Income on which you don’t pay tax

Non taxable amounts generally fall into three categories:

  • exempt income
  • non-assessable non-exempt income (“NANE”), and
  • other non-taxable amounts which don’t affect your tax return.

For individuals see:

Tax Treatment of Covid Relief Payments

State & Territory Covid-19 Support Payments

The government has legislated to provide that payments received in 2020-21 by businesses under the various COVID-19 recovery grant programs administered by States and Territories are treated as non assessable non-exempt income (NANE). See Treasury Laws Amendment (COVID-19 Economic Response) Bill 2021

The Treasury Laws Amendment (COVID-19 Economic Response No 2) Bill 2021 includes measures:

  • Schedule 3 to the Bill enables 2021-22 Commonwealth Covid-19 program support payments to small businesses and businesses with a turnover of less than $50 million to be not taxable (NANE).
  • Schedule 5 to the Bill makes Commonwealth COVID-19 disaster payments paid to individuals not subject to income tax (NANE). This covers payments to individuals that live or work in hotspot areas and have had their income affected by COVID-19 restrictions, and applies retrospectively from the 2020-21 year.

Expenses

In general, expenditure incurred incurred in order to secure a non-taxable grant is not deductible. Expenditure with more than one purpose should be apportioned on a fair and reasonable basis, a record should be kept of the calculations. See further at Government grants and payments during COVID-19

Government PaymentTax treatment
JobKeeper Assessable income, no GST
Employment paymentsNormal tax tax treatment (salary, leave, redundancy etc)
Cash Flow BoostExempt
Unit Trust distributes Cash Flow BoostNot taxable but CGT event E4 (cost base attribution)
Company distributes Cash Flow Boost (dividend)Taxable as a dividend
Pandemic leave disaster payment to individualsAssessable income, no GST
(Covid-based) Early release of superTax free
Child Care Transition Payment (paid to providers)Assessable income, GST free supply
Creative Economy Support – grantAssessable income, no GST
Creative Economy Support – concessional loanNot assessable. Interest/deductions accounted for in the normal way
Consumer Travel Support grantAssessable income, no GST
Vic & NSW Government business support grants (listed here)Non assessable non-exempt income (NANE), no GST
State Govt Voucher SubsidiesAssessable income, and GST accountable

See also at ato.gov.au: Government grants and payments during COVID-19

For more information, see What to exclude from your business’s assessable income.

Redress Scheme Payments For NT & ACT Stolen Generations

Redress payments made to individuals under the Territories Stolen Generations Redress Scheme are exempt from tax and won’t affect eligibility for other Commonwealth payments and benefits. Legislation applies from 2021-22.

Disaster Relief Payments

[update 20 September 2020]
Most one-time and emergency disaster relief payments are exempt, or may become so after specific government action to declare them as such.

Some exempt payments may still need to be declared, although non-taxable.

Payments to volunteer firefighters, assistance provided by charities and employers are exempt from tax.

For more information, see Disaster assistance payments and your tax

[Update 6 February 2020]
Legislation has been passed to make disaster relief payments being made to individuals and businesses impacted by the devastating bushfires tax exempt.

This includes:

  • Disaster Recovery Allowance payments made to individuals; and
  • Payments to small businesses and primary producers that would otherwise have been taxable

National Redress Scheme for Institutional Child Sexual Abuse

Taxation Determination TD 2018/16 – payments are not assessable or subject to capital gains tax. The determination applies from 1 July 2018.

Stolen Generation Compensation

Stolen Generation lump sums payments made by the various states and territories are not taxable income and do not need to be disclosed in a tax return. See here and further TR 95/35, CR 2016/86

Defence Force Overseas Projects

Information regarding the tax position of ADF personnel deployed overseas (including overseas forces tax offset) and the special tax treatment of income received in connection with a joint space and defence project.

See Australian Defence Forces overseas service

Temporary Residents

See Foreign income exemption for temporary residents.

 See also

Because of the complexity of rules determining taxability of income, and potentially high penalties for getting things wrong, qualified advice is always recommended. Some items may be partially taxable. For Tax Office guidance call 132861.

This page was last modified 2022-04-27