ATO ID 2002/331: Assessability of annual leave loading
Date of decision: 11 October 2001
Business line: Small Business/Individual Taxpayers

Issue
Is a salary and wage earner assessable on an amount of annual leave loading under section 6-5 of the Income Tax Assessment Act 1997 (ITAA 1997)?

Decision
Yes. A salary and wages earner is assessable on an amount of annual leave loading under section 6-5 of the ITAA 1997.

Facts
The taxpayer is an employee who earns salary and wages. The taxpayer received an amount of annual leave loading during the income year.

Reasons for decision
Summary: Section 6-5 of the ITAA 1997 provides that a taxpayer's assessable income includes income according to ordinary concepts, which is called ordinary income. Remuneration received for personal services in the capacity of employee, such as salary and wages, is considered income according to ordinary concepts. Amounts paid for annual leave including any additional payment for leave loading is also income according to ordinary concepts. Therefore, the amount of annual leave loading is income according to ordinary concepts and is assessable under section 6-5 of the ITAA 1997.

Legislative references: Income Tax Assessment Act 1997 section 6-5
Subject references: Leave bonus Salary Salary and wages income