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  • Reporting disaster payments and grants in your tax return

    Find out if you need to report disaster payments and grants in your tax return and if you need to pay tax on them.

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    Overview

    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
    • family or friends.

    One-off assistance payments are generally taxable, however some may be tax free. You may still need to include these payments in your tax return.

    Some payments are non-assessable non-exempt (NANE) income, which means you do not include it in your tax return and you do not pay tax on it.

    If you use an assistance payment to purchase items for your business, remember you may be able to claim a tax deduction.

    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.

    If your payment is treated as exempt income, this means you don't pay tax on it.

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

    Australian Government Disaster Recovery Payment

    If you receive an Australian Government Disaster Recovery Payment (DRP), it will be treated as exempt income. However, if you have carried forward losses from an earlier income year, you will need to reduce that amount by any exempt income.

    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. If you have carried forward losses from an earlier income year, you will need to reduce that amount by any exempt income.

    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.

    Storm and flood payments

    Australian Government Disaster Recovery Payment

    Individuals affected by the 2022 floods in New South Wales and Queensland may have been eligible to receive the Australian Government Disaster Recovery Payment.

    This financial assistance payment was distributed through Services Australia, and it is treated as exempt income.

    However, if you have carried forward losses from an earlier income year, you will need to reduce that amount by any exempt income.

    If you received the Australian Government Disaster Recovery Payment - Special SupplementExternal Link, you don't need to include this in your tax return because it is not taxable.

    Services Australia has more information about help for people affected by a natural disaster eventExternal Link.

    Disaster Recovery Allowance

    This short-term allowance from Services Australia was support if you lost income as a direct result of a natural disaster.

    In the 2021–22 financial year, you may have received Disaster Recovery Allowance (DRA) for:

    • Victorian Storms and Floods which began in June 2021
    • Queensland Floods beginning in January 2022
    • New South Wales and Queensland Storms and Floods beginning November 2021
    • New South Wales and South East Queensland Floods beginning in February 2022.

    Disaster Recovery Allowance and the Disaster Recovery Allowance Top-up are taxable payments, which means you pay tax on these amounts and they need to be included in your tax return.

    Services Australia will send you a letter confirming the amount of Disaster Recovery Allowance you received.

    When completing your tax return, enter the Disaster Recovery Allowance you received at either:

    • Australian Government allowances and payments if you lodge online using myTax
    • Question 5 Australian Government allowances and payments if you lodge by paper
    • Question 5A Australian Government allowances and payments if you're a registered tax professional.

    If you received the Disaster Recovery Allowance, you may be eligible to receive the beneficiary tax offset. This may reduce the amount of tax you pay.

    The Disaster Recovery Allowance Top-up, New Zealand Disaster Recovery Allowance and New Zealand Disaster Recovery Allowance Top-up will not show on your payment summary from Services Australia. It also won't be prefilled in your tax return. You need to manually include these payments in your tax return.

    When completing your tax return, enter the Disaster Recover Allowance Top-up and New Zealand Disaster Recovery Allowance 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.

    Services Australia has more information about the:

    Storm and flood Disaster Recovery Grant

    Small businesses and primary producers affected by storm and floods may be eligible to receive a special Disaster Recovery Grant. Some Disaster Recovery Grants are NANE income. You don't need to include NANE government grants in your tax return.

    Drought assistance payments

    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.

    Bushfire payments

    2019–20 Bushfires relief recovery payments

    Any bushfire relief recovery or benefits are NANE income if they are provided by any level of government, including: 

    • Australian Government
    • state
    • territory
    • a municipal corporation
    • a local governing body.

    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.

    Other assistance

    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 where nothing is expected in return − 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 giftsExternal Link from family and friends, you don't need to declare them or pay tax on them.

    Last modified: 23 Jun 2022QC 67560