Not all payments you receive are assessable income for income tax purposes. If a payment you receive is not assessable income, you do not need to include it in your tax return.
List of non-assessable amounts
The following amounts are not assessable, for example:
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
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
Some business support grants are non-assessable, non-exempt (NANE) income. If a business support grant you receive is NANE, you do not include it in your income tax return and you do not pay tax on it.
COVID-19 business support payments
You don't need to pay tax on some COVID-19 payments from the government to support businesses. Eligible payments will be non-assessable non-exempt (NANE) income for tax purposes.
Is a COVID-19 support payment you receive not taxable?
A government COVID-19 business grant or support program payment you receive will only be non-taxable (non-assessable non-exempt income (NANE)) if all the following three criteria are met:
The payment is received under a state or territory grant, or Australian Government support program that is formally declared by the Minister under a legislative instrument to be eligible for NANE treatment.
You carried on a business and have an aggregated turnover of less than $50 million in either the income year the payment was received or the previous income year.
The payment was received in the 2020–21 or 2021–22 financial year for eligible state or territory grants or the 2021–22 financial year for eligible Australian Government programs.
Payments your business received under an eligible state or territory grant or Australian Government support program are taxable if you:
carried on a business, and
did not have an aggregated turnover of less than $50 million in either the income year the payment was received or the previous income year.
The payment will be assessable as ordinary income of the business and should be declared as income in your tax return. If the business is also registered for PAYG instalments, it should be reported at label T1 of the BAS (see PAYG instalments – how to complete your activity statement).
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 Business Costs Assistance Program Rounder Two for the 2020-21 financial year.
This package is part of the Victorian Government's response to the economic impacts of COVID-19.
The Minister has declared that the Business Costs Assistance Program Round Two is a grant program that's eligible for NANE income.
In the 2020–21 financial year, Fresh Brew self-assessed and identified that its aggregated 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 its aggregated turnover is less than $50 million, it does not need to include the grant in its business income.
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