Private ruling: Special disaster assistance grant
Published: December 2014
Ruling period: Year ended 30 June 2013 | Year ended 30 June 2014
Date scheme commenced: 1 July 2012

Ruling: Q1: Are the expenses to repair the depreciating asset deductible in the financial year they are incurred? | A1: Yes. | Q2: Is the grant assessable income? | A2: Yes.

Relevant facts and circumstances: You operate a business of primary production. Your property was directly affected by a natural disaster. Due to the disaster event a depreciating asset used in the business sustained damage. You incurred expenses in relation to the repairs over two financial years. You received a grant from the government. The grant was paid to assist primary producers in paying for clean-up and restoration costs arising out of the direct damage caused by the disaster. The assistance was paid under category C of the jointly funded Commonwealth/Queensland Government Natural Disaster Relief and Recovery Arrangements (NDRRA) and was administered by the QRAA (Queensland Rural Adjustment Authority).

Relevant legislative provisions: Income Tax Assessment Act 1997 Section 6-5 | Income Tax Assessment Act 1997 Section 15-10 | Income Tax Assessment Act 1997 Section 25-10

Reasons for decision: Summary: Section 25-10 of the Income Tax Assessment Act 1997 (ITAA 1997) provides a deduction for expenditure incurred for repairs to premises or a depreciating asset held or used for the purpose of producing assessable income. Therefore expenses incurred to repair a depreciating asset used in carrying on a primary production business are deductible under 25-10 of the ITAA 1997 in the financial year they are incurred. Grants and subsidies Grants and subsidies received by a business in relation to the carrying on of that business are assessable income either according to ordinary concepts under section 6-5 of the ITAA 1997 or as a bounty or subsidy under section 15-10 of the ITAA 1997. Taxation Ruling TR 2006/3 Income tax: government payments to industry to assist entities (including individuals) to continue, commence or cease business, discusses the assessability of government payments. At paragraph 12 of the ruling it states that a government payment to industry made to assist with business operating costs or liabilities is ordinary income in the hands of the recipient and is assessable under section 6-5 in the income year in which it is derived. In your case, you received a government grant to assist with liabilities arising as a result of a natural disaster. As stated in TR 2006/3, these grants are considered to be ordinary income and are assessable under section 6-5 of the ITAA 1997 in the year received. It should be noted that even if the payments were not assessable under section 6-5 of the ITAA 1997 as ordinary income they would be assessable as a bounty or subsidy under section 15-10 of the ITAA 1997 as they were received in relation to carrying on a business. Also, the natural disaster in your case is not one for which recovery grants have been specifically exempted by section 59-50, 59-55 or 59-60 of the ITAA 1997.