COVID-19 Grant Update: Grants Now Tax Exempt

Startups, small and medium sized businesses will now be exempt from Commonwealth income tax, following requests made by the South Australian Government. The COVID-19 grant update will assist eligible businesses who won’t have to pay income tax on their support grants. Ventures will now be able to reap the benefits of the full value of their cash grant. Despite the COVID grant update, businesses will still be able to claim a tax deduction when they spend the cash grant on wages or other eligible deductible expenditure.

In his request Treasurer – Rob Lucas – called for business support packages like the COVID-19 Business Support Grant program and the COVID-19 Additional Business Support Grant to be tax exempt for small and medium sized ventures. After talks with Federal Treasurer – Josh Frydenberg – the government business support grants were declared as non-assessable, non-exempt (NANE) for taxable income means. Other eligible programs, include Victoria’s Business Community Fund, Sole Trader Support Fund, Small Business COVID Hardship Fund, Business Costs Assistance Program Round Two and Business Support Fund Three. For a full list of government grants, business support, cash grants, and all other grants that may be available to your startup, you can visit our grants page.

Conditions for Startups

The move will fall under the legislative requirements for NANE treatment under income tax law. Under Section 59-97 of the Income Tax Assessment Act 1997, a COVID-19 small business support payment is NANE income if: 

• The payment is received under a grant program administered by a State or Territory, or an authority of a State or Territory.
• The business support payment is received by a small business with an aggregated turnover of less than $50 million in the income year the payment was received; and/or
• The taxpayer’s aggregated turnover for the current year is likely to be less than $50 million.
• The payment was received in the 2020-2021 or 2021-2022 financial year.

Is My Startup an Eligible Business?

Under the requirements outlined, the taxpayer must be either: 

• A small business entity (SBE) as defined in Section 329-110 of the Income Tax Assessment Act 1997; or
• An SBE if the $10 million threshold was instead $50 million.

Treasurer, Rob Lucas, has also requested for additional COVID-19 grants to be updated, including the COVID-19 Business Hardship Grant and the COVID-19 Tourism and Hospitality Support Grant. For further grant support, you can visit our grants hub page via the link.  

Need Help?  Contact Us 

If you need assistance finding the right grant for you startup, or if you need help with your grant application, we are the team to contact. Our grant specialists are savvy when it comes to finding the right business support for your startup. To find out more, you can connect with one of our grant specialists on 03 8691 3111 or send us an email at hello@alliedlegal.com.au. 

You might also like our article COVID-19: Latest Grants and Funding for Victorian Startups.