# Tax-free treatment of state and territory COVID-19 grants has been extended



## Jack Malarkey (Jan 11, 2016)

Treasury Laws Amendment (COVID-19 Economic Response) Act 2021 was enacted by the federal Parliament in late June 2021 and has extended the application of the non-assessable non-exempt income status to eligible state and territory business support grants received in the 2021–22 financial year.

The new legislation received Royal Assent on 30 June 2021.

The new Act has built on previous legislation that had limited the tax concession to grants received in the 2020–21 income year.

The federal Treasurer has to declare that a grant program is eligible by legislative instrument if he is satisfied that it is in response to the economic impacts of the coronavirus pandemic.

Only entities with an aggregated turnover of less than $50 million will be eligible for the concessional tax treatment.

*COVID-19 Disaster Payment*

The new Act also allows tax information to be disclosed to Services Australia where the information is disclosed for the purposes of administering the COVID-19 Disaster Payment.

See:






Treasury Laws Amendment (COVID-19 Economic Response) Bill 2021


Helpful information Text of bill First reading: Text of the bill as introduced into the Parliament Third reading: Prepared if the bill is amended by the house in which it was introduced. This version of the bill is then considered by the second house. As passed by




www.aph.gov.au


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## Sandhills (Feb 9, 2018)

Now that is awesome and a very important thing..thanks for posting as a reference Jack


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## Jack Malarkey (Jan 11, 2016)

*TaxBanter overview *

TaxBanter (tax training specialists for small accountancy firms) has produced the following excellent article that will be of interest to those who like to delve into the fine detail:









The tax status of COVID-19 grants [updated] - TaxBanter Pty Ltd.


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




taxbanter.com.au






*The tax status of COVID-19 grants*

July 15, 2021 (as updated)
COVID-19 updates, News, Tax Time


Contents

Eligibility criteria
…

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: We updated this article on 21 July 2021 for newly declared Victorian grants and newly announced grants by other State governments.*

*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:










*Recent grants which have not yet been declared*

In recent weeks, a number of other State and Territory governments have announced various grants to support businesses affected by local restrictions.

These include grants announced by the NSW Government, the Northern Territory Government, the Western Australian Government and the South Australian Government. The Victorian Government has also subsequently announced further funding to support businesses.

At time of writing these recently announced grants have not yet been declared to be eligible grants by legislative instrument.


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## Jack Malarkey (Jan 11, 2016)

*Australian Taxation Office advice (as updated on Thursday 22 July 2021):*



ATO.GOV.AU



*Payments to support business*

Some payments from the Victorian Government to support small businesses will be non-assessable non-exempt (NANE) income for tax purposes. Payments from the following eligible grants programs will be NANE for recipients that meet the eligibility criteria:


Alpine Business Fund
Alpine Support Program
Business Costs Assistance Program Round 2
Business Support Fund 3
Impacted Public Events Support Program
Independent Cinema Support Program
Licensed Hospitality Venue Fund
Licensed Hospitality Venue Fund 2021
Live Performance Support Program
Melbourne City Recovery Fund – Small business reactivation grants
Outdoor Eating and Entertainment Package
Sole Trader Support Fund.
Sustainable Event Business Program
To be eligible for a payment to be NANE, you must meet all of the following criteria:


you received a payment under a grant program identified above
you received the payment in the 2020–21 or 2021–22 financial years
you are a small business with an aggregated turnover of less than $50 million for the income year in which you receive the payment.
You do not include NANE income in your tax return.

The list of eligible grants programs may be extended to specific grants in other states and territories. This page will be updated accordingly.


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## Jack Malarkey (Jan 11, 2016)

Accountants Daily

Wednesday 25 August 2021

Jotham Lian





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*NSW, Victoria business support payments declared tax-free by Josh Frydenberg*

COVID-19 business support programs in New South Wales and Victoria will now be tax-free following a formal declaration by Treasurer Josh Frydenberg.

The declaration comes after legislation was passed earlier this month to allow the Treasurer to decide which state and territory business support programs would be eligible for non-assessable non-exempt (NANE) income status.

Under the new law, payments will be treated as NANE income if they were made under an eligible program, received in the current financial year, and were received by a business with an aggregated turnover of less than $50 million.

Mr Frydenberg has now declared that four NSW grant programs will be eligible for the NANE income treatment:

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.
The inclusion of JobSaver payments as NANE income will likely require urgent guidance from the ATO, due to a turnover threshold difference between the law and the program, said Chartered Accountants Australia and New Zealand tax leader Michael Croker.

NSW’s JobSaver program currently allows businesses of up to $250 million in annual turnover to receive payments, but the new law only provides NANE income treatment to payments made to small entities with a turnover of less than $50 million.

“This is a deliberate policy decision by the Federal government,” said Mr Croker. “So there will be recipients of JobSaver which won't receive NANE treatment and will have the amount included in their assessable income.”

“I fear that some business operators may not appreciate this, thinking that JobSaver is always 'tax-free' because that's what the PM said on Sunrise. Some might have trouble finding the money to pay the tax once the tax return is lodged.”

Five Victorian business support programs have also been declared as eligible grant programs:

the Alpine Resorts Support Program (Streams 1, 2 and 3);
the Business Continuity Fund;
the Business Costs Assistance Program Round Two - July Extension;
the Licenced Hospitality Venue Fund 2021 – July Extension; and
the Small Business COVID Hardship Fund.
The new law also provides individuals receiving COVID-19 Disaster Payments with tax-free payments, meaning workers who lose 20 or more hours of work a week will receive the full $750 a week, while those who lose between eight and 20 hours will receive $450.

View the Income Tax Assessment (Eligible State and Territory COVID-19 Economic Recovery Grant Programs) Amendment Declaration (No. 2) 2021 here.


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