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The tax status of COVID-19 grants

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The State and Territories have provided a range of grants to businesses affected by COVID-19 trading restrictions.

Section 59-97 of the ITAA 1997 provides that such a payment is non-assessable non-exempt income if it meets certain criteria, including that it was announced on or after 13 September 2020.

Editor’s note: This article will be updated whenever the Treasurer makes a new declaration that certain grants are non-assessable non-exempt income.

Eligibility criteria

Conditions for the payment

The payment must be received under a grant program administered by a State or Territory, or an authority of a State or Territory.

The taxpayer must receive the payment in the 2020–21 income year. That means any grant paid before 1 July 2020 is assessable.

Schedule 1 to the Treasury Laws Amendment (COVID-19 Economic Response) Act 2021 (the Act), which received Royal Assent on 30 June 2021 as Act No. 71 of 2021, extends the concessional income tax treatment of qualifying grants to include grants received in the 2021–22 income year. The amendments also ensure that taxpayers with a substituted accounting period are also able to take advantage of the NANE income status of grant payments.

Conditions for the taxpayer

A taxpayer is eligible for the NANE tax treatment where:

  • it carries on a business in the current year;
  • one or both of the following applies:
    • the taxpayer carried on a business in the previous income year and its aggregated turnover for that year was less than $50 million; and/or
    • the taxpayer’s aggregated turnover for the current year is likely to be less than $50 million.

This is based on the requirements in ss. 59-97(1)(d) and (2) that the taxpayer must be either:

  • a small business entity (SBE) as defined in s. 328-110 of the ITAA 1997; or
  • an SBE if the $10 million threshold was instead $50 million.

Conditions for the grant program

The grant program must be declared — under s. 59—97(3) — to be an eligible program. It does not matter whether the declaration is made before, on or after the day the taxpayer receives the payment.

A grant program is declared — by legislative instrument — to be an eligible program if it satisfies all of the criteria. There is no Ministerial discretion to not declare an eligible program.

The eligibility criteria are that:

  • the program was first publicly announced on or after 13 September 2020 by the State, Territory or authority that is administering it;
  • the program is responding to the economic impacts of COVID-19;
  • the program is directed at supporting businesses:
    • who are the subject of a public health directive applying to a geographical area in which the businesses operate;
    • whose operations have been significantly disrupted as a result of the public health directive;
  • the State, Territory or authority has requested the program to be declared to be an eligible program.

Grants which are declared NANE income

The grants which have been declared eligible for NANE treatment — by legislative instrument — are all administered by the State of Victoria. They are listed in the Income Tax Assessment (Eligible State and Territory COVID-19 Economic Recovery Grant Programs) Declaration 2020 and the Income Tax Assessment (Eligible State and Territory COVID-19 Economic Recovery Grant Programs) Amendment Declaration (No. 1) 2021.

The eligible programs are:

Announced grants which have not yet been declared eligible for NANE treatment

All State and Territory governments have announced business support packages to assist businesses suffering from COVID-19 restrictions throughout the country. We are awaiting the Treasurer to declare further grants and programs as eligible for NANE treatment.

Here are the links to each State and Territory’s webpage setting out the available business supports. (Not all of these grants will necessarily be eligible for NANE treatment.)

The Service NSW website has been updated to confirm that businesses must reaffirm their decline in turnover every fortnight to remain eligible for JobSaver payments and the Micro-Business Grant.

Further info and training

Join us at the beginning of each month as we review the current tax landscape. Our monthly Online Tax Updates and Public Sessions are excellent and cost effective options to stay on top of your CPD requirements. We present these monthly online, and also offer face-to-face Public Sessions at 18 locations across Australia. Click here to find a location near you.

We’ll cover these grants (and other new announcements) in full at our upcoming Public Sessions:

Online training

Tailored in-house training

We can also present these Updates at your firm (or through a private online session) with content tailored to your client base – please contact us here to submit an expression of interest or visit our In-house training page for more information.

Our mission is to offer flexible, practical and modern tax training across Australia – you can view all of our services by clicking here.