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12 Nov 2020 Member Advocacy

Cash flow boost — response by Senior Advocate, Robyn Jacobson CTA

A member sought assistance with a cash flow boost issue. The agent has acted for the taxpayer since April 2020. Their client’s trust had attributed personal services income (PSI). Using the actual method, they calculated the PAYG withholding and lodged the June 2020 quarter BAS with the total figures in W1 and W2. Effectively the June 2020 quarter BAS was the first BAS that reported W1 and W2.  The ATO allocated the cash flow boost to the trust automatically.

The ATO then raised an audit regarding the trust’s eligibility for the cash flow boost. The agent had been corresponding with the ATO in relation to the client’s situation. The ATO insisted on information such as a letter of engagement and employment contracts, payroll records, director’s minutes resolving to pay the income as salary instead of it being treated as attributed PSI, superannuation, work cover details, bank statements that showed the wages payments, TFN declarations, PSI attribution calculation method and workpapers, journal entries and loan accounts/ledgers. The agent explained that the W1 and W2 figures reported on the June 2020 quarter BAS were not wages, they related to attributed PSI.

On behalf of the member, The Tax Institute escalated this matter to the cash flow boost area at the ATO. We were advised that someone from their team would follow this up directly with the agent.

The member recently contacted The Tax Institute to advise that the matter has been successfully resolved, and provided the following feedback:

We just wanted to reach out and thank you warmly for your assistance with the cash flow boost audit of our client with the PSI issue and ATO’s approach.  We appreciate your counsel and reaching out to the ATO on our behalf. We were successful in enabling our client to receive the cash flow boost in full, based on our claim, which has significantly helped them with their business and cash flow problems. Our client has requested that I pass on their gratitude to you and their best wishes.

Thank you again, it made a big difference to their lives. We are pleased that we identified and implemented the PSI reporting that enabled them to access this benefit.

I read an article in the Member Advocacy section of The Tax Institute’s newsletter [which discussed another cash flow boost matter that was escalated to the ATO and had a successful outcome for the client]. I am sure there are many other similar cases and your support is invaluable to us, the tax practitioners, and our clients.

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