Private ruling: Assessable income
Published: February 2015
Ruling period: Year ended 30 June 2013
Date scheme commenced: 1 July 20XX

Ruling: Q1: Is the portion of the payment received as compensation for lost wages assessable income? | A1: Yes. | Q2: Is the portion of the payment received for travel and accommodation assessable income? | A2: No.

Relevant facts and circumstances: You were required to go to court by a subpoena. You received a witness expenses payment. The payment comprised of compensation for lost wages, travel and accommodation.

Relevant legislative provisions: Income Tax Assessment Act 1997 Subsection 6-5(2)

Reasons for decision: Summary: Subsection 6-5(2) of the Income Tax Assessment Act 1997 (ITAA 1997) provides that the assessable income of an Australian resident taxpayer includes ordinary income derived directly or indirectly from all sources during the income year. Ordinary income has been held to include income from providing 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: • are earned • are expected or relied upon • have an element of periodicity, recurrence or regularity • replace income. A compensation amount normally assumes the nature of that which it is designed to replace. Payments that replace salary or wages are income according to ordinary concepts and are included in assessable income under section 6-5 of the ITAA 1997 ( Federal Commissioner of Taxation v. Inkster (1989) 24 FCR 53; 89 ATC 5142, (1989) 20 ATR 1516)) In your case, you received a witness expenses payment that comprised of compensation for lost wages, travel and accommodation. The portion of the payment that relates to wages has the characteristics of ordinary income and the payment is assessable under subsection 6-5(2) of the ITAA 1997. Travel and accommodation expenses are generally private in nature. The compensation you received for these expenses is not considered to meet the ordinary definition of income and therefore is not assessable.