More COVID grants for SMEs given tax-free status

Under the Income Tax Assessment (Eligible State and Territory COVID-19 Economic Recovery Grant Programs) Declaration 2020, Mr Frydenberg declared as tax-free funds received in Victoria under the Alpine Business Fund, the Business Support Fund 3, the Licensed Hospitality Venue Fund, the Melbourne City Recover Fund – Small business reactivation grants, the Outdoor Eating and Entertainment Package and the Sole Trader Support Fund.

The explanatory statement defined the programs given tax-free eligibility as follows:

• Alpine Business Fund - provides direct financial support to alpine businesses impacted by the Coronavirus pandemic and covers service fees owed to Alpine Resort Management Boards;
• Business Support Fund 3 - the third round of the Business Support Fund that provides direct financial support to eligible businesses that must stay closed or operate under restrictions until COVID normal;
• Licensed Hospitality Venue Fund - provides direct financial support to eligible liquor licensees with hospitality venues impacted by restrictions due to the coronavirus pandemic;
• Melbourne City Recover Fund – Small business reactivation grants - designed to support businesses to trade safely, including through outdoor trading activities, and to help encourage customers back into Melbourne central city;
• Outdoor Eating and Entertainment Package - provides direct financial support to eligible businesses to adapt their businesses to outdoor dining and entertainment in order to transition to what the Victorian government considers ‘COVID normal’; and
• Sole Trader Support Fund - provides direct financial assistance to eligible sole traders who have been impacted by restrictions due to the coronavirus pandemic.

The declaration was made on 23 December 2020 and is currently in effect.

The move comes after the federal government made changes to the income tax law last year making small-business grants relating to the economic recovery from COVID-19 tax-free.

The changes apply to the 2020–21 income year and later income years under the Treasury Laws Amendment (2020 Measures No. 5) Bill 2020.

The concessional tax-free treatment will be eligible only to businesses with an aggregated turnover of less than $50 million.