Government Support Grants
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 and fit out; or
- pay for other business expenses.
However, some grants are treated as 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.
Non-assessable, non-exempt 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.
Ref: ATO website, Small Business Newsroom, 12 October 2023
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