ATO ID 2002/762: Income: Traineeship program
Date of decision: 8 May 2002
Year of income: Year ending 30 June 2002
Business line: Small Business/Individual Taxpayers

Issue
Is the amount received by the taxpayer from a traineeship program included in assessable income under section 6-5 of the Income Tax Assessment Act 1997 (ITAA 1997)?

Decision
Yes, the amount received by the taxpayer from a traineeship program is included in assessable income under section 6-5 of the ITAA 1997.

Facts
The taxpayer is the employer of a trainee under a traineeship program. The traineeship program is providing sponsorship for the trainee during the 2002 income year. The entity providing the traineeship pays the sponsorship amount to the taxpayer.

Reasons for decision
Summary: Subsection 6-5(1) of the ITAA 1997 provides that the assessable income of a taxpayer is made up of ordinary income and statutory income. Exempt income is not included in assessable income even when it is also ordinary or statutory income. Ordinary income has generally been held to include three categories: namely, income from rendering personal services, income from property and income from carrying on a business. The amount received by the taxpayer from the traineeship program is assessable income under section 6-5 of the ITAA 1997, as it was received as a consequence of carrying on a business and has the character of income. As such, it constitutes ordinary income. The amount received is not exempt from income tax by a provision of the ITAA 1997 or any other Commonwealth law.

Legislative references: Income Tax Assessment Act 1997 section 6-5
Subject references: Income Assessable income test Exempt income