Private ruling: Assessable income – Insurance Payment- NRAS Incentive payment
Date of advice: 5 July 2018
Published: September 2018
Ruling period: Period ending 30 June 20xx
Date scheme commenced: 1 July 20xx

Ruling: Q1: Is the insurance payment for the National Rental Affordability Scheme (NRAS) Incentive treated as assessable income? | A1: No Section 6-5 of the Income Tax Assessment Act 1997 provides that assessable income includes income according to ordinary concepts (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. The payment received was proceeds from an insurance policy. The payment was not income from rendering personal services or income from property or income from carrying on a business. In general, a compensation amount generally bears the character of that which it is designed to replace. In this case the compensation amount was to replace an incentive payment. Had the payment been received through the NRAS scheme it would not have been seen as assessable income. The compensation payment is to be treated in a like manner as the payment it was replacing and therefore it is considered to be non-assessable income.

Relevant facts and circumstances: You own a property, this property is a unit within a body corporate. The property was tenanted under the National Rental Affordability Scheme (NRAS). An NRAS incentive is issued to housing providers to provide affordable rental dwellings at least 20 per cent below market rates. The annual incentive scheme compromises of a Commonwealth Government incentive made by way of a refundable tax offset and a cash payment from the relevant state government, which is non-assessable non-exempt (NANE) income. NRAS Incentive values for 20xx financial year are $XXX compromising of $XX contributed by the Australian Government and $XX contributed by the relevant state government. The NRAS year is 1 May to 30 April in the respective year. The NRAS regulations state “to the extent that the rental dwelling is not rented NRAS year that falls within the incentive period the dwelling must not be vacant for a period of more than 26 weeks during the relevant NRAS year.” Your property was impacted by a natural disaster. The property was deemed uninhabitable. Your property was not available for rent for an extended period greater than 26 weeks. The tenant vacated the property. Insurance payments were received for loss of rent claimed through the body corporate insurance policy. Four separate payments were received at the reduced market rate as per the NRAS scheme criteria. Insurance claim to replace the loss of annual incentive scheme were made through the body corporate insurance with a payment being received.

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