Many small businesses across Australia may be experiencing challenges due to recent weather events, so worrying about meeting your tax obligations will not be your highest priority. However, it is important to understand tax implications of a business support grant.

You may have received a grant to assist your business to navigate through this or another challenging time. When it’s time to lodge your tax return, you’ll need to know if your grant is assessable or non-assessable income.

Grants are generally treated as assessable income. However, some business support grants are formally declared non-assessable non-exempt (NANE) income. This means you don’t need to include these in your tax return if you meet certain eligibility requirements.

If your business has been affected by a natural disaster, you may receive a government support grant or payment to help you recover. These payments are counted as assessable income unless they are made non-taxable by parliament.

If a business support grant or payment is:

• assessable income, you need to report the payment in your tax return in the income year you receive it
• non-taxable, you don’t need to include the payment in your tax return and you don’t pay tax on it

You may be entitled to claim deductions if you use these payments to:

• purchase replacement trading stock or new assets
• repair your business premises and fit out
• pay for other business expenses

Remember, you can only claim deductions for expenses associated with NANE grants if they relate directly to earning assessable income. Expenses may include things like wages, rent and utilities.

The GST treatment of grants or payments depends on whether something is supplied in return for the payment. If you meet eligibility criteria to receive a grant and you don’t have to provide something of value in return for the grant, there are no GST implications.

If you have questions in relation to the above, or any other matters, please do not hesitate to contact Avance Chartered Accountants on 1300 620 345.