When disaster strikes—floods, cyclones, or bushfires—many Australians face the tough challenge of rebuilding their lives and homes from scratch. The road to recovery can feel especially daunting for those who may already be managing health issues or fixed incomes.
Government support payments are often a crucial lifeline during these difficult times, providing much-needed financial relief to help people recover.
However, while these payments can be a lifeline, the Australian Taxation Office (ATO) has issued a timely warning: most people get it wrong when declaring these payments at tax time.
A recent ATO survey found that 82 per cent of business owners didn’t know whether their disaster payment needed to be included in their tax return.
With tax time fast approaching, it’s crucial to know where you stand, because getting it wrong could mean a nasty surprise from the taxman.
It’s easy to assume that if a payment comes from Centrelink or Services Australia, it’s tax-free. But that’s not always the case. The ATO said it all depends on the type of payment you received.
Some disaster payments are tax-free and don’t need to be declared. Most, however, are considered assessable income and must be included in your tax return.
The ATO has a list of payments that are not taxable. These include:
- Cyclone Seroja (April 2021) payments
- 2021 storms and floods recovery grants
- 2019–2020 Bushfires Relief recovery payments
- 2019 North Queensland floods recovery grants
- 2019 restocking, replanting or farm infrastructure grants
If you received any other disaster payment—including those for more recent events like ex-Tropical Cyclone Alfred or the 2024 Western Australia floods—chances are you do need to declare it.
Which payments do you need to declare?
Let’s break down the most common disaster payments and whether you need to include them in your tax return:
- Disaster Recovery Allowance: This is a temporary income support payment (up to 13 weeks) for people who’ve lost income due to a disaster. It’s paid at the JobSeeker or Youth Allowance rate. You must declare this as income.
- Australian Government Disaster Recovery Payment: A one-off payment ($1,000 per adult, $400 per child) for those whose homes or livelihoods have been significantly affected. This is also assessable income and must be declared.
- State-based grants (e.g., Essential Household Contents Grants, Structural Assistance Grants): Most are taxable unless the ATO specifically lists them as tax-free.
- Assistance from private funds, charities, or crowdfunding: If you received money to help pay for business expenses, you must declare it.
What if you used the payment for business expenses?
If you’re a business owner and used your disaster payment to:
- Buy replacement trading stock or new assets
- Repair or fit out your business premises
- Pay for other business expenses
You can claim a deduction for those expenses. But you still need to declare the payment as income first.
Failing to declare assessable income can lead to penalties, interest charges, or even an audit. The ATO is paying close attention this year, especially after so many Australians received disaster payments.
Services Australia spokesperson Hank Jongen said confusion is common, especially after major events like Cyclone Alfred.
‘The federal government works with state and territory governments to provide support, but the tax treatment can vary,’ he explained.
Some smaller grants—like the $180 Emergency/Personal Hardship Assistance Grant or the $150 Essential Services Hardship Assistance—are designed to cover immediate needs such as food, clothing, and medicine.
While these are often not taxable, it’s best to double-check, as rules can change depending on the event and the state.
Don’t leave it to chance if you’ve received any government support after a natural disaster. Double-check whether you need to declare it, and if you’re unsure, visit the ATO website or ask for help. The last thing you want is a tax bill you weren’t expecting.
Have you been affected by a natural disaster and received a payment? Did you know whether it was taxable? Share your experience in the comments below.
Also read: ATO warns against viral myth about ‘voluntary’ tax loophole
