ATO ID 2003/82: Assessability of kindergeld (child benefit) payments from Germany
Date of decision: 20 December 2002
Year of income: Year ended 30 June 2003
Business line: Small Business/Individual Taxpayers

Issue
Do kindergeld (child benefit) payments received from Germany form part of an Australian resident taxpayer's assessable income under section 6-5 of the Income Tax Assessment Act 1997 (ITAA 1997)?

Decision
Yes. As the taxpayer is a resident of Australia, they are required to include the child benefit payments in their assessable income under section 6-5 of the ITAA 1997.

Facts
The taxpayer receives child benefit payments from Germany in respect of their child. The child benefit is a monthly cash payment that is paid to a person who has dependent children. The child benefit can be claimed for eligible children including children under 18 years of age. The child benefit payments are made by the German government to eligible parents to help to defray the cost of raising a child. The child benefit payments are not taxable in Germany. The taxpayer is a resident of Australia for taxation purposes.

Reasons for decision
Summary: Subsections 6-5(1) and 6-5(2) of the ITAA 1997 provide that the assessable income of a taxpayer who is a resident of Australia for taxation purposes includes income according to ordinary concepts (ordinary income) derived directly or indirectly from all sources, whether in or out of Australia, during the income year. Characteristics of what is ordinary income have evolved from case law and include receipts that; The child benefit payments have the characteristics of income according to ordinary concepts in that the amounts are periodical, regular or recurring. The amounts are also expected and relied upon by the taxpayer receiving them. As the taxpayer is a resident of Australia the child benefit payments form part of their assessable income under section 6-5 of the ITAA 1997. There is no provision in the income tax legislation which exempts these payments from tax in Australia. In determining liability to Australian tax on foreign sourced income it is necessary to consider not only the income tax laws but also any applicable double tax agreement contained in the International Tax Agreements Act 1953 (the Agreements Act). Schedule 9 to the Agreements Act contains the double tax agreement between Australia and Germany (the German Agreement). The German Agreement operates to avoid the double taxation of income received by Australian and German residents. The allocation of taxing rights in relation to the child benefit payments is not the subject of any specific Article of the German Agreement. Therefore, the assessability of the child benefit payments has to be determined solely with reference to Australian taxation laws. As the child benefit payments are income under ordinary concepts and are not exempt they are assessable income. Accordingly, the child benefit payments that the taxpayer receives from Germany are to be included in their assessable income under section 6-5 of the ITAA 1997.

Legislative references: Income Tax Assessment Act 1997 section 6-5 subsection 6-5(1) subsection 6-5(2)
Subject references: Children Dependent children Double tax agreements Germany Income