Are You Receiving Government Payments? Here’s What the ATO Expects

Billions of Dollars. Thousands of Providers. One Shared Obligation.

Each year, billions of dollars in Commonwealth funding flow to service providers delivering healthcare, disability support, childcare, and aged care services across Australia. These payments keep critical programs running and support millions of Australians who depend on them.

But receiving government funding comes with a responsibility that many providers overlook or underestimate: every dollar received must be correctly declared as income on your tax return.

The ATO has now updated its Government Payments Program (GPP) data-matching protocol and has made it clear that it is actively working to ensure service providers receiving payments from Commonwealth agencies are meeting their tax and superannuation obligations. If you provide services under a Commonwealth program and receive government payments, this blog is directly relevant to you.

What Is the Government Payments Program?

The Government Payments Program (GPP) is a cross-agency initiative established by the ATO to support service providers receiving government payments in meeting their tax, superannuation, and registration obligations.

At its core, the GPP works by collecting payment data from participating Commonwealth agencies and matching it against ATO records. The goal is to identify service providers who may not be correctly reporting their income, who may have outstanding lodgment or registration obligations, or who may not be meeting their superannuation commitments.

The program is not punitive by design. Its stated aim is to promote voluntary compliance and educate service providers about their obligations. However, where non-compliance is identified, the ATO will take action.

Who Does This Affect?

The GPP applies to service providers delivering services under Commonwealth programs. This includes, but is not limited to:

• Aged care providers receiving the Aged Care Subsidy under the Aged Care Act, including those delivering services under the new Support at Home program (which replaced Home Care Packages from 1 July 2025)
• NDIS registered and unregistered providers receiving payments through the National Disability Insurance Scheme
• Childcare providers receiving subsidies under the Child Care Subsidy program
• Healthcare providers receiving Medicare benefits or other Commonwealth health payments
• Clean energy providers receiving payments administered by the Clean Energy Regulator

Service providers can include sole traders, companies, partnerships, and trusts. The obligation to correctly declare income applies regardless of the structure through which the services are delivered.

According to the ATO’s data-matching program protocol, this data collection covers financial years from 2017-18 through to 2025-26, and the ATO expects to collect details on approximately 60,000 service providers each financial year, of which around 9,000 are individuals.

What the ATO Has Just Done

The ATO recently updated its GPP data-matching program protocol to better detect non-compliance and work more effectively with other government entities. This update signals a strengthening of the program, not a winding back of it.

In early 2026, the ATO advised that it would be contacting taxpayers and tax agents by email to ensure that income received from government agencies, specifically including the Aged Care Subsidy and payments under the National Disability Insurance Scheme, was being correctly reported in tax returns. If you are a registered tax agent with clients in these sectors, or if you are a service provider yourself, you may have already received or shortly expect to receive one of these communications.

Is Government Funding Actually Taxable Income?

This is a question the ATO encounters frequently, and the answer is generally yes.

Payments received from providing government services such as healthcare, disability support, and childcare will generally be assessable income. There are some exceptions and nuances, particularly for not-for-profit entities with income tax exemptions, but the default position is that if your organisation receives money for delivering services, that money is taxable income that must be reported.

How you report the income will depend on your entity type, your tax status, and any other reporting obligations that apply to your specific situation. The ATO’s Government Payments Program page provides general guidance on how different types of service providers should report GPP income in their tax returns.

The Two Core Obligations: Records and Reporting

The ATO has highlighted two fundamental obligations for service providers receiving government payments:

1. Keep Accurate Records

Under tax law, you are required to keep records that explain all transactions relevant to your tax affairs for a minimum of five years. For government-funded service providers, this means:

• Records of all payments received from Commonwealth agencies
• Invoices or statements supporting each payment received
• Records of all expenses claimed as deductions against that income
• Records supporting any GST claims made on your Business Activity Statements

Strong record-keeping is not just about compliance. It is your primary protection if the ATO ever contacts you to verify your declared income against what the agency has reported paying you. If the figures match and your records are in order, a data-matching flag will be resolved quickly and without penalty.

2. Report All Income in Your Tax Return

Every payment you receive from a Commonwealth agency for delivering services must be included in your tax return for the year in which it is received (or earned, depending on your accounting method). This applies even if:

• The payment is described as a “subsidy” rather than income
• Part of the payment is passed on to participants or used to cover their expenses
• You are operating as a not-for-profit (unless your organisation holds a specific income tax exemption)
• The payment relates to prior-period services

If you are unsure whether a specific government payment needs to be included in your tax return, this is exactly the kind of question your tax adviser should be able to answer quickly and definitively.

How the Data Matching Works

The GPP operates by collecting payment data directly from participating Commonwealth agencies, including the Department of Health and Aged Care, the National Disability Insurance Agency, the Clean Energy Regulator, and the Department of Education. This data is then matched against ATO records to identify discrepancies.

The matching covers a wide range of compliance indicators:

• Whether the service provider is registered for tax (has a valid ABN, TFN, or is registered for GST)
• Whether income tax returns and BAS lodgments are up to date
• Whether the income declared in tax returns is consistent with the payment data provided by the agencies
• Whether superannuation obligations for any employees are being met

The ATO retains each financial year’s data for five years, which means it can conduct long-term trend analysis, not just a single-year snapshot. If your reporting has been inconsistent across multiple years, the data-matching program is designed to identify that pattern.

What Happens If a Discrepancy Is Found?

If the ATO’s data matching identifies a potential gap between what an agency has reported paying you and what you have declared in your tax return, the typical process is:

Contact and education first. The ATO’s stated approach is to start by contacting service providers and their tax agents to explain the discrepancy and encourage voluntary correction. This may come in the form of an email, letter, or phone call.

Voluntary amendment. If the discrepancy is straightforward, you may be asked to amend your tax return to include the omitted income. Doing so voluntarily and promptly generally results in reduced penalties compared to those that apply when the ATO must pursue the correction through a formal audit.

Formal review or audit. If a provider does not respond to initial contact or if the discrepancy is significant, the ATO may escalate to a formal compliance review or audit. At this stage, penalties and interest on any outstanding tax liability will apply.

Special Considerations for NDIS Providers

NDIS providers face a particularly detailed compliance environment. The NDIA maintains highly structured payment records through the NDIS portal, meaning the data provided to the ATO under the GPP is both comprehensive and precise. Every support delivered and claimed through the system is documented.

For NDIS providers, common compliance risks include:

• Failing to declare NDIS payments received as a sole trader in a personal tax return
• Operating multiple entities and not consolidating income correctly across returns
• Claiming expenses as business deductions without adequate documentation
• Not registering for GST when turnover exceeds the $75,000 threshold

If you are an NDIS provider, sole trader, or otherwise, and you are not working with a registered tax agent, now is a good time to start.

Special Considerations for Aged Care Providers

The aged care sector underwent significant structural change from 1 July 2025, when the Support at Home program replaced the previous Home Care Packages system. Providers transitioning to the new program need to ensure their financial systems are updated to correctly capture and categorise payments under the new structure, and that their tax return reporting reflects the new funding arrangements accurately.

Record-Keeping Checklist for GPP Service Providers

Use this checklist to confirm your records are in order:

• All government payment remittances and statements are saved and filed by financial year
• Your income tax return for 2024-25 includes all government payments received in that year
• Your BAS lodgments are up to date and reflect the correct GST position
• Your ABN registration details are current and accurate with the Australian Business Register
• Superannuation contributions for all employees are correctly calculated and paid on time
• Any amendments needed for prior years have been identified and actioned

How JMB Consultants Can Help

At JMB Consultants, we work with healthcare providers, NDIS service providers, aged care operators, and childcare businesses to ensure their tax affairs are in order. If you have received an ATO communication about the Government Payments Program, or if you simply want to confirm that your reporting is correct before the ATO comes to you, we can help.

We can assist with:

• Reviewing your declared income against payment records from Commonwealth agencies
• Preparing and lodging outstanding tax returns and BAS
• Advising on the tax treatment of different types of government funding
• Setting up record-keeping systems that make annual compliance straightforward

Contact us to make sure your government payment reporting is accurate, complete, and audit-ready.

The information in this blog is general in nature and does not constitute personal tax advice. Please seek professional advice to confirm how these rules apply to your specific circumstances.