schedule 1 to the TAA 1953 and amounts payable under Division 13 in Schedule 1 to the TAA 1953 are not required to repay these amounts.

6.20 While the amendments apply retrospectively, they are wholly beneficial to affected entities, making them entitled to the cash flow boost or increasing the amount of the cash flow boost they are to be paid.