Government funding doesn’t always mean tax-free income (September 2026)

If your business provides services under a government-funded program, it’s important not to assume that payments you receive are tax-free simply because the money originates from a government source.

The ATO has recently reminded service providers that payments received for delivering services under participating Commonwealth programs will generally form part of their assessable business income.

This issue can affect businesses operating in a range of sectors, including disability support, aged care, childcare, hearing services, NDIS-related services and veteran health services.

If your business receives payments under a government program, you should ensure the income is recorded correctly, included in your tax return and supported by appropriate records. Treating these amounts as non-taxable may result in unexpected tax liabilities later.

The ATO receives information about payments made under government programs, making it easier to identify discrepancies between amounts received and amounts reported, so if your business receives government-funded payments and you’re unsure how they should be treated for tax purposes, talk to us.