Obtaining a grant, whether of Federal or State origin, is for many businesses the difference between thrive and decline, especially in these COVID times. But many wind up surprised by the tax bill that follows, wishing they had looked that gift horse in the mouth.
Income Tax All grants are assessable for Income Tax purposes, unless they are specifically marked as non-assessable by legislation. Specifically, the following packages are non-assessable:
Federal 2020 Cash flow boost
NSW (only for entities with aggregated turnover ≤ $50m) 2021 COVID-19 business grant 2021 COVID-19 JobSaver payment 2021 COVID-19 micro-business grant NSW Performing Arts COVID Support Package
Please note however that your costs in obtaining these grants (e.g. advisor fees) will in turn not be tax deductible (and therefore you will not be able to claim GST on these either). GST Many grants require the recipient to do something in return (e.g. supply to the public, provide reports, finish the development of a product…), beyond the mere satisfaction of an eligibility criteria. If there is consideration provided for the supply of services or goods that are not specifically GST-free or input-taxed, such a grant would generally be subject to GST. This means that you are required to pay 1/11th of the money you collected to the ATO. Unfortunately, this is a very grey area where little government guidance is given, and you will need to determine whether GST applies on a case-by-case. For instance, no GST is imposed on the NSW 2021 COVID-19 JobSaver, but GST is imposed on the Minimum Viable Product Grant. Accru Felsers has assisted many clients throughout the current crisis with their loan applications and tax planning. Please reach out to Will Merdy for assistance on either of these services at firstname.lastname@example.org or on 02 8226 1655.
PUBLISHED: 27 SEPTEMBER 2021