In addition to the COVID-19 stimulus packages released by the federal government, many state governments have also made available support measures to businesses significantly impacted by the pandemic. These include cash grants, payroll and land tax relief and other expense reimbursements or rebates.
The ATO has provided further clarification on how these must be treated when preparing your tax returns.
Many businesses have been the recipients of either the $10,000 or $3,000 NSW Government Small Business Recovery Grant. These, and other similar grants, that have been paid as a lump sum should be included in the recipient’s taxable income. However, these are not subject to GST.
Reconciling them in your Xero File
When you are reconciling the cash received as part of a grant, you should allocate them to a new revenue account called Government Grants. Also ensure that these are marked as BAS Excluded so they are not picked up when you complete your Business Activity Statements.
In regards to other forms of relief, such as payroll or land tax relief, whether this is taxable will generally depend on how the relief was provided. For example, any refunds of payroll tax and /or land tax will reduce the deduction claimed, rather than being included as assessable income. These refunds also do not have any GST implications.
Any other rebates or reimbursements (such as electricity rebates) received are also not included in assessable income, but similarly they will reduce the deduction that is claimed by the business.
If you require any assistance with this or require further clarification, please contact the team at Waterford Accountants on (02) 4940 2800.
The material and contents provided in this publication are informative in nature only. It is not intended to be advice and you should not act specifically on the basis of this information alone. If expert assistance is required, professional advice should be obtained.
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