ATO ID 2003/512: Assessable Income: Volunteer Firefighters Emergency and General Assistance payment
Date of decision: 13 June 2003
Year of income: Year ended 30 June 2002
Business line: Small Business/Individual Taxpayers

Issue
Is an Emergency and General Assistance payment made to a taxpayer under the Volunteer Firefighters Assistance package included in assessable income under section 6-5 of the Income Tax Assessment Act 1997 (ITAA 1997)?

Decision
Yes. An Emergency and General Assistance payment made to a taxpayer under the Volunteer Firefighters Assistance package is included in assessable income under section 6-5 of the ITAA 1997 as it was paid as compensation to replace lost income.

Facts
Ex gratia payments were made by the Department of Family and Community Services, through Centrelink, under a Volunteer Firefighters Assistance Package. These payments were made as Emergency and General Assistance payments and were paid at the rate of $160 per day. They were paid to compensate volunteer firefighters for the loss of income they sustained while fighting bushfires in New South Wales. The payments were made to those firefighters who met the following criteria: The taxpayer was a volunteer firefighter who met these criteria and received an Emergency and General Assistance payment from Centrelink.

Reasons for decision
Summary: Subsection 6-5(1) of the ITAA 1997 provides that a taxpayer's assessable income includes income according to ordinary concepts, which is called ordinary income. Ordinary income has been held by the courts to include income from the rendering of personal services, income from property and income from carrying on a business. An amount paid to compensate for loss generally acquires the character of that for which it is substituted ( Federal Commissioner of Taxation v. Dixon (1952) 86 CLR 540; [1952] HCA 65; (1952) 5 AITR 443; (1952) 10 ATD 82). Compensation payments which are paid to substitute income have been held by the courts to be income ( Federal Commissioner of Taxation v. Inkster (1989) 24 FCR 53; [1989] FCA 423; 89 ATC 5142; (1989) 20 ATR 1516, Tinkler v. FC of T (1979) 10 ATR 411; 79 ATC 4641 and Case Y47 91 ATC 433; Case 7328 (1991) 22 ATR 3422). As an Emergency and General Assistance payment made under the Voluntary Firefighters Assistance package is paid as compensation to replace income, the payment acquires the character of income. Accordingly, a Voluntary Firefighters Assistance payment is ordinary income and is therefore assessable under section 6-5 of the ITAA 1997.

Legislative references: Income Tax Assessment Act 1997 section 6-5 subsection 6-5(1)
Case references: Taxation, Federal Commissioner of v. Dixon (1952) 86 CLR 540 [1952] HCA 65 (1952) 5 AITR 443 (1952) 10 ATD 82
Subject references: Income Income support payments