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Do you need to pay tax on COVID-19 financial support payments?

Do you need to pay tax on COVID-19 financial support payments?

There are a number of different schemes providing government help for individuals and businesses affected by the COVID-19 pandemic.

If you receive assistance (whether from the Commonwealth or a State or Territory government), you may be wondering if you need to pay tax on the assistance. Here is what the ATO website advises.

 

 Assistance   Income tax treatment  GST treatment
COVID-19 Disaster Payment Not taxable N/A
JobKeeper Taxable – but amounts paid to employees that are subsidised by JobKeeper are deductible (see below) No GST
Pandemic Leave Disaster Payment  Taxable N/A
Small business support payments  See below No GST
Child Care Transition Payment   Taxable No GST (GST-free supply)
Creative Economy Support Payment  Taxable No GST
Creative Economy Concessional Loan  Not taxable No GST
Consumer Travel Support Program Grant  Taxable No GST
State Government Voucher Subsidy Scheme Payment  Taxable GST payable
Electricity rebate Not taxable – but rebate reduces a business’ deduction for electricity No GST

 

Small business support payments

Government payments to assist a business to continue operating are generally taxable, whether provided as a one-off lump sum or a series of payments. That includes SA COVID-19 Additional Business Support Grant.

Summary of SA 2021 COVID-19 business support measures

This summary sets out the key features and conditions of the COVID-19 financial support measures currently available to businesses in South Australia.

The hyperlinked information for each measure will take you to the landing page where you can find guidance, terms and conditions, further information on eligibility and online application forms.

This information is current as at 11:00am on 26 August 2021.

 SA COVID-19 Business Support Grant — July 2021 
Amount

•       Employing: $3,000

•       Non-employing: $1,000

Program open 29 July 2021 to 30 September 2021
Aggregated turnover $75,000 or more
Decline in turnover (DIT) ≥ 30% in the week of 20 July 2021 to 26 July 2021 (inclusive) compared to the prior week
Other key conditions Must be registered for GST. Australian payroll must be less than $10m if employing
More information SA Department of Treasury and Finance website

SA COVID-19 Additional Business Support Grant 

Amount

•       Employing: $3,000

•       Non-employing: $1,000 Plus further $1,000 if operate from a commercial premise in the Adelaide CBD

Program open 13 August 2021 to 17 October 2021
Aggregated turnover No minimum turnover
Decline in turnover (DIT) ≥ 30% over the 2 weeks from 28 July 2021 to 10 August 2021 compared to average fortnightly turnover in the June 2021 quarter
Other key conditions Must be registered for GSTAustralian payroll must be less than $10m if employing
More information SA Department of Treasury and Finance website

 

Common exclusions

  • Businesses located or operating outside of South Australia
  • Businesses such as sole traders who are eligible to receive the Commonwealth Disaster Payment
  • Businesses for which the primary or only source of income is passive (rent, dividends, interest)
  • Eligible for another business grant.

 

Use of business grant funds

  • Meeting business costs, including utilities, salaries, rent
  • Seeking financial, legal or other advice to support business continuity planning
  • Developing the business through marketing and communications activities
  • Other supporting activities related to the operation of the business.

 

Rent relief

If a sole trader receives rent relief, its deduction for rent will be reduced. If the sole trader is registered for GST, its entitlement to GST credits is reduced in proportion to the rent reduction.

Land tax relief

Land tax relief will result in a smaller allowable deduction. GST is not payable on the relief, but the GST payable on rent received by the landowner is reduced in proportion to the rent reduction given to the tenant.

Payroll tax relief

There are no GST consequences where:

  • no payroll tax is payable – the sole trader will have a smaller allowable deduction in their tax return;
  • a refund of payroll tax is paid – the allowable deduction for payroll tax will be less than any refunds given.

 

The article is provided for general information purposes only and is not intended as professional advice. Readers should not act on the information contained therein without professional advice from a suitably qualified accountant. 

Contact our KMT tax adviser or call 08 8431 0022 to check whether specific support government payments are taxable.

 

What’s new for individual tax?

Keep up to date with the new income tax thresholds, Medicare levy surcharge and private health insurance for individuals 2021-22… Learn more

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