Private ruling: Assessable Income - Grant Funding
Published: August 2017
Ruling period: Year ended 30 June 2016
Date scheme commenced: 1 July 2015

Ruling: Q1: Is the grant paid to you by the government assessable income? | A1: Yes

Relevant facts and circumstances: You are a professional. You have received a grant from the government to undertake training in a particular area of your profession.

Relevant legislative provisions: Income Tax Assessment Act 1997 Section 6-5 Income Tax Assessment Act 1997 Section 15-2

Reasons for decision: Summary: Subsection 6-5(1) of the Income Tax Assessment Act 1997 (ITAA 1997) states that 'Your assessable income includes income according to ordinary concepts, which is called ordinary income'. Subsection 6-5(2) provides that the assessable income of a resident taxpayer includes ordinary income derived directly or indirectly from all sources during the income year. An incentive bonus comes within the meaning of ordinary income. An incentive bonus is an additional reward payment derived by you in your capacity as an employee as a financial incentive to remain in your profession ( Dean and Anor v. Federal Commissioner of Taxation (1997) 78 FCR 140; (1997) 37 ATR 52; 97 ATC 4762) (Deans Case). Dean's case also found that the payment need not be paid by your employer. In your case you received payments under the grant for undertaking additional training so you can provide more comprehensive services in in your profession. The payments are considered a bonus you derive as a result of your income earning activity as they are paid to encourage you to undertake additional training in order to expand services. It follows that for the purposes of section 6-5 of the ITAA 1997 the grant constitutes ordinary assessable income. Although the grant payments were not paid to you by your employer, it is considered the grant payments were paid in relation to your employment. The grants are targeted at a particular employment group and are intended to support the development of the professional skills of person's within that group. That is, if it were not for your employment as a professional, you would not be eligible to receive the grant. The grant is assessable income under section 6-5 of the ITAA 1997 and must be declared in your tax return.