ATO Issues Warning Regarding Centrelink Payments as 82% of Australians Misinterpret Guidelines

Understanding ATO Reporting Requirements for Natural Disaster Payments

The Australian Taxation Office (ATO) is urging businesses that received natural disaster payments this year to report their income accurately on tax returns. Those funds, distributed by Services Australia in response to recent flooding across various regions, can significantly impact an individual’s taxable income.

Clarifying Income Types

Despite these payments being issued by a government agency, the ATO emphasises that they are considered assessable income. Alarmingly, a recent ATO survey revealed that 82% of business owners incorrectly understood their tax obligations regarding these payments.

“The classification depends on the specific type of support received,” stated the ATO.

It’s important to note that not all payments from Services Australia require declaration on tax returns. Payments considered non-taxable include certain grants meant for disaster recovery, which do not need inclusion in taxable income.

For clarity, the ATO provides a succinct list of disaster payments that are non-taxable, which includes:

• Cyclone Seroja payments (dated 11 April 2021)
• 2021 storms and floods recovery grants
• 2019–2020 Bushfires Relief payments
• 2019 North Queensland floods recovery grants
• 2019 grants for restocking, replanting, or farm infrastructure

For instance, payments received from ex-Tropical Cyclone Alfred that affected northern New South Wales and southeast Queensland must be included in a taxpayer’s income report.

Tax Deductions Eligibility

The ATO also indicates that deductions can be claimed on these payments if they were used for specific business expenses, such as:

• Purchasing replacement trading stock or new business assets
• Repairing business premises
• Covering other necessary business expenses

Assistance received from private sources, charitable organisations, or crowdfunding platforms aimed at helping with business expenses is also subject to tax reporting.

Services Australia spokesperson Hank Jongen pointed out that confusion remains surrounding the tax implications of these disaster payments issued after Cyclone Alfred, explaining that federal support collaborates with state governments under the Disaster Recovery Funding Arrangements (DRFA).

Support Available Through DRFA

For those affected by Cyclone Alfred, several forms of assistance were available through the DRFA, including:

• Emergency/Personal Hardship Assistance Grants (NSW & Queensland): $180 per individual or up to $900 for families, aimed at covering essential needs such as food and clothing.
• Essential Services Hardship Assistance (Queensland): $150 per person, up to $750 for larger families, to help recover from long-term loss of essential services.
• Essential Household Contents Grants (Queensland): Up to $1,765 for individuals or $5,300 for families, to replace urgent household items.
• Structural Assistance Grants (Queensland): As much as $80,000 for uninsured, income-affected individuals, for repairs to their homes.
• Essential Services Safety and Reconnection Scheme (Queensland): This caters to both immediate and longer-term support needs.

Overview of Disaster Payments

In the broader context, the following are the typical disaster support payments available:

1. Disaster Recovery Allowance (DRA): Provides up to 13 weeks of income support for those affected who have lost income, paid at either JobSeeker or Youth Allowance rates. This could amount to approximately $6,574 over 13 weeks at the maximum JobSeeker rate.

2. Australian Government Disaster Recovery Payment (AGDRP): A one-off payment available for significantly impacted individuals, providing $1,000 per adult and $400 per child.

Those who have received these forms of support recently, including assistance designed for flooding victims in Western Australia, must ensure this income is correctly reported in their tax returns.

This information is crucial for business owners and individuals to navigate their tax responsibilities effectively, avoiding potential complications going forward.

For additional assistance or queries regarding tax obligations related to disaster relief funds, business owners are encouraged to consult the ATO or a tax professional.