Private ruling: Assessable income - reimbursements
Date of advice: 12 December 2023
Published: 19 February 2024
Ruling period: Year ending 30 June 20YY
Date scheme commenced: DD MM 20YY

Ruling: Q1: Is the payment received weekly from the Provider under the terms of an NDIS Individualised Living Options agreement assessable income under section 6-5 of the Income Tax Assessment Act 1997 ( ITAA 1997)? | A1: Yes

Relevant facts and circumstances: You have been a carer for your friend (the Caree) since 20YY. You live with the Caree and provide constant care. Until recently you received a Carer Payment and Carer Allowance from Centrelink. You and the Caree recently moved into Specialist Disability Accommodation. You both share the cost of rent and utilities. You have signed an agreement with an NDIS provider (the Provider) to provide support to the Caree under Individualised Living Options (ILOs), an NDIS-funded scheme to help participants live in their chosen home with suitable support. The Provider will pay you an amount weekly under the arrangement. NDIS guidelines about ILOs state: "Payments received through an individualised living option may be assessable for tax purposes." (www.ndis.gov.au/providers/housing-and-living-supports-and-services/individualised-living-options-providers). You sought advice from Centrelink about the status of these payments. They have referred you to the Social Security Guide, section 4.3.2.30 'Income exempt from assessment - legislated', which states: NDIS amounts, received by an NDIS participant as part of the participant's NDIS plan, are exempt income for the NDIS participant ... The exemption of NDIS amounts under the income test only applies in the hands of the NDIS participant. Example: If NDIS amounts are used to pay a person to provide care and/or support for the NDIS participant, the amount paid is treated as employment income for the person providing the care and/or support. (guides.dss.gov.au/social-security-guide/4/3/2/30)

Relevant legislative provisions: Income Tax Assessment Act 1997 section 6-5 Additional information you have provided (this does not form part of the facts and circumstances) | In relation to the payment you received, the Provider has stated this does not reflect an hourly wage, but is 'a reimbursement for the support provided'. | The Provider have stated that they do not consider you an employee or contractor. They have asked you to complete a 'Statement from a supplier' form, selecting the following reason for not providing an ABN: 'The supply is made by an individual or partnership without a reasonable expectation of profit or gain'. | The Provider has referred you to Taxation Determination TD 2004/75 Income tax: are payments to a volunteer respite carer to cover expenses of providing respite care for a disabled person assessable income? to support their view that the payments are not assessable income.

Reasons for decision: Detailed Reasoning - Ordinary income: Subsection 6-5(1) of the ITAA 1997 states that your assessable income includes income according to ordinary concepts, which is called ordinary income. Subsection 6-5(2) of the ITAA 1997 states that if you are an Australian resident, your assessable income includes the ordinary income you derived directly or indirectly from all sources, whether in or out of Australia during the income year. Subsection 6-5(4) of the ITAA 1997 states in working out whether you have derived an amount of ordinary income, and (if so) when you derived it, you are taken to have received the amount as soon as it is applied or dealt with in any way on your behalf or as you direct. Chapter 4 of the Explanatory Memorandum to the ITAA 1997 provides that amounts received still need to have all the attributes of ordinary or statutory income before it is treated as such. You still need to have 'derived' the 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. Other characteristics of income that have evolved from case law include receipts that: (a) are earned (b) are expected (c) are relied upon, and (d) have an element of periodicity, recurrence or regularity. If the income has characteristics of the four listed above then it can be considered as ordinary income under section 6-5 of the ITAA 1997. | Detailed Reasoning - Reimbursements: Taxation Ruling TR 92/15 Income tax and fringe benefits tax: the difference between an allowance and a reimbursement considers the meaning of a reimbursement, stating: 3. A payment is a reimbursement when the recipient is compensated exactly (meaning precisely, as opposed to approximately), whether wholly or partly, for an expense already incurred although not necessarily disbursed. In general, the provider considers the expense to be its own and the recipient incurs the expenditure on behalf of the provider. A requirement that the recipient vouch expenses lends weight to a presumption that a payment is a reimbursement rather than an allowance. A requirement that the recipient refunds unexpended amounts to the employer adds further weight to that presumption. 4. The meaning of the word "reimburse" includes payments made in advance of expenditure as long as those payments possess the characteristics outlined in paragraph 3. Consequently, a payment will only be a reimbursement when the payment exactly matches the expense incurred. | Detailed Reasoning - Application to your circumstances: The payment you receive is for rendering personal services, being the caring duties you provide. The payment is: • earned (you receive it for providing care) • expected (you receive it as part of an agreement) • relied upon (it is your only significant source of income, and you stopped receiving government carer payments in consequence of receiving it), and • received periodically (weekly). It is income according to ordinary concepts and therefore assessable under section 6-5 of the ITAA 1997. The payment is not a reimbursement. The Provider has not informed you of any specific expenses for which you are being reimbursed, nor told you that you are expected to incur expenditure on their behalf. You do not have to provide any records to confirm you have spent money, nor refund any unexpended amounts. Your circumstances are not the same as those described in TD 2004/75. In that case, an individual is providing respite care on an occasional and entirely voluntary basis. There is no expectation of reward for their services, time or loss of other income. The payment in that case is made to reimburse specific and identified expenses incurred while providing care as a volunteer.