Private ruling: Subject - Income - Home Purchase Assistance Scheme
Published: August 2011
Ruling period: Year ended 30 June 2011
Date scheme commenced: 1 July 2010

Ruling: Subject - Income - Home Purchase Assistance Scheme | Question and answer | Is the Home Purchase Assistance Scheme (HPAS) payment assessable income? | Answer: Yes


Relevant legislative provisions: Income Tax Assessment Act 1936 section 23AD Income Tax Assessment Act 1936 subsection 23AD(1) Income Tax Assessment Act 1936 subsection 23AD(2) Income Tax Assessment Act 1936 subsection 23AD(3) Income Tax Assessment Act 1936 paragraph 23AD(3)(b) Income Tax Assessment Act 1997 section 6-5 Income Tax Assessment Act 1997 s ubsection 6-5(2) Income Tax Assessment Act 1997 subsection 6-15(2) | Income Tax Assessment Act 1997 section 11-15

Reasons for decision: Summary: Subsection 6-5(2) of the Income Tax Assessment Act 1997 (ITAA 1997) provides that the assessable income of a resident taxpayer includes ordinary income derived directly or indirectly from all sources, whether in or out of Australia, during the income year. Subsection 6-15(2) of the ITAA 1997 provides that if an amount is exempt income then it is not assessable income. Section 11-15 of the ITAA 1997 lists those provisions dealing with income which may be exempt. Included in this list is section 23AD of the ITAA 1936 which deals with pay and allowances received by Australia ADF members performing certain overseas duty. Subsection 23AD(1) of the ITAA 1936 provides that the pay and allowances earned by a person serving as a member of the Defence Force are exempt from tax if: (a) they are earned while there is in force a certificate in writing issued by the chief of the Defence Force to the effect that the person is on eligibleduty with a specified organisation in a specified area outside Australia, and (b) the eligible duty is not as, or under, an attaché at an Australian embassy or legation. Subsection 23AD(2) of the ITAA 1936 provides that the regulations may declare that duty with a specified organisation, in a specified area outside Australia and after a specified day, is eligible duty for the purposes of the exemption. | Detailed Reasoning - Pay and allowances: The HPAS payment will fall for consideration under section 23AD of the ITAA 1936 if it falls within the meaning of the term 'pay and allowances'. The term 'pay and allowances' is not defined in section 23AD of the ITAA 1936 or elsewhere, but it may reasonably be construed to refer to salary, wages, bonuses and allowances received by an ADF member in their capacity as an employee. The HPAS is an entitlement paid to ADF personnel to assist with the purchase of a home. The HPAS payment is an additional payment you derived in your capacity as an employee ( Dean & Anor v. Federal Commissioner of Taxation (1997) 78 FCR 140; (1997) 37 ATR 52; 97 ATC 4762). As such, the HPAS payment is considered an allowance within the term pay and allowances for the purposes of section 23 AD of the ITAA 1936. Earned while certificate in force A HPAS payment is derived at the time it is received ((1958) 9 TBRD Case J20; 7 CTBR (NS) Case 130; and (1958) 9 TBRD Case J60; 8 CTBR (NS) Case 50 ). Therefore, the HPAS payment is earned by you at the time it was received. While it will usually be the case that section 23AD of the ITAA 1936 will apply to the pay and allowances earned by an ADF member from eligible duty, there is no requirement in section 23AD of the ITAA 1936 that the pay and allowances be connected to that eligible duty. Rather, section 23AD of the ITAA 1936 only requires that the pay and allowances are earned by an ADF member while the member is on eligible duty. Subsection 23AD(3) of the ITAA 1936 outlines when a certificate is in force. Under paragraph 23AD(3)(b) of the ITAA 1936, the certificate continues in force until the earliest of: (i) the time of the person's departure from the specified area; and (ii) the time when, in accordance with a certificate of revocation signed by the Chief of the Defence Force, it ceases to be in force; and (iii) any time prescribed by the regulations in relation to the eligible duty for the purposes of this subparagraph. As the period you ceased being on the military operation was a certain date, this is when the certificate ceases to be in force. Therefore, after this date, you are not considered to be on eligible duty for the purposes of section 23AD of the ITAA 1936. You received the HPAS payment at the end of the fortnightly pay period which was after your return to Australia. Therefore, the payment was not earned while on eligible duty with the military operation and is not exempt under section 23AD of the ITAA 1936. Therefore, the HPAS payment will be assessable under subsection 6-5(2) of the ITAA 1997.

Please check this edited version to be sure that there are no details remaining that you think may allow you to be identified. Contact us at the address given in the fact sheet if you have any concerns. | Relevant facts: You are an employee of the Australian Defence Forces (ADF). | You received a HPAS payment during the 20XX-XXfinancial year | You served as part of a military operation. | The Chief of the Defence Force has issued a certificate declaring that ADF members deployed on the military operation were on eligible duty for the purposes of section 23AD of the Income Tax Assessment Act 1936 (ITAA 1936). | You provided a copy of your pay advice covering a specific fortnightly period. | The pay advice shows the salary variation to include the effective dates of your service on the military operation as being included in the dates covering the specific fortnightly period. | The pay advice also shows the salary variation to include the HPAS payment being effective from a certain date which was prior to your return to Australia. | The full HPAS payment was paid to your bank account after you returned to Australia. This is confirmed in the email provided by you together with a copy of a bank statement showing the deposit of the payment. | You provided a copy of your payment summary showing you had a certain number of days in the section 23AD of the ITAA 1936 tax zone in the 20XX-XXfinancial year. | You are a resident of Australia for tax purposes.