The treatment of JobKeeper payments in tax returns for sole traders

Suitable for: Sole traders who had received JobKeeper payments in FY2021

Tax Difficulty: Easy

Time to Read: 3-4 minutes

Tax Focus: Reporting JobKeeper payments accurately in tax returns

In March and April 2020, the Federal Government introduced numerous programs to help Australians cope financially with the impact of the COVID-19 pandemic. One of which was the JobKeeper payment scheme, which aimed to ensure individual Australians have money to continue paying their bills when things get tough

JobKeeper was designed to keep more Australians employed. There are certain implications that are important to take note of when reporting these payments in your Income Tax Return.

FAQs

As a sole trader, is my JobKeeper payment taxable?

Yes. When you complete your tax return, JobKeeper will form part of your gross business income and will be taxed at your marginal tax rate. 

Please note that your JobKeeper payments are not reported in your Business Activity Statements as they are not GST inclusive. As such, the payments are only required to be disclosed in your Tax Return.

How do I ensure that I am claiming an accurate amount?

Given that everyone received variable JobKeeper payments throughout the year, it is important for you to keep track of what you received from the Government. In order for us to prepare your return accurately, you must confirm the actual amounts obtained during the relevant tax year by checking your bank account and summing all payments up.

If I have just received Centrelink/JobSeeker payments, do I need to lodge a tax return? 

All Australian residents and citizens are required to lodge a tax return, unless they qualify for an exemption (see details here). As JobSeeker (and other Government payments such as Newstart, Youth Allowance, Austudy, the age pension and Carer payments) are classified as taxable payments, they need to be declared in your tax return.

The majority of these payments will automatically flow through from your prefill report when we prepare your tax return. You will likely have had taxes taken out on some of these payments as well. If you are under the tax free threshold for the year and have had tax taken out, then you may get some of this back at the end of the year. However, you would still need to lodge a tax return. 

More Information

You can find further information via:

• The ATO’s JobKeeper portal
• By booking a Tax Assist call to speak with a tax specialist

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This document merely provides a broad outline of the subject and is necessarily general in nature. If you require specific advice, which is tailored to your specific circumstances, please do not hesitate to contact us (fees would apply).