This month we will turn our attention to Government grants, payments and stimulus programs that have delivered desperately needed financial support for individuals and businesses impacted upon by the COVID-19 lockdowns.
There has been such a complex array of support measures and reliefs that we have never experienced before and therefore have no prior experience or knowledge of how or whether these benefits are taxed.
JobKeeper (30/3/2020 – 28/3/2021)
JobKeeper payments are assessable as ordinary income to businesses that were eligible to receive the payments. As the JobKeeper payments must be on- paid to all eligible employees, the payments, even if in excess of an employee’s normal wage will be a deductible expense to the employer.
In the hands of employees, the JobKeeper payments received will be assessable income and will appear as salary or wages, or an allowance or top up on the employee’s income statement or payment summary.
If you are a sole trader who has received JobKeeper payments the receipts will be reported as business income at the label ‘Assessable government industry payments’ in your personal tax return at item P8 Label G or H.
If your business is a partnership, trust or company you need to report JobKeeper receipts in your business tax return at item 6 Label Q.
Cash Flow Boost (from 12th March 2020 to 30 September 2020)
Irrespective of whether your business operates as a sole trader, partnership, trust or company, if your business received cash flow boost credits they are treated as non-assessable non-exempt income (NANE) and do not need to be included in your business tax return and neither is GST applicable.
Commonwealth COVID-19 Disaster Payments to Individuals
This payment was announced on 3rd June 2021 in response to the May/June 2021 Victorian lockdown and was designed to provide weekly assistance to eligible individuals be they full time, part time or casual workers who have lost hours of paid work due to state imposed health restrictions.
How much of the Disaster Payment an individual receives will depend upon factors such as the location of the applicable health order, the period the individual is claiming for and the hours of work they lost. For example in August 2021 if a person lost 20 hours or more of work a week they were entitled to $750 per week or $450 per week if the person lost between 8 and 20 hours of work each week.
On 9th August 2021 the government passed legislation retrospectively making these payments NANE income, tax free in the hands of the recipient.
TIP: If you received such payments in June 2021 and have already lodged your 2021 income tax return, make sure the ATO makes an appropriate adjustment to your tax return if you included this income as part of your assessable income.
Victoria COVID-19 Economic Support Measures (BCAP)
This Victorian Government Business Costs Assistance Program (BCAP) provides grants to small and medium size businesses impacted by Victoria’s COVID-19 public health restrictions.
a) Vic Govt. Business Costs Assistance Program Round One (BCAP1)
The first round of the program targeted support of $2,000 for businesses that were most likely to have incurred direct costs as a result of the Circuit Breaker action during February and March 2021 and is no longer available.
b) BCAP2
BCAP round two was launched in June 2021 with an expanded list of eligible sectors offering payments of $2,500
c) BCAP2 July Extension
This extension was launched to give businesses that had not previously applied for the program, or had since become eligible, the opportunity to apply for an initial payment of $4,800.
d) BCAP3
On 6th August 2021 it was announced that eligible businesses will be automatically paid a BCAP3 grant of $2,800.
e) BCAP4
Announced on 4th September 2021, weekly payments of $2,800, $5,600 or $8,400 were made available to businesses depending upon the annual payroll size ranging from less than $650,000, between $650,000 and less than $3 million and the top rate for businesses with an annual payroll between $3 and $10 million. Eligible recipients must be unable to operate due to the public health restrictions.
f) BCAP5
Top-up payments of $1,000, $2,800, $5,600 or $8,400 were announced on 30th September 2021 available to recipients of the BCAP round 2 and the round 2 July extension.
Comment:
Businesses must be registered for GST in order to be eligible and these payments are expected to be income tax free.
Victoria Small Business COVID Hardship Fund
On 28th July it was announced that a new fund would be set up to pay grants of $20,000 to small businesses that:
- had an ABN and was registered for GST on and from 28th July 2021
- suffered a reduction in turnover of at least 70% for a two-week period since 27 May 2021
- have been ineligible for other Victorian Govt. COVID-19 support packages launched on or after 27 May 2021
- have an annual Victorian payroll of up to $10 million in 2019-20
It is also assumed the Federal Govt. will declare these grants to be tax free.
Further Information:
Please refer to the Business Victoria ‘Grants and Programs’ for further details on all available Victorian Government COVID-19 business assistance, particularly if you are seeking commercial tenancy relief or are a sole trader or microbusiness working for yourself or have 1 to 2 employees with an annual turnover of less than $75,000 and are not eligible for Victorian Government COVID-19 business support grants.
Disclaimer:
The content of this article is not intended to be relied upon as professional advice and should not be used as such. If you have any questions you should consult a registered tax agent.
Brian Spurrell B A, B Com, Dip Ed, FCPA, CTA, Registered Tax Agent.
Director, Personalised Taxation & Accounting Services Pty Ltd
PO Box 143 Warrandyte 3113 Ph: 0412 011 946
Web: www.ptasaccountants .com.au