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COVID-19 support payments to individuals and businesses will now be tax-free after a new bill was passed by both houses on Monday.
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Parliament passes bill on tax-free COVID-19 support payments
10 August 2021
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The Treasury Laws Amendment (COVID-19 Economic Response No. 2) Bill 2021 finally passed both houses without amendment on Monday after the Senate agreed not to insist on a transparency measure which would have forced businesses to disclose how much they received in JobKeeper wage subsidies.
Under the new law, COVID-19 Disaster Payments dating back to its introduction on 3 June will now be non-assessable non-exempt income, meaning recipients will take home more than they did under the $90 billion JobKeeper wage subsidy program, which was taxed.
Workers who lose 20 or more hours of work a week will receive $750 a week, while those who lose between eight and 20 hours will receive $450.
COVID-19 Disaster Payment recipients can now expect to be better off by $90 a week compared with the JobKeeper wage subsidy, based on an annualised $39,000 income of $750 each week.
The newly passed bill will also ensure that COVID-19 business support payments will be treated as non-assessable non-exempt income.
Business support payments will only be tax-free if they are made under a program declared eligible by Treasurer Josh Frydenberg and were received in the 2021–22 financial year.
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Entities must also have an aggregated turnover of less than $50 million to be eligible for the concessional tax treatment, putting it at odds with NSW’s JobSaver program which was recently expanded to businesses with an annual turnover of up to $250 million.
Information and data from the ATO will also now be shared with the relevant states and territories administering COVID-19 business support programs.
Finally, the bill will also give Treasurer Josh Frydenberg powers to authorise additional COVID-19 payments to businesses affected by state or territory lockdowns between 1 July 2021 and 31 December 2022.
Mr Frydenberg was previously granted similar powers in introducing the JobKeeper program and the JobMaker Hiring Credit Scheme.
Michael Croker, tax leader at Chartered Accountants Australia and New Zealand, believes the Treasurer now has ace up his sleeve as states continue to enter snap lockdowns to combat the spread of COVID-19.
“Accountants are curious about the power this bill gives the federal government to stand up its own business support arrangements in response to state lockdowns,” said Mr Croker.
“Josh Frydenberg now has an ace in his pocket, but nobody knows how he’ll play it.
“Hopefully, the ATO will now move quickly to engage with the professional associations on the ramifications of treating COVID-19 Disaster Payments and eligible state business support packages as non-assessable non-exempt income.”
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