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Aussies WON’T pay tax on $750 COVID-19 payments, PM says

·3-min read
Prime Minister Scott Morrison gesturing; image of cash in hands
Contradicting current ATO and Treasury advice, Aussies won't have to pay tax on COVID-19 lockdown payments, Prime Minister Scott Morrison has said. (Source: Getty, AAP)

Australians will not need to pay tax on their $450 and $750 lockdown payments come tax time next year, Prime Minister Scott Morrison has announced.

On Thursday morning, Morrison responded to questions on whether the COVID-19 Disaster Payments would be subject to tax.

“No, it won't and I've made that very clear this morning, back through the system, they won't be taxable,” Morrison told Sunrise.

JobKeeper, by the way, was. We are treating this as a disaster in these areas where this has befallen people in the same way the payments that we make for bushfires and the payments we made for floods and other natural disasters, we are making these payments under that disaster payment framework.”

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However, Morrison’s statement is a significant break away from all the official advice released by Services Australia, the Australian Taxation Office and Treasury to date.

The ATO’s webpage about the COVID-19 Disaster Payment states that they are “assessable income”.

“Individuals need to report this income in their tax return in the income year the amounts are received,” it states.

Similarly, the Treasury's factsheet about the payments declares: “COVID-19 Disaster Payment is taxable income.”

A Treasury official confirmed to Accountants Daily that this represented a policy change and was in the process of updating guidance.

Yahoo Finance has reached out to the Prime Minister’s Office, Treasury, and Services Australia for further comment.

While the change means Australians will be able to pocket all of the $750 than they did with JobKeeper, the change has caused confusion for the accounting industry.

“The main concern is that these payments have always been stated as assessable so now there's confusion,” said Institute of Public Accountants’ Tony Greco.

“It is a significant shift in treatment from what people have been told and what we have come to expect.”

“This is a seismic shift in the tax treatment for recipients and a windfall which will come at a huge cost to the taxpayer.”

Prime Minister Scott Morrison speaks during a press conference at Kirribilli House on July 15, 2021 in Sydney, Australia.
Prime Minister Scott Morrison. (Photo by James D. Morgan/Getty Images)

Australians will see the new payment levels, $450 and $750, reflected from next week, Morrison said.

From next Tuesday, Australians receiving Centrelink payments will be able to claim $200 top-ups.

The Federal Government has already issued $411 million in disaster payments to nearly half a million Sydneysiders, Morrison said.

The Prime Minister also promised payments would continue to flow even if Sydney’s lockdown continued until Christmas.

“Those payments will keep coming. Just like we were providing that support last year,” he told the Today Show.

“What it does is it helps people get through. It's not supposed to replace every dollar they were earning before.

“But just like with the supports we gave last year and JobSeeker and JobKeeper and the cash flow support, it keeps the businesses as whole as possible because on the other side, because we've got a million jobs back into Australia after the pandemic recession last year.

“That's what I foresee this time. We keep them together. When the lockdown lifts, the jobs come back.”

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