Highlights

  • Businesses receiving government payments to deliver services need to report that income correctly in their tax returns.
  • The ATO's Government Payments Program is designed to improve compliance among businesses receiving public funds.
  • Accurate record-keeping, correct income reporting and timely lodgment and payment are the core obligations.
  • Providers in disability support, healthcare, aged care and childcare should pay particular attention where they receive both government and private income.

Businesses that receive government payments to deliver services have been reminded by the Australian Taxation Office that those payments can carry tax obligations and need to be reported correctly.

In guidance published in August 2026, the ATO outlined the Government Payments Program and the compliance expectations applying to businesses that receive public funding to provide services under Commonwealth programs.

What the Government Payments Program is

The Government Payments Program is a compliance initiative through which the ATO works with government agencies to help ensure businesses receiving public funds meet their tax obligations.

The program is focused on improving the accuracy of reporting by service providers and helping the ATO identify situations where government-funded income may not have been properly disclosed.

The ATO also participates in broader multi-agency Fraud initiatives, including the Fraud Fusion Taskforce, which targets fraud affecting government programmes such as the National Disability Insurance Scheme.

For legitimate providers, however, the core issue is straightforward tax compliance rather than an assumption of wrongdoing.

Who is a service provider

A service provider is broadly a Business that receives government payments to deliver services.

Examples can include businesses providing:

  • healthcare services;
  • disability support;
  • aged-care-related services; and
  • childcare services

under government-funded programmes.

If a business receives public money in return for delivering services, the income may fall within the Government Payments Program reporting framework.

The obligations that apply

Service providers are expected to maintain accurate records of their transactions and ensure government-funded income is reported correctly in their tax returns.

The core obligations include:

  • keeping complete business records;
  • reporting Government Payments Program income at the appropriate place in the tax return;
  • lodging tax obligations on time; and
  • paying amounts owing by the relevant due dates.

Failure to report income correctly can lead to further ATO enquiries and, depending on the circumstances, penalties, interest or other compliance action.

The ATO also uses reminders and other communications to help businesses correctly identify and report government-funded income.

Who may be affected

Businesses operating in sectors that rely heavily on government-funded service delivery are the main audience.

This includes disability support, healthcare, aged care and childcare providers.

The issue is particularly relevant for businesses receiving a combination of government payments and private customer revenue.

Where income comes from multiple sources, providers need accounting systems capable of identifying government-funded receipts and reconciling them with amounts reported for tax purposes.

What to consider next

Businesses should review how government payment income is captured in their accounting records and tax returns.

A useful starting point is to reconcile payments received from each government programme against:

  • bank records;
  • invoices;
  • accounting-system income;
  • government Remittance information; and
  • amounts included in the tax return.

Any discrepancies should be investigated before lodgment.

The aim is to make sure all Taxable Income is captured accurately and reported in the correct way.

Compliance sits within a broader fraud response

The Government Payments Program forms part of a wider effort to protect public funds and improve compliance across government-funded schemes.

The ATO's involvement in the Fraud Fusion Taskforce reflects the government's broader focus on fraud in areas such as the National Disability Insurance Scheme.

That does not mean ordinary service providers receiving government funding are automatically under suspicion.

For compliant businesses, the practical expectation is simply that public funding should be recorded and reported with the same accuracy as other business income.

Where providers receive both government and private payments, the main risk can be incomplete or inconsistent reporting rather than deliberate evasion.

Practical steps for providers

The compliance process does not need to be complicated.

Businesses can reduce risk by keeping clear records of all government-funded receipts and reconciling them regularly rather than waiting until year-end.

Providers should also ensure that their accounting treatment matches the figures ultimately reported in their tax returns.

Where several government programmes are involved, maintaining separate income categories can make reconciliation easier and help identify missing or duplicated amounts.

Timely lodgment and payment are also important because overdue obligations can attract interest or penalties.

The broader message is simple: government-funded income should be treated as a normal part of the business's tax reporting process and supported by clear records.