Tax issues for businesses that have received a support payment

Taxpayers who have received a government support grant or payment recently to help their business recover from COVID-19 or a natural disaster should check if they need to include the payment in their assessable income.

Grants are generally treated as assessable income, and taxpayers may be able to claim deductions if they use these payments to:

•     purchase replacement trading stock or new assets;
•     repair their business premises and fit out; or
•     pay for other business expenses.

However, some grants are declared non-assessable, non-exempt ('NANE') income.  This means taxpayers don't need to include them in their tax return if they meet certain eligibility requirements.

NANE grants include but are not limited to:

•       COVID-19 business support payments;
•       natural disaster grants; and
•       water infrastructure payments.

Taxpayers can only claim deductions for expenses associated with NANE grants if they relate directly to earning their assessable income, including wages, dividends, interest and rent.

Taxpayers cannot claim expenses related to obtaining the grant, such as accountant's fees.