ATO clarifies whether businesses should include government grant income in JobKeeper eligibility test

The tax office has clarified how small businesses should report government grant income in JobKeeper applications after Treasurer Josh Frydenberg issued similar guidance for universities and charities late last week.

In a statement responding to questions, an Australian Tax Office spokesperson told SmartCompany businesses should only include income from government grants in GST turnover under limited circumstances.

“Under the existing rules for JobKeeper, government grants received by a business are only included in their GST turnover when the grant is characterised as a payment for a supply the business is making,” the spokesperson said in the statement.

“An exception to this is when the grant is made to a government-related entity. In this case the grant will not be included in GST turnover when it meets certain criteria.”

Grant income has become an area of confusion for businesses and organisations large and small hoping to lodge JobKeeper applications in recent weeks amid uncertainty around whether such income should be included or excluded in turnover test calculations.

Businesses with less than $1 billion in revenue must show a 30% decline in revenue on an eligible comparable period a year ago to be accepted into the JobKeeper program, but firms accessing government grants and other subsidy programs have been unsure whether this income should be included in those calculations, and if so under what circumstances.

After Victoria’s La Trobe University made the case for enrolling in JobKeeper on the understanding government income could be excluded from its turnover test last week, Treasurer Josh Frydenberg moved to clarify that “core Commonwealth Government financial assistance” to universities should be included in calculations, scuppering hopes the university sector could access wage subsidies.

But other firms are in the opposite position, relying on the inclusion of government grant income to qualify for the $130 billion scheme, highlighting the disparate nature of individual circumstances when revenue calculations are made year-on-year, pitting whatever circumstance an organisation found itself in a year ago against the current trading environment.

Businesses relying on including government grant income in their GST turnover calculation will be able to do so in cases where those grants were, for accounting purposes, booked as a taxable supply.

For example, if a business received a government grant in March 2019, that income would be included in JobKeeper GST turnover, even if the income was spent in future BAS periods.

But while businesses that have booked grant income in 2019 could define their eligibility on the inclusion of grant revenue, those who have booked grant revenue as a taxable supply in March 2020 could see their turnover declines subdued by that income.

Many firms hit by the Australian bushfire crisis have been attempting to access government grant support in recent months, although firms that have been subject to natural disasters are eligible for alternative JobKeeper test measures outlined in a legislative instrument released by the ATO last week.

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