ATO ID 2006/72: Election funding received by political parties from the Australian Electoral Commission
Date of decision: 15 March 2006
Year of income: 30 June 2002
Business line: Private Groups and High Wealth Individuals

Issue
Is election funding received by a political party from the Australian Electoral Commission assessable income under subsection 6-5(1) of the Income Tax Assessment Act 1997 (ITAA 1997)?

Decision
No. Election funding received by a political party from the Australian Electoral Commission is not assessable income under subsection 6-5(1) of the ITAA 1997.

Facts
Following a federal election or by-election, the federal government, through the Australian Electoral Commission, distributes election funding where candidates or groups secure more than 4% of the total number of eligible votes in a particular electorate. The purpose of the election funding is to assist the payment of election expenses and the amount paid is based on the number of first preference votes gained. The election funding is paid by the Australian Electoral Commission to a candidate's political party unless the candidate is contesting the election as an independent.

Reasons for decision
Summary: Subsection 6-5(1) of the ITAA 1997 provides that the assessable income of a taxpayer includes income according to ordinary concepts, which is called ordinary 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. In addition, characteristics of ordinary income that have evolved from case law include receipts that: The election funding received by a political party does not exhibit the characteristics of ordinary income as described to such an extent as to be characterised as income according to ordinary concepts. The election funding also does not relate to, or result from the performance of any personal services rendered by the political party, nor is it income from property. While a political party may derive assessable income from investments or activities of a business nature, the election funding is not considered to be income from the proceeds of any business activity carried on by the political party. Accordingly, the election funding received by a political party is not assessable as ordinary income under subsection 6-5(1) of the ITAA 1997. In addition we do not consider the election funding, when received by a political party, is assessable under any of the statutory income provisions of the ITAA 1997.

Legislative references: Income Tax Assessment Act 1997 subsection 6-5(1) subdivision 20-A
Related public rulings and determinations: Taxation Ruling TR 1999/10
Subject references: Carrying on a business Election funding Political organisations Parliament election expenses