Private ruling: Assessable income
Date of advice: 24 November 2016
Published: April 2017
Ruling period: Year ended 30 June 2014 | Year ended 30 June 2015 | Year ended 30 June 2016 | Year ending 30 June 2017 | Year ending 30 June 2018 | Year ending 30 June 2019 | Year ending 30 June 2020 | Year ending 30 June 2021
Date scheme commenced: 1 July 2013

Ruling: Q1: Are the payments you receive on a fortnightly basis considered assessable income? | A1: No.

Relevant facts and circumstances: Your child was involved in a motor vehicle accident which left them with permanent disabilities. They will never be in a position to manage their own affairs or live independently. The Courts appointed a trustee to manage the lump sum compensation payment awarded to your child as a result of their accident. You are paid a fortnightly payment by the trustee to assist you with meeting the costs associated with caring for a person with disabilities. These payments are made at the trustee's discretion and can be cancelled at any time without explanation. The trustee believes that the payments do not create any enforceable obligation on the part of either party and do not create any legal relationship between the parties. The trustee does not withhold any tax from the payments nor do they contribute to a superannuation fund on your behalf. The payments you receive are used to meet the costs you incur with caring for your child. You are not an employee of the trustee or in the business of providing disability care.

Relevant legislative provisions: Income Tax Assessment Act 1997 section 6-5 | Income Tax Assessment Act 1997 section 6-10

Reasons for decision: Summary: Section 6-5 and section 6-10 of the Income Tax Assessment Act 1997 (ITAA 1997) provides that the assessable income of a resident taxpayer includes ordinary and statutory income derived directly and indirectly from all sources during the income year. In determining if an amount is income according to ordinary concepts, consideration must be given to whether the amount is the product of any income producing activity. Such an activity could include employment, carrying on a business or rendering a service. The receipt of payment as a reward for services (which would be considered assessable income) can be contrasted with the receipt of a payment to a volunteer to reimburse them for costs incurred by them in the carrying out of their activities. An example of this would be payments made to volunteers to allow for their provision of foster care or respite care. Where the payment is intended to cover expenses incurred in providing the care including food and drink, laundry, recreation activities and transport the payment is considered to be in the nature of a reimbursement of expenses and therefore is not assessable income. Based on the facts you have provided, we accept that you are not being paid for your personal services but are receiving payments in recognition of the costs you may incur in providing care for your child. Such payments are not considered to be ordinary or statutory income. Therefore, the payments do not form part of your assessable income and you are not required to include the amounts in your tax return.