ATO ID 2002/205: Income - Money received for personal expenses while residing at a college
Date of decision: 26 September 2001
Business line: Small Business/Individual Taxpayers

Issue
Is money received by the taxpayer for personal expenses while residing at a college assessable income under section 6-5 of the Income Tax Assessment Act 1997 (ITAA 1997)?

Decision
Yes. Money received by the taxpayer for personal expenses while residing at a college is income according to ordinary concepts and assessable under section 6-5 of the ITAA 1997.

Facts
The taxpayer is an overseas student who is residing at an Australian college between the end of secondary education and the start of university. The taxpayer undertakes various duties while at the college. The taxpayer is provided with board and lodging and a limited amount of money for personal expenses. The taxpayer is a resident of Australia for income tax purposes.

Reasons for decision
Summary: Subsection 6-5(2) of the ITAA 1997 provides that the assessable income of a resident taxpayer includes ordinary income derived directly or indirectly from all sources, whether in or out of Australia, during the income year. Ordinary income has generally been held to include 3 categories, namely, income from rendering personal services, income from property and income from carrying on a business. Paragraph 3 of Taxation Ruling IT 2639 defines 'income from personal services' and states that: '3. "Income from personal services" is income that an individual taxpayer earns predominantly as a direct reward for his or her personal efforts by, for example, the provision of services, exercise of skills or the application of labour. The inclusion of predominantly in this definition allows for the situation where personal services involve the use of some equipment, for example the drawing board of an architect.' Other characteristics of income that have evolved from case law include that the receipts: The taxpayer undertakes various duties at the college and is provided with board and lodgings and a limited amount of money for personal expenses. The taxpayer receives the money on a regular basis, and it is earned, expected and relied upon. The money received by the taxpayer is therefore ordinary income and assessable income under section 6-5 of the ITAA 1997.

Legislative references: Income Tax Assessment Act 1997 section 6-5 subsection 6-5(2)
Related public rulings and determinations: IT 2639
Subject references: Salary & wages income Employee allowances