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  • Reporting disaster payments and grants in your tax return

    If you've been affected by a natural disaster, you may receive a relief payment from:

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

    Most one-off assistance payments are tax free, but you may need to include them in your tax return. If you use an assistance payment to purchase items for your business, the normal conditions for deductibility apply.

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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.

    You may need to report and pay tax on government grants, payments and stimulus during COVID-19 that you receive from federal, state or territory, or local governments.

    Regular Centrelink payments remain taxable, unless exempted by the government.

    You may need to include the following payments in your tax return although you may not pay tax on them.

    Disaster Recovery Payment

    If you receive an Australian Government 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.

    The government decides on the tax status of each particular type of payment.

    Drought assistance payments and tax

    If you or your business receives drought assistance payments from private funds, charitable groups or crowdfunding platforms, the tax treatment of the payments is affected by:

    • the reasons for receiving the funds
    • how you used the funds.

    If you intend to use the payments for business expenditure, they must be declared as assessable income. However, you can also claim the appropriate business deductions. For example, if you spent the payment on livestock feed, which is a deductible expense, the increase in assessable income will be offset by the increase in deductions claimed. This means there will be no net effect on your taxable outcome.

    If you intend to use the payments for food or clothing (or other non-business purposes), they are not counted as assessable income.

    Disaster relief grants and payments

    Grants from government and private funding bodies don't attract goods and services tax (GST), as long as you don't provide anything of value in return.

    The following disaster relief grants and payments are tax free and you don't need to include them in your tax return:

    Storms and floods

    Small businesses and primary producers affected by the storms and floods that occurred between 19 February and 31 March 2021 may be eligible to receive special disaster recovery grants. These include:

    • small business recovery grants of up to $50,000
    • primary producer recovery grants of up to $75,000.

    These grants are non-assessable, non-exempt income from the 2020–21 financial year onwards. You don't include them in your assessable income, and you don't pay tax on them.

    The grant must be a Category D grant under the Disaster Recovery Funding Arrangements 2018. To find out what type of category grant funding you received under the Disaster Recovery Funding Arrangements 2018, you can speak to the person within your state or territory who administered your grant.

    Payments to volunteer firefighters

    You are not required to pay tax on government support payments you received as a volunteer firefighter during the 2019–20 bushfires.

    You don't need to include these payments in your tax return.

    Assistance from 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 a gift to you from the organisation.

    Assistance from 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 that gives emergency assistance to an employee can claim a tax deduction as a business expense.

    Gifts from family or friends

    If you receive emergency help in the form of gifts from family and friends, you don't need to declare them or pay tax on them.

    Last modified: 21 Dec 2021QC 67560