Do you need to pay tax on COVID-19 financial support payments that you receive?

Do you need to pay tax on COVID-19 financial support payments that you receive?

There are a number of different schemes providing government help for businesses affected by the COVID-19 pandemic.

If you receive assistance (whether from the Commonwealth or a State or Territory government), you may be wondering if you need to pay tax on the assistance. Here is what the ATO website advises.

  Assistance    Income tax treatment  GST treatment
COVID-19 Disaster PaymentNot taxableN/A  
JobKeeperTaxable – but amounts paid to employees that are subsidised by JobKeeper are deductible (see below)  No GST
Pandemic Leave Disaster Payment  TaxableN/A
Small business support payments  See belowNo GST
Child Care Transition Payment  TaxableNo GST (GST-free supply)
Creative Economy Support Payment  TaxableNo GST
Creative Economy Concessional Loan  Not taxableNo GST
Consumer Travel Support Program Grant  TaxableNo GST
State Government Voucher Subsidy Scheme Payment  Taxable  GST payable
Electricity rebateNot taxable – but rebate reduces a business’ deduction for electricity  No GST

Other support programs

If you receive a government support payment that is not listed above, then it is taxable (at least as at 25 August 2021). This includes:

  • QLD:         2021 COVID-19 Business Support Grant
  • ACT:         COVID-19 Business Support Grant
  • SA:            COVID-19 Additional Business Support Grant
  • TAS:         Business Hardship – Border Closure Critical Support Grant
  • WA:           Tourism Business Survival Grants and payments under the Tourism and Travel
  • NT:            Payments under the Territory Business Lockdown Payment Program.

However, the Federal Government may declare any such payments to be non-taxable (by declaring the relevant program to be an eligible program).

Repayments of JobKeeper overpayments

If your business:

  • has repaid or is repaying JobKeeper overpayments, the amount need not be included as assessable income in the business’ tax return. If the overpaid amount has already been included in an earlier tax return, the return will have to be amended to reduce the assessable income by the repaid amount;
  • doesn’t need to repay JobKeeper overpayments because the ATO has waived them, the overpaid amounts have to be included as assessable income in the business’ tax return.

Rent relief

If a business receives rent relief, its deduction for rent will be reduced. If the business is registered for GST, its entitlement to GST credits is reduced in proportion to the rent reduction.

Land tax relief

Land tax relief will result in a smaller allowable deduction. GST is not payable on the relief, but the GST payable on rent received by the landowner is reduced in proportion to the rent reduction given to the tenant.

Tip! Check with Southern Business Solutions as to whether specific support government payments are taxable.

Ref: TaxWise Business October 2021

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