How to account for government payments

How to account for government payments

Agribusiness
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Government grants and subsidies are treated differently for taxation and GST purposes.

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Helen Warnock

Helen Warnock

We are in a year of disasters and pandemics. To support us through this the government has released funds via various grants and subsidies. These payments are treated differently for taxation and GST purposes.

The Cashflow Boost payments, which are paid to every employer as a credit against your Activity Statement debt, are tax-free payments and should be not included on your Business Activity Statement as a taxable supply. You did not have to apply for these credits and I have seen where many clients have ended up with a credit with the tax office as they continued to pay the full amount owing on their Activity Statements. If this is the case your accountant can request a refund to you of this overpayment.

Jobkeeper payments received by a business is taxable income to the business and also not included on the Business Activity Statement. The payment to employees is treated as wages and will be included in their yearly Payment Summary. If you registered as an Eligible Business Participant the payment is still taxable to the business entity even though you registered as an individual. Jobseeker payments are taxable to the individual who applied for the payment.

There have been various state and federal government grants paid to businesses and individuals to assist with managing costs during COVID, fires and drought. Generally, if there is a connection to your business, these grants would be taxable income. If a grant has been received in a personal capacity, for example you may have received some money from the Salvation Army if you were drought affected, then this payment is private and not taxable. The government has the ability to change the law to allow certain disaster relief payments to be exempt from tax, such as payments received as result of the 2019-20 fires. Some grants include GST and others don't. It depends on the terms of the grant, so it pays to check your paperwork to ensure you account for them correctly.

The Queensland Small Business COVID-19 Adaption Grant Program is still open to regional business if your business has been affected by the pandemic. This grant covers various costs to help your business adapt and stay in operation. Details can be found on the Business Queensland website.

  • Helen Warnock is a partner in a Central Queensland chartered accountant firm. This article offers general information only. You should consult your personal adviser to seek advice relevant to your personal circumstances before taking action.
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