Tax Exemptions for Heavily Hit Businesses

Recent rounds of the Government’s business support cash grants paid to eligible COVID-affected small and medium businesses will be exempt from Commonwealth income tax, following a request by the Marshall Government.

Treasurer Rob Lucas wrote to Federal Treasurer Josh Frydenberg last month, seeking the COVID-19 Business Support Grant – July program and the COVID-19 Additional Business Support Grant be declared non-assessable, non-exempt (NANE) for income tax purposes.

Mr Lucas said the effect of this would be that eligible businesses will not pay income tax on the grant, and in addition, they can still claim a tax deduction when they spend the grant on wages or other eligible deductible expenditure.

“I am pleased to have received correspondence from the Federal Treasurer this week, that confirms his intention to declare these grants as meeting the legislative requirements for NANE treatment under the income tax law,” said Mr Lucas.

“We welcome this, because it ensures businesses can apply the full value of the grants to support their operations in recognition of the impact of COVID-19 restrictions on eligible businesses.

“I have also written to the Federal Treasurer asking that the latest two rounds, the COVID-19 Tourism and Hospitality Support Grant and the COVID-19 Business Hardship Grant, also be declared NANE for income tax purposes.

“The Marshall Government is doing all it can to save as many local jobs and businesses as possible, and our cash grant programs are part of our strong Economic Recovery Plan.”

In response to the 7-day lockdown in July and subsequent trading restrictions, the Government announced a Business Support Grant (including $3,000 and $1,000 cash grants), and a further Additional Business Support Grant (joint funded with the Federal Government), of up to $4,000.

Under the Income Tax Assessment Act 1997, a COVID-19 small businesses support payment is NANE income if:

  • The payment is received under an eligible State or Territory grant or Commonwealth support program.
  • The payment is received by a small business with an aggregated turnover of less than $50 million in the income year the payment was received.
  • The payment was received in 2020–21 or 2021–22 financial year for eligible State or Territory grants*

* The ATO webpage on ‘Government grants and payments during COVID-19’ explains the tax treat of grants. For more information see:

Eligible South Australian grants will be added to the list of grant and support payments following the formal declaration by the Federal Minister.

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