Private ruling: Timing of assessable income
Published: September 2011
Ruling period: Year ended 30 June 2010 | Year ended 30 June 2011 | Year ended 30 June 2012
Date scheme commenced: 1 July 2009

Ruling: Q1: Is the lump sum payment you received assessable in the years ended 30 June 2010 and 30 June 2011? | A1: No. | Q2: Is the lump sum payment you received assessable in the year ended 30 June 2012? | A2: Yes.

Relevant facts and circumstances: You received a lump sum payment in arrears in July 2011 from a previous employer. Your employer withheld tax from this payment, and paid the net amount to you. This payment was for salary and wages that should have been paid to you in the years ended 30 June 2010 and 30 June 2011. You will receive a payment summary for this lump sum payment in July 2012.

Relevant legislative provisions: Income Tax Assessment Act 1997 Section 6-5.

Reasons for decision: Summary: Subsection 6-5(2) of the Income Tax Assessment Act 1997 (ITAA 1997) provides that the assessable income of an Australian resident includes ordinary income derived directly or indirectly from all sources, whether in or out of Australia, during the income year. Salary and wages income is regarded as ordinary income. Similarly, back payments for salary and wages are also regarded as ordinary income and therefore assessable under subsection 6-5(2) of the ITAA 1997. Taxation Ruling TR 98/1 sets out the Commissioner's policy on the derivation of income. Paragraph 42 of the ruling states that income from employment would normally be assessable on a receipts basis. Salary, wages or other employment remuneration are assessable on receipt even though they relate to a past or future income period. Therefore, this payment is assessable to you in the year ended 30 June 2012, as this is the year you received the payment. Consequently, it is correct that the gross payment and the tax withheld be included in a single payment summary for the year ended 30 June 2012.

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