Government grants and subsidies

If you get a grant or subsidy from a government or government agency, you'll have to report it either as income or as a reduction of an expense. Generally, a grant or subsidy:

• increases your income or reduces your expenses;
• relates to an income deficiency; or
• relates to specific expenses.

For example, if you are a farmer and you received a payment to subsidize your income in a drought year, add the payment to your income. However, if you are a business which receives a government employment grant to let you hire more students, you would generally deduct it from the wage expense you are claiming.

Government assistance that enables you to acquire capital property does not increase your net income. However, in the case of depreciable property, reduce the capital cost of the property by the amount of the assistance you received. In the case of other capital property, reduce the adjusted cost base accordingly.

For more information, see IT273, Government Assistance - General Comments.