The federal government will suspend indexation of GST and Pay-As-You-Go (PAYG) income tax instalments for financial year 2020-21 to ease cashflow pressures in the wake of the COVID-19 pandemic.
Announced by Assistant Treasurer Michael Sukkar on Wednesday, the yet-to-be-legislated change will benefit an estimated 2.2 million businesses and high income earners paying income tax in instalments throughout the year.
An additional 81,000 businesses are expected to benefit from the suspension of GST instalment indexation, Sukkar said.
“The decision to suspend the indexation of tax instalments is yet another tangible way the Morrison Government is supporting Australians as we respond to the COVID-19 health crisis,” Sukkar said in a statement.
Typically the Australian Taxation Office (ATO) indexes these payments against gross domestic product (GDP) figures to take in an attempt to account for income growth.
No longer so, at least for the 2020-21 year. However, this change will only benefit taxpayers paying GST and income tax by instalments based on their projected income — not those using current income.
As previously reported by SmartCompany, the ATO said in March it would provide tax relief to businesses affected by the COVID-19 pandemic in the form of payment deferrals and faster access to GST refunds.
At the time, the ATO said a number of options would be available to affected businesses, including four-month deferrals for the payments of amounts due through business activity statements (including PAYG instalments), income tax assessments, fringe benefits tax assessments and excise.
The ATO said in March it may also allow businesses that are on a quarterly reporting cycle to switch to monthly GST reporting so they can gain quicker access to any available GST refunds.