Private ruling: Assessable Income
Date of advice: 6 July 2018
Published: September 2018
Ruling period: Year ending 30 June 2017 | Year ending 30 June 2018
Date scheme commenced: 1 July 2016

Ruling: Q1: Are the carer payments you receive considered assessable income? | A1: Yes

Relevant facts and circumstances: You, being B and C provide full time care for a child with a disability. The child has resided with you for over a year. B entered into a contractor agreement (agreement) with a not for profit organisation to provide care to the child. B is defined as a contactor (contractor) within the agreement. B and B’s spouse through a partnership provide the following services to the child: ● Provide accommodation to the child; ● Actively involve the child in the Contractor’s family and household activities; ● Ensure that the child attends regular social, recreational, educational or work related activities; ● Support the child in attending medical appointments and reviews and administer medication when required; ● Care for the child in accordance with the not for profit organisation’s policies and procedures; ● Liaise with people providing support to the child, including medical staff, the child’s family, staff at the not for profit organisation and government agencies. Other obligations required to be performed by you as outlined in the agreement include: ● Participate in the annual home inspection. ● Participate in meetings with staff from the not for profit organisation. ● Report incidents on an incident report form and submit it to the not for profit organisation. ● Maintain current public liability insurance, professional indemnity insurance, workers compensation insurance for any of the contractor’s employees or subcontractors and comprehensive vehicle insurance. ● Indemnify the not for profit organisation against liability, loss, damage, injury or death sustained by any person or any damage caused to any property. You are required to have the requisite qualification and skills to perform the obligations within the agreement including the following qualifications: 1. Current senior first aid certificate and CPR; 2. A current driver’s licence; and 3. Blue card or yellow exemption card The agreement allows you to employ or engage staff to perform the role and functions within the agreement, subject to the staff meeting the minimum qualifications above. You do not engage any staff and only care for one child. The not for profit organisation will arrange for another contractor to look after the child you care for when you go on holidays, although you tend to arrange for the child to accompany you on holidays. The not for profit organisation receives funding from a government department for each child participating in the respite out of home care program. Each fortnight or month, you send an invoice to the not for profit organisation, specifying the: ● The period worked; ● Amount claimed, plus GST; ● Any claim for expenses relating to toll charges and proportional expenses relating to the child’s food and utility costs. The agreement you entered into, provides that these expenses have to be pre- approved and receipt furnished to the not for profit organisation. ● Including details of your ABN. Upon you submitting either a fortnightly or monthly invoice to the not for profit organisation, you receive payment for the 24 hour care you provide. You receive a higher daily rate for care provided on Saturday, Sunday and Public holidays. The child’s medical costs, including visits to the doctor and other practitioners, in addition to medication, nappies, entertainment and social and recreational expenses and general clothing are paid by you and are not reimbursed by the not for profit organisation. Damage caused by the child and repairs to these damages are paid by you and are not reimbursed. While the agreement you entered into provides for the not for profit organisation to contribute a proportion of the above 24 hour payments to a complying superannuation fund on behalf of the contractor, the organisation does not make any superannuation contribution on behalf of you. The agreement also states that the not for profit organisation may deduct PAYG withholding tax from the daily payments to you, but no such PAYG instalments are withheld. Either party to the agreement may terminate the contract by giving notice in the following circumstances: ● Breach of the conditions within the contact by the contractor; ● Contractor performs the role incompetently or negligently; ● The contractor refuses to perform the work reasonably and property; ● The contractor is charged or convicted of an offence; ● The funding is altered or withdrawn. B has worked part time while providing care to the child, but currently cares for a family member.

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

Reasons for decision: Summary: Your activity in providing respite care to the disabled child is considered personal services income and is assessable. | Detailed Reasoning - Detailed reasoning: Sections 6-5 and 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. Personal services income Taxation Ruing IT 2639 Income Tax: personal services income describes income from personal services as ‘income that an individual earns predominantly as a direct reward for his or her personal efforts, for example, the provision of services, exercise of skills or the application of labour’. The receipt of payment as a reward for employment or rendering 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. Payments provided in respect of, or in relation to rendering services are considered assessable income. | Detailed Reasoning - Application to your circumstances: The income derived under your contract is personal services income as it is a reward for your personal efforts or skills, namely providing support and respite care to a disabled child in your home. | Detailed Reasoning - Note:: As your income is assessable, any expenses you incur in relation to your earning your assessable income are deductible.