After another challenging year, businesses may be wondering whether the amounts they’ve received from governments as various COVID-19 recovery grants or recovery payments should be included in their assessable income. The short answer is no, but the devil is in the detail, it all depends on type of payment you received and who you received it from so you’ll need to be careful when preparing your business return.
In general, some COVID-19 recovery payments from various governments to support small businesses will be non-assessable non-exempt (NANE) income for tax purposes will not be a part of your assessable income. A payment will be NANE if it was received under an eligible grant program, in the 2020-21 or 2021-22 financial years by a small business with an aggregated turnover of less than $50m in the income year the payment was received.
Eligible grants consist of the following:
The above grants are all from the State of Victoria. Some grant programs from NSW have also been designated as NANE income recently. These include the 2021 COVID-19 business grant, the 2021 COVID-19 JobSaver payment, the 2021 COVID-19 micro-business grant, and the NSW Performing Arts COVID Support Package. So far, the Federal government has taken a very piecemeal approach to whether various State/Territory based payments are considered to be NANE, so businesses will need to be careful if they have received any payments and check often to see whether the payments they have received has been designated NANE.
At this stage, it is not known whether the various grants and business support offered by other State and Territory governments such as Tasmania, ACT, South Australian, and more recently Northern Territory and Western Australia will be designated NANE. This means that unless the Federal government specifically declares the grants to be “eligible grant programs”, businesses that received such help may have to declare that income on their tax return and be assessed for income tax on those payments.
With COVID-19 overshadowing everything, many businesses may have forgotten the 2021 storms and floods. Small businesses (ie employ less than 20 full-time equivalent staff and not a sole trader business where 50% or less of their income comes from that business) and primary producers affected by storms and floods that occurred between 19 February 2021 and 31 March 2021 were eligible to receive special disaster recovery grants. Grants that are Category D under the Disaster Recovery Funding Arrangements 2018 are NANE income from the 2020-21 financial year and onwards.