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 Payment||Not taxable||N/A|
|JobKeeper||Taxable – but amounts paid to employees that are subsidised by JobKeeper are deductible (see below)||No GST|
|Pandemic Leave Disaster Payment||Taxable||N/A|
|Small business support payments||See below||No GST|
|Child Care Transition Payment||Taxable||No GST (GST-free supply)|
|Creative Economy Support Payment||Taxable||No GST|
|Creative Economy Concessional Loan||Not taxable||No GST|
|Consumer Travel Support Program Grant||Taxable||No GST|
|State Government Voucher Subsidy Scheme Payment||Taxable||GST payable|
|Electricity rebate||Not 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.
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