The Treasury Laws Amendment (COVID-19 Economic Response No. 2) Bill 2021 was recently presented in parliament. It seeked to ratify declarations made by PM Scott Morrison that Australians will not pay taxes on the latest round of lockdown payments come the next tax season in 2022.
This is a change from previous payouts like JobKeeper which were subject to taxation. The new changes will apply to both individual and business support payments.
Morrison’s comments, were also at odds with guidelines given by the Treasury, the ATO, and Services Australia who had said that the payments would be taxed. This online information from the ATO and Treasury was however updated by Tuesday.
Once the bill is passed, COVID-19 disaster payments that date back to 3 June will become non-assessable non-exempt income. This reclassification will allow recipients to pocket as much as an additional $90 a week as compared to the wage subsidies that were offered under the JobKeeper scheme.
Under the new disaster payments plan, workers that lose more than 20 hours of work due to lockdowns will receive $750 a week, while those that lose 8-20 hours of work will receive $450 a week.
While recipients will be laughing all the way to the bank at this new development, not everyone feels as upbeat. According to tax leader at Chartered Accountants Australia and New Zealand (CA ANZ), Michael Croker, this change will mean a bigger burden for taxpayers and would make for an “unquantifiable tax expenditure” that would erode the government’s budget bottom line.
Australian Industry Group (AIG) chief executive, Innes Willox, also noted that some low-earning workers may be encouraged to give up some hours of work to earn even more through disaster payments. He highlighted the fact that the national minimum wage stands at $772.60 per week based on a 38-hour workweek. He urged the federal government to closely monitor the possible disincentive effects of the payments, similar to what was seen when JobKeeper was initially introduced.
Croker hopes that once the necessary law is changed, the ATO will correct individual tax returns that were already filed with the COVID-19 disaster payments being classified as assessable. Business support payments that will also become tax-free include the JobSaver scheme, NSW’s business support grant, and micro-business support grant.
To qualify for this relief, the businesses must have an aggregated turnover of less than $50 million, despite businesses that have an annual turnover of up to $250 million being eligible for JobSaver. This accounting issue is something Croker hopes CA ANZ will be able to consult with the ATO over.
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