If you are 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, but regular Centrelink payments remain taxable.
Emergency assistance in the form of gifts from family and friends is not taxable.
If you use an assistance payment to purchase items for your business, the normal conditions for deductibility apply. The fact that money from a relief fund is used to purchase an item does not affect the deductibility of that item.
Grants from government and private funding bodies do not attract GST, provided the grant recipient doesn't provide anything of value in return.
For some major disasters, we have published a list of 'affected postcodes' to help us identify people and businesses in disaster-affected areas.
Government disaster recovery payments
If you have received a relief 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 relief payments are:
- Australian Government Disaster Recovery Payments (DRP)
- Disaster Recovery Allowance (DRA)
- Natural Disaster Relief and Recovery Arrangements (NDRRA) and
- ex-gratia recovery payments.
Australian Government Disaster Recovery Payments (DRP)
If you receive a DRP, it will be treated as exempt income. You do not pay tax on this amount but you need to include it when you work out your tax loss.
Disaster Recovery Allowance (DRA) and Natural Disaster Relief and Recovery Arrangements (NDRRA)
DRA and NDRRA payments are generally taxable. However, the Australian Government may declare that, for some natural disasters, DRA and NDRRA payments are exempt income. You do not pay tax on exempt income but you include the amount when you work out your tax loss.
Ex-gratia recovery payments
The tax treatment of ex-gratia recovery payments depends on the specific circumstances of the payments. In some recent cases the Australian 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.
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.
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.
Salary or wages are taxable because they are part of your ordinary income. They have to be included as income in your tax return and your employer will specify the amount as normal salary or wages in your annual payment summary.
However, emergency assistance from your employer - for example, one-off and other non-periodic 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.
You may receive assistance from government authorities, charitable institutions, employers, your family, a trade union or other sources. Most one-off assistance payments are tax free, but regular Centrelink payments remain taxable