The guidance comes as Treasurer Josh Frydenberg declares a number of New South Wales and Victorian COVID-19 business support programs to be eligible for non-assessable non-exempt (NANE) income treatment.
Under the new law, payments will be treated as NANE income if they were made under an eligible program, received in the current financial year, and were received by a business with an aggregated turnover of less than $50 million.
ATO guidance has now be updated to identify expenditure rendered non-deductible in the production of NANE income, including accounting fees related to the application of the grants.
In an example provided by the ATO, a bookkeeper has been engaged by a business to apply for a tax-free government grant on their behalf. The bookkeeper provides no other service and charges the business a fee for the application. The fee cannot be claimed as a tax deduction.
Likewise, the ATO notes that if a business receives an invoice from their accountant for the application of the grant, alongside other professional services, a deduction cannot be claimed for the part that relates to getting the non-taxable government grant.
“There is no set way to work out the part of the expense that relates to each purpose, but the way you work it out should be fair and reasonable,” said the ATO. “You should keep a record of how you work it out.”
The ATO states, however, that they will not commit compliance resources where a business acts in good faith.
“If you act in good faith and use your best endeavours to determine whether you are entitled to a deduction for an expense related to a government grant that is not taxable, we will generally not apply compliance resources to confirm if the expense is deductible,” said the ATO.