The ATO’s guidance comes after a new law was passed on Monday to ensure COVID-19 Disaster Payments dating back to its introduction on 3 June will now be treated as non-assessable non-exempt income.
Such payments were previously classified as taxable income by the ATO, the Treasury and Services Australia, until Prime Minister Scott Morrison made the change on the fly in late July.
New legislation was then introduced last week and sailed through the Parliament, making the COVID-19 Disaster Payments more generous than the $90 billion JobKeeper wage subsidy program, which was taxed.
Due to its retrospective application to 3 June — when Victoria entered its fourth lockdown — some individuals will now need to lodge an amendment if they have already lodged their 2020–21 tax return and included the payment as assessable income.
“If your client received this payment from Services Australia due to the Greater Melbourne lockdowns in the 2020–21 income year and you’ve already lodged their tax return, you will need to lodge an amendment,” said the ATO on Wednesday.
“Clients who received the payment on or after 1 July 2021 won’t need to include the amount as assessable income in their tax return next year.”
Accountants Daily understands that Services Australia will now reach out to impacted individuals through a myGov message and SMS.
Michael Croker, tax leader at Chartered Accountants Australia and New Zealand, said it was unfortunate that individuals or their tax agents would need to lodge an amendment.
“It’s a pity the ATO computer can’t talk to the Services Australia computer and auto-amend the assessments for tax returns already lodged by COVID-19 Disaster Payment recipients,” said Mr Croker.
Under the payments, workers who lose 20 or more hours of work a week will receive $750 a week, while those who lose between eight and 20 hours will receive $450.
The original JobKeeper payments were also worth $750 a week but were taxed, meaning previous recipients received $90 less each week based on an annualised $39,000 income of $750 each week.
Jotham Lian is the editor of Accountants Daily, the leading source of breaking news, analysis and insight for Australian accounting professionals.
Before joining the team in 2017, Jotham wrote for a range of national mastheads including the Sydney Morning Herald, and Channel NewsAsia.