The Treasury Laws Amendment (COVID-19 Economic Response No. 2) Bill 2021 has passed the House and the Senate, making COVID-19 disaster payments tax-free for individuals and businesses.
Introduced on 3 August, the bill was subject to discussion over an amendment introduced by senator Rex Patrick, who proposed that businesses with an annual turnover of more than $10 million that had received JobKeeper payments should be publicly named.
The amendment was rejected by the House of Representatives last Thursday, with the final bill passing both chambers on Monday.
The new tax-free status applies to business grants that were paid in the 2021–22 financial year, as well as payments to individuals that have been made since 3 June, when the new disaster relief funding measures were first rolled out.
“The bill will ensure that COVID‑19 disaster payments received by individuals from the 2020–21 income year are tax-free, providing additional relief for individuals who are doing it tough,” Treasurer Josh Frydenberg said in a statement.
“The bill also gives effect to the Morrison government’s commitment to assist any state and territory that is unable to administer its own business support payments in the event of a significant lockdown imposed by a state or territory.”
The Treasurer will also be able to determine the tax treatment of eligible COVID‑19 business support payments administered by the Commonwealth.
While the intention to make business grants tax-free had been announced by Prime Minister Scott Morrison and Treasurer Josh Frydenberg in a joint statement on 13 July, the extension of tax-free status to individual payments came as a surprise when later announced by Mr Morrison in an interview on ABC Radio.
At the time, the online guidance from the Treasury, the Tax Office and Services Australia indicated that the payments for individuals would be taxed. The government agencies updated their messaging to confirm the tax-free status prior to the bill’s introduction.
Currently, workers who have lost 20 hours or more of work each week are eligible for weekly compensation of $750, while those who have lost between eight and 20 hours of work each week will receive $450.
For businesses, a threshold for tax-free grants was implemented, applying only to entities that record an annual revenue of $50 million or less.
Businesses earning above this threshold are still eligible for support under the updated measures that were introduced on 28 July, which raised the cap on who could receive funding from those with an annual turnover of $50 million to $250 million. Contributions to businesses that bring in revenue over $50 million annually will be taxed.