House of Representatives

Treasury Laws Amendment (2021 Measures No. 3) Bill 2021

Explanatory Memorandum

(Circulated by authority of the Assistant Treasurer, Minister for Housing and Minister for Homelessness, Social and Community Housing, the Hon Michael Sukkar MP)

Chapter 4 - Recovery grants for 2021 floods and storms

Outline of chapter

4.1 Schedule 4 to the Bill amends the ITAA 1997 to make disaster recovery grant payments in relation to the storms and floods that occurred in February and March 2021 non-assessable non-exempt income.

Context of amendments

4.2 The storms and floods that occurred in February and March 2021 had a devastating impact on a number of communities.

4.3 On 26 March 2021, the Prime Minister announced that primary producer recovery grants for primary producers and small businesses would be activated as a Category D measure under the Disaster Recovery Funding Arrangements.

4.4 The Prime Minister has announced that such grant payments would not be subject to income tax.

Summary of new law

4.5 Schedule 4 amends the ITAA 1997 to provide that disaster recovery grant payments in relation to floods caused by rainfall that occurred between 19 February 2021 and 31 March 2021 and storms in the same period are not assessable income and not exempt income.

Comparison of key features of new law and current law

New law Current law
Disaster recovery grant payments to primary producers and small businesses that are in relation to floods that occurred following rainfall and storms between 19 February and 31 March 2021 are non-assessable non-exempt income. Disaster recovery grant payments to primary producers and small businesses that are in relation to floods that occurred following rainfall and storms between 19 February 2021 and 31 March 2021 could be subject to income tax, depending on the circumstances of the recipient.

Detailed explanation of new law

4.6 Schedule 4 amends the ITAA 1997 to provide that payments are not assessable income and not exempt income if:

·
the payments are recovery grants made to small businesses or primary producers (within the meaning of those terms in the Disaster Recovery Funding Arrangements 2018 as set out in a determination made by the Minister for Law Enforcement and Cyber Security on 5 June 2018) as part of a Category D measure under the Disaster Recovery Funding Arrangements 2018; and
·
the payments relate to floods consequent on rainfall events that occurred between 19 February and 31 March 2021 or to storms that occurred in the same period.

[Schedule 4, item 2, section 59-99 of the ITAA 1997]

4.7 Schedule 4 also updates the guide in section 11-55 of the ITAA 1997 which lists particular kinds of non-assessable non-exempt income to include a reference to the new exemption. [Schedule 4, item 1, section 11-55 of the ITAA 1997]

Application and transitional provisions

4.8 The amendment made by Schedule 4 will apply to assessments for the 2020-2021 income year and later income years. [Schedule 4, item 3]


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