New CTH Act Exempts Disaster Relief Payments from Income Tax

Friday 14 February 2020 @ 11.48 a.m. | Legal Research | Taxation

The Treasury Laws Amendment (2019-20 Bushfire Tax Assistance) Act 2020 (Act No 1 of 2020) (the “Act”) was assented to on 13 February 2020.  The Bill was originally introduced to the House of Representatives on 5 February 2020 by Federal Treasurer, Josh Frydenberg.


The legislation exempts disaster relief payments being made to individuals and businesses impacted by the bushfires from tax. Under the new laws, “volunteers working with a fire service of a state or territory will not be subject to income tax on compensation payments for loss of income resulting from their work with their respective fire service in the 2019–20 financial year”.

In a Media Release of 29 December 2019, Prime Minister Scott Morrison announced:

“Volunteer firefighters will receive financial support from the Morrison Government for loss of income, where they have been called out for extended periods of service … The payments will provide for lost income of up to $300 per day up to a total of up to $6,000 per person. These payments are tax free and will not be means-tested, but are targeted to those most likely to suffer lost income by volunteering for extended periods of time …”

Treasurer Josh Frydenberg also announced in a Media Release:

“… [that] disaster relief payments being made to individuals and businesses impacted by the devastating bushfires are tax exempt. This decision will 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. Notably, the exemption will extend 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”.

In the Treasurer's second reading speech, he said:

“… The unprecedented scale and damage of these fires has warranted an unprecedented response. The tireless efforts of our professional and volunteer firefighters to protect life and property cannot be understated … The Government is committed to supporting volunteer firefighters involved in the firefighting effort, as well as ensure that communities and businesses affected by the bushfires can get back on their feet … Payments for eligible volunteer firefighters will be treated as non-assessable, non-exempt income, which means: the payments will not be counted as assessable income; and the payments will not reduce any tax losses that can be carried forward to future years by the taxpayer”.

Outline of the Amendments

As outlined in the Bill’s Explanatory Memorandum (“EM”), the amendments to the Income Tax Assessment Act 1997 (“the Act”) are:

  • Schedule 1 - inserts new Table items to section 11-55, while new section “59-55 2019-20 bushfires—payments for volunteer work with fire services” and section “59-60-2019-20 bushfires—disaster relief payments and non-cash benefits” are inserted after section 59-50; and
  • Schedule 2 - relates to “deductible gift receipts”, namely the inclusion of the Australian Volunteers Support Trust and the Community Rebuilding Trust (“CRT”) on the list of deductible gift recipients (“DGRs”). A DGR status allows members of the public to receive income tax deductions for the donations they make to these two organisations.

About the Trusts

The Australian Volunteer Support Trust was founded by the Business Council of Australia ("BCA") and Equity Trustees with its aim to assist the families of any registered volunteer in Australia who tragically loses their life through their volunteer work.

The Community Rebuilding Trust ("CRT") has been established with the broader aim of supporting the rebuilding of communities. It is to be part of a larger Community Rebuilding Initiative which will complement the National Bushfire Recovery Agency.

The CRT will work to co-ordinate support from the business community such as providing employment opportunities for volunteers and those who have lost work as a result of the disasters, additional services for communities, reconstruction support and financial relief.

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