Private ruling: Assessable income – bulk billing payments
Date of advice: 13 July 2018
Published: September 2018
Ruling period: Year ended 30 June 2013
Date scheme commenced: 1 July 2012

Ruling: Q1: Are the fees you derived from bulk-billing assessable income? | A1: Yes | Q2: Are you exempt from income tax under section 50-5 of the Income Tax Assessment Act 1997 ? | A2: No

Relevant facts and circumstances: You are a medical practitioner. You received your income from bulk billing payments. You are not a registered charity.

Relevant legislative provisions: Income Tax Assessment Act 1997 Section 6-5 | Income Tax Assessment Act 1997 S ection 6-10 | Income Tax Assessment Act 1997 Section 50-5

Reasons for decision: Summary: Subsection 6-5(2) of the Income Tax Assessment Act 1997 (ITAA 1997) states that the assessable income of an Australian resident taxpayer includes ordinary income derived directly or indirectly from all sources, whether in or out of Australia, during the income year. Ordinary income is income according to ordinary concepts which is not specifically defined in the legislation. However, characteristics of ordinary income that have evolved from case law include receipts that: ● are earned ● are expected ● are relied upon, and ● have an element of periodicity, recurrence or regularity. It is not necessary for all of these characteristics to be present for an amount to be considered ordinary income. You have contended that the payments received from the Commonwealth under the bulk billing scheme are gratuities by definition and thus not assessable. The word “gratuity” is not defined in the ITAA 1997 and therefore takes its ordinary meaning. The Macquarie dictionary defines it to be: 1. a gift, usually of money, over and above payment due for service; tip. 2. that which is given without claim or demand. 3. a bounty given to soldiers. In Mews v FC of T [2008] AATA 357 it was determined that a gift can be assessable income depending on the nature of the circumstances that led to the provision of the gift, as such the provision of a gift for services rendered can meet the requirements to be considered ordinary income. | Detailed Reasoning - Application to you: In your case, you received fees from Medicare as a result of treating patients via bulk billing. We consider this to be inherently ordinary income in nature as it is a product of services rendered by you. The payments were regular, relied upon and had an element of regularity, and thus had many of the characteristics normally associated with ordinary income. Therefore, the fees you received from bulk-billing are ordinary income and, as such, are assessable income. | Detailed Reasoning - Question 2: Section 50-5 of the ITAA 1997 provides an income tax exemption for charities registered under the Australian Charities and Not-for-profits Commission Act 2012 . As you are not a registered charity you will not be exempt from taxation under this section.