Private ruling: COVID-19 payment
Date of advice: 19 November 2021
Published: February 2022
Ruling period: Year ended 30 June 20XX
Date scheme commenced: 1 July 20XX

Ruling: Q1: Is a Covid19 payment paid by the government of Country A assessable income in Australia under sections 6-5 or 6-10 of the Income Tax Assessment Act 1997 (ITAA 1997)? | A1: No.

Relevant facts and circumstances: You are a dual Australian and Country A citizen. You reside solely in Australia. You lodge tax returns in Australia and Country A. You received a COVID-19 support payment. This payment is not taxable in Country A.

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

Reasons for decision: Summary: Assessable income - general 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 6-5(1) refers to 'ordinary income' as 'income according to ordinary concepts' but does not otherwise define the term. The phrase 'income according to ordinary concepts' appears to have been inspired by Jordan CJ's statement in Scott v. FCT (NSW) (1935) 35 SR (NSW) 215 at 219: The word "income" is not a term of art, and what forms of receipts are comprehended within it, and what principles are to be applied to ascertain how much of those receipts ought to be treated as income, must be determined in accordance with the ordinary concepts and usages of mankind, except in so far as the statute states or indicates an intention that receipts which are not income in ordinary parlance are to be treated as income, or that special rules are to be applied for arriving at the taxable amount of such receipts. Subsection 6-10(2) of the ITAA 1997 also provides that your assessable income includes amounts assessed by a specific provision of either the ITAA 1997 or the Income Tax Assessment Act 1936 (ITAA 1936) (the Act). Covid-19 Payment This "payment" is a tax credit as defined by the taxation authority of Country A. In simplified terms, the payment works as follows: 1. If eligible, the taxpayer is given a credit for the Payment in their income tax account. 2. This credit is refunded to the taxpayer, resulting in the Payment being made. 3. When the taxpayer's income year income tax assessment is done it will show a credit for the Payment in the account which is offset against a debit for the making of the payment of the amount (offsetting each other). 4.The taxpayer's income tax is assessed in the normal manner (the only difference being that it contains the entries in (3). A tax credit of this type, in the Australian tax system, would be a refundable tax offset. An income tax offset, whether it originates in Australia or under a foreign taxation law, does not come within what is ordinarily understood to be income according to ordinary concepts. Therefore, the Payment is not income according to ordinary concepts. The Payment is also not statutory income as it is not something that would be assessed as income under another provision of either the ITAA 1997 or the ITAA 1936.