2020 Tax time and Government Support Measures

|by Rochelle Whitbread|Taxation and Compliance

The 2020 financial year will be remembered as the year of uncertainty for all small businesses and individuals. The government ramped things up and made every effort to ensure that there was financial support available for all Australians.

So what are the tax implications for financial support received?

JobKeeper: All JobKeeper payments will be treated as assessable income to the entity that is in receipt of the payment. Whilst the income received is assessable for tax pruposes, it is not subject to GST. The gross wages reported, including those that have attracted the JobKeeper subsidy will be fully deductible under the normal rules. If you are operating on an accruals basis, JobKeeper payments will be derived when the entity provides a valid completed business monthly declaration to the ATO. This means that the payments being received for the fortnights in June will not be assessable until the 2020 – 2021 financial year because the monthly declaration will not be processed until July 2020.

Cash flow Boost: If you were in receipt of the cash flow boost – that being the credit of the of the PAYGW on employee wages used to offset liabilities arising from the same activity statement, you will not be required to report this as assessable income, nor is this subject to GST. If you received a refund, because the credit from the PAYGW exceeded the liability associated with the relevant activity statement, the same rules will apply. That is, the amount refunded to you will not be considered taxable income and nor will it be subject to GST.

Government Grants: If you were in receipt of a government payment to assist your business during COVID-19, the amount received will be included in your assessable income. In most circumstances – this will be offset by business expenses which were paid using the income received. The Income will not be subject to GST, but the expenses paid will carry their normal GST consequences. If you report on an accruals basis, the income will be derived when the right to use the government payment arises – that is when the grant was accepted. If you report on a cash basis, the income will be derived when the government payment is received.

Early Release of Superannuation: If you were eligible and in turn received access to early release of your superannuation you do not need to do anything. The income you have received will not be assessable nor will it be included in your tax return.

If you would like more information regarding the 2020 financial year, please give one of our friendly Gold Coast advisors a call on (07) 5504 5700.

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