Coronavirus grants now tax-free

Coronavirus Grants Now Tax-Free

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Legislation aimed at ensuring coronavirus small business grants are not subject to income tax has now passed both houses of Parliament.

Treasury Laws Amendment (2020 Measures No. 5) Bill 2020 passed Parliament late on Thursday.

The bill amends income tax law to make certain grant payments received by eligible businesses non-assessable non-exempt income so that these payments are not subject to income tax by the Commonwealth.

The minister must declare a grant program to be eligible by legislative instrument and must be satisfied that the program is responding to the economic impacts of the coronavirus pandemic.

The grant must have been first publicly announced on or after 13 September 2020 by the relevant state, territory or authority, and must be directed at supporting businesses subject to certain restrictions regarding their operations.

Only entities with an aggregated turnover of less than $50 million will be eligible for the concessional tax treatment.

“The concessional tax treatment ensures that eligible businesses obtain an additional boost to their cash flow, further supporting their economic recovery,” the explanatory memorandum said.

“This is because, in addition to the payments not being subject to income tax (by being treated as non-assessable non-exempt income), businesses will continue to be able to claim deductions for eligible expenses made with the grant payments.”

The concessionary measure was first revealed by Prime Minister Scott Morrison following the announcement of Victoria’s $3 billion Business Resilience Package.

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