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  • Government grants and payments during COVID-19

    Government grants, payments or stimulus you receive if you or your business has been impacted by COVID-19 may have tax implications. Use this information to find out if:

    • amounts are taxable or non-assessable, non-exempt income
    • you need to include the amounts in your tax return and where to include them
    • there are any GST implications.

    On this page

    Further information about the tax implications of government grants is in:

    • GST and grants – the GST treatment of grants depends in part on whether something is supplied in return for the grant or payment
    • Tax Ruling 2006/3 Income tax: government payments to industry to assist entities (including individuals) to continue, commence or cease business.

    See also

    Australian Government payments and assistance

    These are payments and financial assistance the Australian Government is providing to support individuals and businesses through the economic impacts of COVID-19.

    In this section

    COVID-19 Disaster Payments

    The Australian Government is providing COVID-19 Disaster Payments to eligible individuals. These payments provide support to individuals who are unable to earn income because state or territory health orders prevent them working in their usual employment.

    Due to recent legislative changes, the COVID-19 Disaster Payment has been reclassified as non-assessable non-exempt (NANE) income.

    This means it:

    • is a non-taxable payment
    • does not need to be included in your tax return.

    If you've recently applied for the COVID-19 Disaster Payment with Services Australia and received the payment on or after 1 July 2021, you won't need to include the amount as assessable income in your tax return next year.

    If you received a COVID-19 Disaster Payment due to the Greater Melbourne lockdowns in the 2020–21 income year and you haven’t yet lodged your 2020–21 tax return, you don't need to include the payment as assessable income when you lodge.

    If you have already lodged

    If you have already lodged your 2020–21 tax return and included the payment as assessable income, you should amend your return because these payments are no longer taxable. You may get a refund.

    You can amend your tax return online through myGov or your registered tax agent. You can also lodge an amendment form or send a letter. Your amended taxable income will be provided to Services Australia for assessment for family assistance and Child Support purposes.

    For more information, see COVID-19 Disaster Payment – Services AustraliaExternal Link.

    JobKeeper and other measures

    All JobKeeper payments are assessable as ordinary income of the business eligible to receive the payments. The normal rules for deductibility apply for the amounts the business pays to its employees where those amounts are subsidised by the JobKeeper payment.

    As an employee or sole trader receiving JobKeeper amounts in or as a replacement for your wage or salary, you need to include these amounts in your tax return. For employees, the amount will be included in your income statement as either salary and wages or as an allowance, depending on your circumstances.

    For more information see Employer: JobKeeper payment tax consequences.

    Completing your tax return

    Employees

    If you are an employee, include the amount of JobKeeper you received as 'Salary or wages, or other income on an income statement or payment summary' in your tax return.

    If you complete your tax return online, this amount will generally pre-fill for you. You will need to wait for your income statement to be marked as 'tax ready', check this information and add in any missing amounts.

    If you lodge with a registered tax agent, they will also have access to this information.

    Sole traders

    If you're a sole trader, include the amount of JobKeeper you received as 'business income' in your individual tax return.

    You will be able to see the total amount of JobKeeper payments you received in either:

    • Online services for business account
    • Online services for individuals and sole traders through myGov.

    These amounts are 'information only' and you will need to check and enter these amounts in your tax return.

    If you lodge with a registered tax agent, they will also have access to this information.

    See also

    Pandemic Leave Disaster payment

    The Australian Government is providing support for individuals in certain states who can't earn an income because either they:

    • must self-isolate or quarantine at home
    • are caring for someone with COVID-19.

    These payments are assessable income. Individuals need to report this income in their tax return in the income year the amounts are received.

    You will receive advice from Services Australia confirming the amount you received.

    Completing your tax return

    Enter the amount you received at either:

    • Australian Government special payments’ if you lodge online using myTax
    • 'Question 24 Other income' if you lodge by paper
    • Question 24V or add the Income Details schedule at field ‘Australian government benefit taxable amount’ (INCDTLS128), with field ‘Australian government benefit type’ (INCDTLS126) set to ‘Special’ if you’re a registered tax professional.

    For more information about these payments, see Services Australia – Pandemic Leave Disaster PaymentExternal Link.

    Child care Transition Payment

    The Australian Government implemented measures throughout 2020 to help the early childhood education and care sector manage the impacts of COVID-19. The measures included a Transition Payment available to approved early childhood education and care providers.

    The Transition Payment was made instead of JobKeeper Payment for workers of these providers. It was paid for the period 13 July 2020 to 27 September 2020 (the Transition Period).

    The Transition Payment was paid as a grant under the Community Child Care Fund. It was to support providers to return to the Child Care Subsidy.

    Conditions of the Transition Payment

    Approved providers of child care services must have met certain conditions to receive and maintain the Transition Payment, including:

    • offering an employment guarantee, by continuing to employ those employees over the Transition Period who were working or being paid JobKeeper at the end of the relief package
    • cap fees charged during the Transition Period to an amount that would otherwise have been charged for the same care in the relevant Relief Payment reference period
    • not claim JobKeeper for ineligible employees or themselves as JobKeeper eligible business participants.

    See also

    Information on the Department of Education, Skills and Training website:

    Tax implications

    Income tax

    A government payment to assist a child care business to continue operating needs to be included in the business's assessable income. This includes assistance provided as a one-off lump sum or as a series of payments.

    For businesses operating on:

    • an accruals accounting method – the income will be derived when the right to the government payment arises
    • a cash accounting method – the income will be derived when the government payment is received.
    GST

    You do not have any GST implications if the government funding is not for a supply. If you provide something of value in return for the payment it can be for a supply.

    A supply can include either:

    • entering into a binding legal obligation to do something
    • refraining from doing something.

    To receive the Transition Payment, child care providers are required to enter into an obligation to:

    • provide an employment guarantee for their workers who were previously receiving JobKeeper payments
    • cap the child care fees.

    The Transition Payment is a payment for a supply. However, the payment is for a GST-free supply. It is directly related to the supply of GST-free child care. This means that child care providers do not have to pay GST on the Transition Payment they receive.

    Example – Transition Payment

    Penny is an approved provider of a child care service that she operates in the western suburbs of Sydney. Penny also runs a nanny service (not approved child care). She has 20 employees and 15 are employed principally in the operation of approved child care. Five are principally employed in nanny services.

    Penny applies for and starts receiving the Transition Payment from 13 July 2020. She agrees to stop claiming JobKeeper payments for her 15 child care employees and for herself as a business participant for JobKeeper fortnights from 20 July 2020.

    Income tax implications

    In her 2021 tax return, Penny:

    • includes the Transition Payment as assessable income
    • claims business operating expenses as a deduction, in the usual manner.

    GST implications

    Penny does not have to pay GST on the Transition Payment she receives. The Transition Payment is a payment for a GST-free supply. It is directly related to the supply of GST-free childcare.

    JobKeeper eligibility

    Penny may consider accessing the JobKeeper extension for the five eligible employees of her nanny service. The Transition Payment is for a GST-free supply. She needs to include it in the relevant GST turnover calculation when working out her decline in turnover and eligibility for the scheme.

    End of example

    Payments to support the creative economy

    On 25 June 2020, the Australian Government announced a comprehensive COVID-19 Creative Economy Support Package. This is to support artists and organisations to get back in business following the disruptions caused by COVID-19. A range of new grant and loan programs were announced for different parts of the arts sector.

    Example 1 – Cash payment

    Israel runs an event management business. He had to cancel a music festival organised for April 2020 due to COVID-19.

    As social distancing and border restrictions ease, Israel applies to the Australian Government for a grant through the Restart Investment to Sustain and Expand (RISE) fund. He plans to run the music festival in March 2021. The RISE program provides finance to assist the presentation of new or re-shaped cultural and creative activities and events.

    To be eligible, Israel needs to:

    • provide a co-contribution for the activity
    • have an Australian business number (ABN)
    • be registered for GST.

    Israel does not enter into an agreement with the government to provide the music festival. If Israel chooses not to hold the music festival, he is:

    • not under a binding legal obligation to go ahead with it
    • required to repay the funding he received.

    Israel is successful in his application. He receives a $200,000 grant on 1 December 2020.

    Income tax implications

    In his 2021 tax return, Israel:

    • includes the $200,000 government payment as assessable income
    • claims a deduction for the costs of running the music festival, including venue and equipment hire, performers and staff.

    GST implications

    There are no GST implications. The payment is made to assist Israel to provide a re-shaped music festival in 2021. Israel only needs to meet the eligibility requirements in the funding application.

    He is not providing anything of value to the government in return for the payment. In particular, he is not entering into a binding legal obligation with the government to provide the festival. Therefore, he does not have to pay GST on the grant received.

    End of example

     

    Example 2 – Concessional loan

    Josiah is the owner and operator of a small theatre. Prior to COVID-19, Josiah’s theatre ran around six productions each year, which members of the general public paid to attend. He doesn't employ any full-time staff.

    As social distancing and border restrictions ease, Josiah applies through his bank for a concessional Show Starter loan. The loans are designed to assist creative economy businesses to fund new productions and events that stimulate job creation and economic activity. The loans are backed by a 100% Commonwealth guarantee.

    Josiah is successful in his application. He receives a $150,000 loan on 1 September 2020, with a 4% interest rate.

    Income tax implications

    Although any income from his theatre productions is included in Josiah’s 2021 tax return, the concessional loan is not included in assessable income.

    In his 2021 tax return, Josiah:

    • includes income from his theatre productions (but not the loan)
    • claims a deduction for the interest payments on the loan and the costs of the theatre productions (in the usual manner).

    GST implications

    There are no GST implications. The concessional loan is guaranteed by the Australian Government to support funding of new productions and events and assist Australia’s creative economy businesses.

    Josiah only needs to meet eligibility requirements as outlined in the application for the concessional loan. He is not providing anything of value to the government in return for guaranteeing the loan. He does not have to pay GST on the loan received.

    End of example

    See also  

    Find out about  

    Consumer Travel Support program

    The COVID-19 Consumer Travel Support Program is administered by Services Australia on behalf of Austrade.

    The program assists travel agents and tour arrangement service providers to:

    • continue to trade
    • meet their legal obligations to process refunds and credits to Australian consumers who were unable to travel due to COVID-19.

    Applications were open from 14 December 2020 to 13 March 2021.

    If eligible, a provider received a one-off grant during the 2020–21 financial year. The payments were between $1,500 and $100,000, depending on the business’ annual GST turnover in the 2019 calendar year.

    Eligible businesses will not be required to prove how they spend the payment.

    Tax implications

    Income tax

    The government grant to assist a travel agent or tour arrangement service provider business is included in its assessable income. This includes assistance provided as a one-off lump sum.

    For businesses operating on:

    • an accruals accounting method – the income will be derived when the right to the government payment arises
    • a cash accounting method – the income will be derived when the government payment is received.
    GST

    Grants under the Travel Support program are not subject to GST as you do not provide something of value in return for the payment.

    Example – Consumer Travel Support program

    Kimberley Extreme Adventures operated as a tour arrangement service provider until the announcement of the closure of international borders by the Prime Minister of Australia on 19 March 2020.

    Kimberley Extreme Adventures had lodged its tax return for the 2018–19 income year and satisfied the other eligibility criteria for the grant.

    Kimberley Extreme Adventures lodged an online application with Services Australia. Its annual GST turnover for the 2019 calendar year was $250,000 and it was determined to be entitled to a $6,500 Travel Support grant.

    The grant of $6,500 was received in their bank account on 1 April 2021.

    Income tax implications

    In its 2021 tax return, Kimberley Extreme Adventures:

    • includes the Travel Support grant as assessable income
    • claims business operating expenses as a deduction, in the usual manner.

    GST implications

    Kimberley Extreme Adventures does not have to pay GST on the grant they received. The payment was made to provide financial support to ease the pressures faced by travel agent and tour arrangement service provider businesses impacted by COVID-19.

    The business only needed to meet the eligibility requirements outlined in the application. Kimberley Extreme Adventures is not providing anything of value to the government in return for the grant.

    End of example

    State, territory and local government assistance

    In addition to the assistance provided by the Australian Government, individuals and businesses may receive specific financial support from state, territory and local governments to help them respond to the impacts of COVID-19:

    Payroll tax relief

    Some states and territories are offering support such as increased thresholds, waivers, and interest-free deferrals of payroll tax. The tax consequences of receiving this support will depend on how it is delivered.

    Where payroll tax relief is provided as:

    • no payroll tax payable – the business will have a smaller allowable deduction in their tax return
    • a refund of the payroll tax paid – the allowable deduction for payroll tax will be less any refunds given.

    There are no GST consequences on payroll tax relief provided by state and territory governments to small businesses.

    Example 1 – Payroll tax relief

    Abi operates a hairdressing salon. The state government introduces payroll tax relief for all small businesses to help them cope with the impacts of COVID-19. The relief is delivered as no payroll tax payable for the quarter April to June 2020.

    As Abi received the payroll tax relief, she has a smaller allowable deduction in her 2020 tax return.

    End of example

     

    Example 2 – Payroll tax refund

    Evan operates a backhoe and machinery hire business. The state government introduces payroll tax relief for all small businesses to help them cope with the impacts of COVID-19. The relief is delivered as a refund of the payroll tax paid for the quarter January to March 2020 and no payroll tax for the quarter April to June 2020.

    Evan pays payroll tax of:

    • $50,000 for 1 July to 31 December 2019
    • $25,000 for 1 January to 31 March 2020
    • $0 for 1 April to 30 June 2020.

    Evan receives a payroll tax refund of $25,000 before 30 June 2020.

    Evan’s allowable deduction for payroll tax in his 2020 tax return is $50,000 ($75,000 paid less the $25,000 refund).

    There are no GST consequences on the payroll tax relief he receives.

    End of example

    Small business support payments

    You don't need to pay tax on some COVID-19 payments from the government to support small businesses. These payments will be non-assessable non-exempt (NANE) income for tax purposes.

    There are two types of grant programs announced by the government that may be NANE income. These are:

    • State and Territory grants relating to the recovery from COVID-19
    • Commonwealth support payments established under the COVID-19 Business Assistance Program.

    Each program has its own set of eligibility criteria and eligible grants.

    Eligibility

    You will need to work out if an amount you received under a government COVID-19 small businesses support payment is NANE income. A payment you receive will be NANE income if it meets these three criteria:

    Eligible grants and support programs

    VIC state grants

    • Alpine Business Fund
    • Alpine Resorts Support Program (Streams 1, 2 and 3)
    • Business Continuity Fund
    • Business Costs Assistance Program Round Two
    • Business Costs Assistance Program Round Two - July Extension
    • Business Support Fund 3
    • Impacted Public Events Support Program
    • Independent Cinema Support Program
    • Licensed Hospitality Venue Fund
    • Licensed Hospitality Venue Fund 2021
    • Licensed Hospitality Venue Fund 2021 - July Extension
    • Live Performance Support Program
    • Melbourne City Recovery Fund – Small business reactivation grants
    • Outdoor Eating and Entertainment Package
    • Small Business COVID Hardship Fund
    • Sole Trader Support Fund
    • Sustainable Event Business Program

    NSW state grants

    • 2021 COVID-19 business grant
    • 2021 COVID-19 JobSaver payment
    • 2021 COVID-19 micro-business grant
    • NSW Performing Arts COVID Support Package

    Additional government COVID-19 business support programs may be made eligible by a declaration by the Minister. If this occurs we will update this page.

    GST implications

    You do not need to pay GST on cash payments received under state government business support/lockdown assistance or support packages. Because you do not need to provide anything of value to the state government to receive the payment, you have not made a taxable supply. You only need to meet the eligibility requirements as outlined in the funding application.

    Example – Receiving a grant eligible for NANE income

    Fresh Brew is a small business operating a café in Victoria.

    Fresh Brew received an eligible grant payment under the Business Costs Assistance Program Round 2 for the 2020–21 financial year.

    This package is part of the Victorian Government's response to the economic impacts of Coronavirus.

    The Minister has declared that the Business Costs Assistance Program Round 2 is a grant program that is eligible for NANE income.

    In the 2020–21 financial year, Fresh Brew self-assessed and identified that they are a small business as their aggregated turnover was less than $50 million in the income year the payment was received.

    As Fresh Brew received an eligible grant payment in the 2020–21 financial year and they are a small business, they do not need to include the grant in their business income.

    GST implications

    The payment is made to provide financial support to ease the pressures faced by small business impacted by COVID-19. Fresh Brew only needs to meet eligibility requirements as outlined in the funding application.

    Fresh Brew is not providing anything of value to the state government in return for the payment. Therefore, does not have to pay GST on the grant payment received.

    End of example

    See also

    Tax treatment of government payments to business

    Unless there is a specific exception, such as a payment that is treated as NANE income under an eligible State or Territory grant or Commonwealth support program, government payments to assist a business to continue operating are included in assessable income. This will include assistance provided as a one-off lump sum or a series of payments.

    For businesses operating on:

    • an accruals accounting method – the income will be derived when the right to the government payment arises
    • a cash accounting method – the income will be derived when the government payment is received.

    Example 1 – Cash payment for running a business

    Boris operates a local café which employs five full-time and 10 casual workers. His business is registered for GST. As a result of COVID-19, the café is closed for two months and operates at reduced capacity for another two months after re-opening.

    The state government provides a $10,000 cash payment to businesses like Boris’s to help them cope with the impacts of COVID-19. Eligibility for the grant included Boris verifying that he carried on a business and was eligible for JobKeeper. The payment is not received under a state grant program eligible for NANE income treatment.

    Boris applies for and receives the $10,000 payment. He spends this on paying outstanding utility bills for the café, replacement stock and deep cleaning the premises so he can reopen.

    Income tax implications

    In his 2020 tax return, Boris:

    • includes the $10,000 payment from government as assessable income
    • includes the stock expenses in his trading stock calculation
    • claims the utility bills and cleaning expenses as a deduction.

    GST implications

    The payment is made to provide financial support to ease the pressures faced by small business impacted by COVID-19. The café only needs to meet eligibility requirements as outlined in the funding application. Boris is not providing anything of value to the state government in return for the payment. Therefore, he does not have to pay GST on the cash payment he receives.

    End of example

     

    Example 2 – Cash payment to purchase capital asset

    The situation is the same as in Example 1, except Boris spends the $10,000 payment on purchasing a new cold room which costs $11,000 (GST-inclusive). The cold room is installed and ready for use on 1 July 2020.

    Income tax implications

    In his 2020 tax return, Boris includes the $10,000 payment from government as assessable income.

    In his 2021 tax return, assuming Boris's business has an aggregated turnover of less than $500 million, Boris can claim the GST-exclusive cost of the new cold room ($10,000) under the instant asset write-off. This is because:

    • the cold room is less than the $150,000 threshold
    • he had the cold room ready for use before 31 December 2020
    • the cold room is only used for business purposes.

    GST implications

    The payment is made to provide financial support to ease the pressures faced by small business impacted by COVID-19. The café only needs to meet eligibility requirements as outlined in the funding application.

    Boris is not providing anything of value to the government in return for the payment. He does not have to pay GST on the cash payment received. Boris can also claim a GST credit of $1,000 for the purchase of the cold room in his business activity statement.

    End of example

     

    Example 3 – Cash payment to purchase trading stock

    The situation is the same as in Example 1, except spends the $10,000 payment on replacing trading stock which was discarded when Boris had to close the café as a result of COVID-19.

    Income tax implications

    In his 2020 tax return, Boris includes the $10,000 payment from government as assessable income.

    Boris will include the $10,000 (GST-exclusive) stock purchased in his trading stock calculation.

    Boris did not take any items out of trading stock for private purposes during the year.

    Boris’s trading stock account records for the 2019–20 financial year will include the following entries:

    • opening trading stock $35,000    
      • add purchases $82,000 (including the $10,000)
      • less sales ($75,000)
      • less waste ($8,000)
    • closing trading stock $34,000.

    GST implications

    The payment is made to provide financial support to ease the pressures faced by small businesses impacted by COVID-19. The café only needs to meet eligibility requirements as outlined in the funding application.

    Boris is not providing anything of value to the government in return for the payment. He does not have to pay GST on the cash payment received.

    End of example

     

    Example 4 – Cash payment for advice

    Connie operates an independent child care centre. The state government offers a ‘one-off’ payment of up to $1,500 to enable businesses to seek advice to assist them manage the impacts of COVID-19. The payment is not received under a state grant program eligible for NANE income treatment.

    Connie engages her adviser to undertake a review of her business operations and identify cost savings and efficiencies. Connie pays her adviser $2,200 (GST-inclusive) for their services. She applies to the state government for the $1,500 payment, which she receives.

    Income tax implications

    In her 2020 tax return, Connie:

    • includes the $1,500 government payment as assessable income
    • claims the $2,000 (GST-exclusive) fee paid to her adviser as a deduction.

    GST implications

    The government grant is not for a supply made by Connie. The government has certain eligibility criteria that businesses must meet. However, meeting these criteria does not involve Connie providing anything of value to the government. She does not have to pay GST on the cash payment she receives.

    Connie can claim a $200 GST credit for the purchase of financial advice in her business activity statement.

    End of example

    See also

    Deductions for expenses incurred by businesses receiving government support payments that are non-taxable

    In the course of carrying on a business, you may incur one or more expenses that are related to getting a government grant that is non-taxable. Such expenses may include costs associated with the application process and expenses incurred to satisfy an eligibility requirement of the grant.

    In some cases, you may not be able to claim a tax deduction for some or all of an expense that is related to the grant. In other cases, you will be able to claim a tax deduction for the whole expense.

    Expenses incurred by a business solely to get a non-taxable government grant

    You cannot claim a tax deduction for these expenses.

    Example 1 – Expenses incurred solely to get a non-taxable government grant

    Flame Pty Ltd engages a bookkeeper to apply for a non-taxable government grant on their behalf.

    The bookkeeper provides no other service to Flame Pty Ltd and gives them an invoice for a fee solely for applying for the grant on their behalf.

    Flame Pty Ltd cannot claim a tax deduction for this fee.

    End of example
    Expenses incurred by a business both to gain assessable income and to get a non-taxable government grant

    You can only claim a tax deduction for the part of these expenses that relates to gaining your assessable income. You cannot claim a tax deduction for the part that relates to getting the non-taxable government grant.

    There is no set way to work out the part of the expense that relates to each purpose, but the way you work it out should be fair and reasonable. You should keep a record of how you work it out.

    Example 2 – Expenses incurred to gain assessable income and to get a non-taxable government grant

    Flame Pty Ltd is eligible to receive a government grant that is non-taxable.

    Flame Pty Ltd asks their accountant to apply for this grant on their behalf. Their accountant does not separately bill Flame Pty Ltd for this service, but itemises the fee charged for applying for the grant in a quarterly bill that they give to Flame Pty Ltd for professional services provided over the quarter.

    Flame Pty Ltd cannot claim a deduction for this part of the bill.

    End of example
    Expenses that you would usually incur in the ordinary course of carrying on your business, but are incidentally related to getting a non-taxable government grant

    You can claim a tax deduction for the whole of these expenses.

    Getting a government grant is considered incidental where the expense is one that relates to the whole of your business and is of a kind you would usually incur. We will consider that a government grant is not incidental where the expense is not one that you usually incur and is a pre-condition of being eligible for the grant.

    Example 3 – Expenses incidentally related to getting a non-taxable government grant

    Flame Pty Ltd is eligible for a non-taxable government grant if they keep their staff on the payroll.

    Flame Pty Ltd uses the grant to pay for wages, rent and utilities that they would ordinarily incur in carrying on his business.

    Flame Pty Ltd can claim a deduction for the wages, rent and utilities paid.

    End of example

    If you act in good faith and use your best endeavours to determine whether you are entitled to a deduction for an expense related to a government grant that is not taxable, we will generally not apply compliance resources to confirm if the expense is deductible.

    State government voucher subsidy scheme

    Some state governments are offering a voucher subsidy scheme. This is to encourage eligible customers to purchase goods and services from businesses impacted by COVID-19.

    Vouchers are issued to eligible customers who apply. These vouchers represent the maximum amount the state government will contribute towards eligible purchases from participating businesses.

    Under these schemes, eligible purchases may include the following:

    • eating in at restaurants, cafes, bars, pubs and clubs
    • entertainment and recreation, cultural institutions, live music, and arts venues
    • accommodation.

    Check your state scheme for details of eligibility.

    Tax implications

    Income tax

    A government payment to assist a business to continue operating is included in its assessable income. This will include assistance provided as a one-off lump sum or as a series of payments.

    For businesses operating on:

    • an accruals accounting method – the income will be derived when the right to the government payment arises
    • a cash accounting method – the income will be derived when the government payment is received.
    GST

    A GST registered participating business needs to report GST on the total amount of payments received. This includes:

    • the amount from the customer making the eligible purchase
    • the amount the state government contributes towards the eligible purchase.

    Example – Voucher subsidy scheme

    Boris operates a local café which is a participating business impacted by COVID-19. Meals served to customers and eaten on the premises are ‘eligible purchases’ under the state government voucher scheme.

    Fred and Kathy have each been issued with a $25 voucher by the state government. On 24 March 2021, they separately order meals at the cafe. Their purchases are unrelated to any business that they may carry on.

    Fred orders a $33 meal (including $3 GST). Kathy orders a $22 meal (including $2 GST). Fred presents his $25 voucher and $8 cash to pay for his meal. Kathy presents the $25 voucher as payment for her meal. Kathy is not given a $3 refund. The unused portion of the voucher cannot be used on a future occasion or redeemed by the business.

    Boris electronically verifies on the spot that the vouchers are valid. At the same time, he submits a request to the state government for payment.

    Within five days Boris receives $47 from the state government voucher scheme. This represents $25 as a contribution towards Fred’s meal and $22 for payment of Kathy’s meal.

    Income tax implications

    In his 2021 tax return, Boris includes $50 as assessable income which is the GST-exclusive amount of Fred and Kathy's meals.

    There are no income tax implications for Fred and Kathy.

    GST implications

    Boris needs to report total taxable sales of $55 (for Fred's $33 meal and Kathy's $22 meal).

    If Boris is reporting on an accruals' basis, Fred and Kathy's meals will be included in total taxable sales for the period ended 31 March 2021.

    However, if Boris’ GST reporting method is on a cash basis, and the payment of $47 from the state government voucher scheme is delayed and received on or after 1 April 2021, then Boris would need to report as follows:

    • for the period ending 31 March 2021  
      • $8 payment received from Fred included in total taxable sales
      • $0.73 GST (one-eleventh of $8.00)
    • for the period ending 30 June 2021  
      • $47 payment received from the state government
      • $4.27 GST (one-eleventh of $47.00).

    There are no GST implications for Fred and Kathy.

    End of example

    Electricity rebates

    Some states and territories are offering households and some businesses automatic electricity rebates. These rebates are not included in assessable income.

    For a business, the rebate will reduce the deduction the business can claim for electricity.

    Example – Household electricity rebate

    Duncan is a householder. His electricity supplier has provided a rebate of $150 to all householders in recognition of the impacts of COVID-19. The rebate is delivered as a $150 reduction in electricity accounts for the quarter April to June 2020.

    Duncan does not need to include the $150 rebate as assessable income in his 2020 tax return.

    End of example

    Land tax relief

    Some states and territories are providing land tax relief to businesses impacted by COVID-19. The types of land tax relief being offered may include:

    • credits
    • deferrals
    • rebates
    • reductions
    • refunds
    • waivers.

    The eligibility criteria for many of the programs require landlords to have provided rent relief to their business tenants. The taxation consequences of receiving land tax relief will depend on its delivery.

    Example 1 – Land tax reduction

    Farisha owns a small block of three shops and is registered for GST. Her tenants are significantly impacted by COVID-19. Farisha reduces the rent for each of her tenants by 50% for the April to June 2020 quarter. Her tenants are not required to pay the rent reduction.

    Farisha applies to her territory government for a 50% land tax reduction for the April to June 2020 quarter. This is approved before June 2020.

    Income tax implications

    Because Farisha received the land tax reduction, she has a smaller allowable deduction in her 2020 tax return.

    GST implications

    Farisha does not have to pay GST for receiving the land tax relief. It is not a reduction in response to a supply by her to the government.

    The GST payable by Farisha on the rent received for the April to June 2020 quarter is reduced in proportion to the rent reduction she gave her tenants.

    End of example

     

    Example 2 – Land tax refund

    Gianna owns a block of 10 shops. Two shops have been vacant since 1 March 2020. Her tenants are significantly impacted by COVID-19. Gianna reduces the rent for each of her tenants by 25% for the April to June 2020 quarter. Her tenants are not required to pay the rent reduction.

    As a result of COVID-19, Gianna has also been unable to find tenants for her two vacant shops.

    Gianna pays her land tax of $50,000 for the 2019–20 year on 1 April 2020. She applies to her state government for a land tax refund of $10,000 which she receives before June 2020.

    Income tax implications

    Because Gianna received the land tax refund, she has a smaller allowable deduction for land tax of $40,000 in her 2020 tax return.

    GST implications

    Gianna does not have to pay GST on the land tax relief. It is not a reduction in response to a supply by her to the government.

    The GST payable by Gianna on the rent received for the April to June 2020 quarter is reduced in proportion to the rent reduction she gave her tenants.

    End of example

    Rent relief

    Some states and territories are offering support such as waivers or rent reductions (or both) for commercial tenants in government-owned properties. The taxation consequences of receiving such support will depend on how it is delivered.

    Example – Government-owned building

    Hamish operates a gym in a government-owned building. The state government introduces rent relief for small businesses with less than 20 employees to help them cope with the impacts of COVID-19. Hamish receives the rent relief, which is delivered as a 25% reduction in his monthly rent for the quarter April to June 2020.

    Income tax implications

    Because Hamish received the rent relief, he has a smaller allowable deduction in his 2020 tax return.

    GST implications

    If Hamish is registered for GST, his entitlement to GST credits is reduced in proportion to the rent reduction.

    End of example

    See also

    Last modified: 03 Sep 2021QC 63381