Australian families affected by lockdown could get a windfall at tax time

Some Australian families will enjoy a silver lining from the pain of being in lockdown, with many in line for a tax windfall.

With millions of Aussies suffering through lockdowns, there is some good news for those receiving Covid-19 disaster payments.

Due to a change announced by Prime Minister Scott Morrison in July, those payments are not taxed.

This means people who have been receiving the disaster payments do not need to include them as part of their taxable income for Family Tax Benefit and Child Care Subsidy estimates.

When the Covid-19 disaster payments were first introduced in June, guidelines said they were to be taxed, however in late July Mr Morrison amended that.

“They won’t be taxable,” he said on Sunrise at the time. “JobKeeper, by the way was. And 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.”

He also said on ABC radio that for welfare recipients, “they’re also non-assessable on your income test for accessing your welfare payments”.

Prime Minister Scott Morrison announced the payments were tax-free back in July. Picture: NCA NewsWire/Gary Ramage

What does this mean for family benefits?

While it’s clear that the payments aren’t taxed, what many may have not realised is that they do not count towards the income estimates that people must make for things like the Family Tax Benefit and the Child Care Subsidy.

At the start of each tax year, families who wish to access those benefits must give an estimate of their annual income.

For those who have lost jobs or income due to the pandemic, this will affect their estimate.

Those who haven’t updated their income estimate, come tax time, it could mean Centrelink has underpaid them, therefore they may receive a payment to make up for that.

Also, if families do update their income estimate, they could now qualify for more Family Tax Benefit this year.

“It’s a double bonus. It’s extremely good news for those recipients,” Tony Greco from the Institute of Public Accountants told 9 News.

Many have lost work during lockdowns in Sydney and Melbourne (pictured). Picture: NCA NewsWire/David Crosling

“It’s understandable people may not have realised, the disaster payment is tax-free and it’s retrospective to June 3. So you’ve got a double bonus, it’s not taxable for tax purposes nor is it counted towards family tax benefit,” Mr Greco said.

So far 1.8 million Australians have received the disaster payments which are now paid at rates of $450 a week if you lose between eight and 20 hours’ work a week, or $750 if you lose more than 20 hours a week.

To qualify for the payments, people must have had their income affected by either lockdowns or restriction on movement due to Covid outbreaks.

Initially, the payment could only be made for lockdowns which lasted longer than seven days and eligibility was restricted to those whose work or income was affected in the second or subsequent weeks of a lockdown.

But that condition has now been removed so the payment is available for lockdowns shorter than seven days. However for all lockdowns, applications for the payment can only be made seven days after the lockdown commenced.

An extra $41 billion was committed to economic support due to the pandemic in the 2021-22 Federal Budget. That means in total, since the beginning of the pandemic, the Federal Government has spent $291 billion in economic assistance.