The federal government has passed legislation to make disaster relief payments being made to individuals and businesses impacted by the devastating bushfires tax exempt.

The new laws ensure that every dollar that is paid out to affected individuals, businesses and primary producers goes to supporting them during these difficult times and to rebuilding their livelihoods.

The exemption extends to payments such as:

  • Disaster Recovery Allowance payments made to individuals; and
  • Payments that would otherwise be taxable under the Disaster Recovery Funding Arrangements, such as grants that may be made to small businesses and primary producers.

The legislation also allows taxpayers to claim income tax deductions for donations to two organisations established in response to the bushfires.

The legislation also gives effect to the Prime Minister’s announcement on December 29 that the government would, in co-operation with the NSW Government, provide tax-free financial support to volunteers in the NSW Rural Fire Service who are employed by small or medium businesses and had volunteered for an extended period to assist in combatting the bushfires.

The new laws will also allow taxpayers to claim income tax reductions for donations to two organisations established by the Business Council of Australia in response to the bushfires:

  • The Australian Volunteers Trust provides support to volunteers and their immediate families where the volunteer has died or become seriously injured during their service in responding to a disaster in Australia.
  • The Community Rebuilding Trust will receive, manage and mobilise donations to help rebuild and re-establish communities affected by disasters in Australia.

Further information on the support being provided by the Australian Taxation Office can be found on the ATO website. Impacted individuals or businesses can also contact the ATO’s Emergency Support Infoline on 1800 806 218.