Tax treatment of disaster and pandemic relief payments, grants & loans

If you received a government grant or relief to help soften the blow of a disaster, the way these grants and loans are taxed will vary.

In general, grants are taxable unless a law has been passed to specifically exclude the grant or loan from tax. For example, the 2021-22 Federal Budget made disaster recovery grant payments to primary producers and small businesses that relate to floods that occurred between 19 February and 31 March 2021 non-assessable non-exempt income.

And, if your business is in Victoria, a series of grants have been declared non-assessable, non-exempt income, but it really depends on the specific grant.

If you carry on a business and the payment relates to your continuing business activities, then it is likely to be included in your assessable income for income tax purposes unless a specific exemption applies. The position can sometimes be different where the payment was made to enable you to commence a new business or cease carrying on a business.

When it comes to GST treatment, the key issue is whether the grant is consideration for a supply. That is, was the business expected to deliver something for the grant? The following government payments are not consideration for a supply and therefore not subject to GST or included in your GST turnover:
• JobKeeper payment
• Cash flow boost payment
• The Early Childhood Education & Care Relief Package paid to approved child care providers
• Payment of grants to an entity where the entity has no binding obligations to do anything or does not provide goods and services in return for the monies.