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A number of different stimulus measures have been implemented to help those impacted by the current COVID-19 restrictions. In this update we explore whether they are tax free and why.

The table below provides a summary of COVID-19 stimulus measures and their tax free status. Read on for further details. 
Most people would think that money provided by the Government to support people and business during a crisis would be tax free? Otherwise, it’s like giving money with one hand and then taking it away with the other, isn’t it?

Unfortunately, the tax laws don’t work like that. To make a payment tax-free, legislation is required to enable it to be classified as exempt income or non-assessable non-exempt income. In general, any income received will be assessable unless the Government has legislated for it to be tax-free. JobKeeper for example was not tax free and anyone who received it in 2020-21 will need to declare it in their income tax return.

At the Federal Government level, the Prime Minister announced in late July that the COVID-19 Disaster Payment will be tax free and legislation had been introduced to Parliament to enable this change. Other payments however, such as Pandemic Leave Disaster Payments, remain taxable.

This new law was passed on Monday 9 August 2021 to ensure COVID-19 Disaster Payments will now be treated as non-assessable non-exempt income (i.e. Tax Free), dating back to its introduction on 3 June.

This legislation makes the COVID-19 Disaster Payments potentially more generous than the JobKeeper wage subsidy program, which was taxable.

Clients who have received the payment won’t need to include the amount as assessable income in their 2021 or 2022 income tax returns.

The Treasurer has also been granted the power to make State and Territory grants tax-free but only from 13 September 2020, and only if they request the Commonwealth Government to make it tax free.

The result is a mix of tax treatments depending on what support you received and from whom. To date, only a series of Victorian business grants are tax-free.

The recent business grants in New South Wales, including the Small Business Grant, JobSaver and the Micro Business Grant, have not yet been declared as tax free. However, this may change and we will keep you informed if and when it does.

Here to Help

As always, the FMA team are across the detail and ready to answer any questions you may have. 

Contact our office on +61 2 9540 6888 or via email at info@fmapartners.com.au 
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