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  • Disaster assistance payments and your tax

    If you're experiencing financial hardship as a result of a disaster, you may receive a relief payment from:

    • local, state or federal government agencies
    • a charity or community group
    • your employer.

    Most one-off assistance payments are tax-free. Regular Centrelink payments remain taxable, unless exempted by the government.

    If you receive emergency help in the form of gifts from family and friends, you don't need to declare it or pay tax on it. If you use an assistance payment to purchase items for your business, the normal conditions for deductibility apply.

    Grants from government and private funding bodies don't attract goods and services tax (GST), provided the grant recipient doesn't provide anything of value in return.

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    Government disaster recovery payments

    If you receive a recovery payment from a local, state or federal government agency, you need to understand what type of payment it is and how it affects your tax.

    Common types of government disaster recovery payments are:

    Australian Government Disaster Recovery Payments

    If you receive a Disaster Recovery Payment (DRP), it will be treated as exempt income. This means you don't pay tax on this amount, but you need to include it in your tax return.

    Disaster Recovery Allowance and Natural Disaster Relief and Recovery Arrangements

    Disaster Recovery Allowance (DRA) and Natural Disaster Relief and Recovery Arrangements (NDRRA) payments are generally taxable. However, the government may declare that, for some natural disasters, DRA and NDRRA payments are exempt income. This means you don't pay tax on this amount, but you need to include it in your tax return.

    Ex-gratia recovery payments

    The tax treatment of ex-gratia recovery payments, payments made by favour and not because of legal obligation, depends on the specific circumstances of the payments. In some recent cases the government has decided to exempt such payments from tax.

    We can't advise you about the tax treatment of ex-gratia payments until the government decides on the tax status of that type of payment.

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    Payments to volunteer firefighters

    You are not required to pay tax on government support payments you receive as a volunteer firefighter in relation to the bushfires 2019–20.You don't need to include these payments on your tax return.

    For more information, refer to:

    Charities and community groups

    If you receive assistance from a charitable organisation, the payment you receive is not taxable. These payments have no GST implications.

    These payments are not taxable because:

    • the organisations make these payments voluntarily to help you with the basic necessities of life
    • you have no right or entitlement to the payment
    • the payment is in the nature of a gift to you from the organisation.

    Your employer

    Emergency assistance from your employer − for example, one-off emergency relief payments − is not taxable.

    An employer is not required to withhold tax from a payment that is not taxable.

    An employer who gives emergency assistance to an employee can claim a tax deduction as a business expense.

    Tax treatment of disaster relief payments

    You are not required to pay tax on any relief recovery payments or benefits provided by the Australian Government in relation to the bushfires 2019–20.

    You don't need to include these payments on your tax return and they will not affect your tax losses. 

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    Last modified: 21 Sep 2020QC 21525