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ATO Updates Guidance on What to Exclude from Assessable Income — Orbitax Tax News & Alerts

The Australian Taxation Office has published updated guidance on What to exclude from your business's assessable income. The guidance has been expanded, including in relation to non-assessable non-exempt (NANE) income in the form of government grants for COVID-19 and others.

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What to exclude from your business's assessable income

Not all payments you receive are assessable income for income tax purposes and do not need to be included as assessable income.

List of non-assessable amounts

The following amounts are not assessable:

  • betting and gambling wins (unless you operate a betting or gambling business)
  • earnings from a hobby
  • gifts or inheritance
  • GST you have collected
  • non-assessable non-exempt government grants for grant recipients
  • prizes and awards not related to your business
  • money you have borrowed
  • money you contribute as the business owner.

Non-assessable non-exempt government grants for grant recipients

The Federal Government can declare eligible business support grants as non-assessable, non-exempt (NANE) income. This means you do not include NANE income in your income tax return and you do not pay tax on it.

COVID-19 recovery payments

Some COVID-19 recovery payments from the Government to support small businesses will be NANE income for tax purposes.

Eligibility

To meet the eligibility requirements to treat support grants as NANE income on your income tax return, you will need to self-assess.

A payment will be NANE if it was received:

  • under an eligible grant program
  • in the 2020–21 or 2021-22 financial years
  • by a small business with an aggregated turnover of less than $50 million in the income year the payment was received.

Grants

  • Alpine Business Fund
  • Alpine Support Program
  • Business Costs Assistance Program Round Two
  • Business Support Fund 3
  • Impacted Public Events Support Program
  • Independent Cinema Support Program
  • Licensed Hospitality Venue Fund
  • Licensed Hospitality Venue Fund 2021
  • Live Performance Support Program
  • Melbourne City Recovery Fund - Small business reactivation grants
  • Outdoor Eating and Entertainment Package
  • Sole Trader Support Fund.
  • Sustainable Event Business Program

Example: receiving a grant eligible for NANE income

Fresh Brew is a small business operating a café in Victoria.

Fresh Brew received an eligible grant payment under the Outdoor Eating and Entertainment Package for the 2020-21 financial year.

This Package is part of the Victorian Government's response to the economic impacts of Coronavirus.

The Minister has declared that the Outdoor Eating and Entertainment Package is a grant program that's eligible for NANE income.

In the 2020-21 financial year, Fresh Brew self-assessed and identified that they are a small business as their turnover was less than $50 million in the income year the payment was received.

As Fresh Brew received an eligible grant payment in the 2020-21 financial year and they are a small business, they do not need to include the grant in their business income.