Federal Government regulation to make certain Victorian Covid financial support payments exempt from income tax

The Federal Income Tax law has been amended to allow Covid-19 financial support to be tax free to the recipient, if gazetted as such (s59-97). On 16.7.21, the Treasurer made such a declaration and on Tues 20.7.21, it was registered on the Federal Register of Legislation, citing certain Victorian State relief payments to be exempt.

See below for further detail.

[Tax Month – July 2021]

Declaration that certain Victorian Covid relief is tax exempt

On Friday 16.7.21, the Treasurer made a legislative instrument – the Income Tax Assessment (Eligible State and Territory COVID-19 Economic Recovery Grant Programs) Amendment Declaration (No 1) 2021 and on Tues 20.7.2021 this was registered on the Federal Register of Legislation (Instrument, Explanatory Statement).

The declaration makes clear that certain grant programs administered by the State of Victoria are eligible programs for the purposes of s 59-97 of the ITAA 1997, under which a payment received by an eligible business entity from an eligible program is non-assessable non-exempt income.

The following Vic grants are declared eligible grant programs:

• the Alpine Support Program;
• the Business Costs Assistance Program Round Two;
• the Impacted Public Events Support Program;
• the Independent Cinema Support Program;
• the Licensed Hospitality Venue Fund 2021;
• the Live Performance Support Program; and
• the Sustainable Event Business Program.

DATE OF EFFECT: 21 July 2021.

The relevant exempting provision in the ITAA 1997, provides as follows.

SECTION 59-97   State and Territory grants to small business relating to the recovery from the coronavirus known as COVID-19  

59-97(1) A payment an entity receives is not assessable income and is not *exempt income if:

(a)  the entity receives the payment under a grant program administered by:

(i) a State or a Territory; or

(ii) an authority of a State or a Territory; and

(b)  the grant program is declared under subsection (3) to be an eligible program (whether this declaration is made before, on or after the day the entity receives the payment); and

(c)  the entity receives the payment in the 2020-21 or 2021-22 *financial year; and

(d)  the entity is a *small business entity, or an entity covered by subsection (2) , for the income year in which the entity receives the payment.

It is under subsection (3) that the Treasurer can make this kind of ‘declaration’.

[LTN 137, 20/7/21]