Private ruling: Taxation of grant
Published: January 2013
Ruling period: Year ended 30 June 2012
Date scheme commenced: 1 July 2011

Ruling: Q1: Is your grant considered to be assessable income? | A1: Yes.


Relevant legislative provisions: Income Tax Assessment Act 1997 subsection 6-5

Reasons for decision: Summary: Section 6-5 of the Income Tax Assessment Act 1997 provides that the assessable income of a taxpayer includes income according to ordinary concepts (ordinary income). Ordinary income has generally been held to include three categories, namely income from rendering 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 · are relied upon · have an element of periodicity, recurrence or regularity. Generally, a receipt will be income according to ordinary concepts if it is a receipt arising out of a taxpayer's employment or in connection to services provided. Payments for services are income even if no employer/employee relationship exists, or there is no carrying on of a business. This principle is demonstrated in Brent v. FC of T (1971) 71 ATC 4195; (1971) 125 CLR 418. In that case, Gibbs J held that Mrs Brent was not an employee, nor did she carry on a business. The payments received under an agreement, however, were income on the basis that she had provided services. This will be the case even if the receipt is not directly related to any service provided by the recipient to the donor ( FC of T v. Dixon (1952) 86 CLR 540; (1952) 10 ATD 82). In your case, the grant is provided to you for financial support in developing your profession and career. Participation in the program will develop your professional skills to the satisfaction of the relevant entity. The grant is paid as a direct result of your income earning activities and is considered income according to ordinary concepts. Therefore the grant is assessable income.

Please check this edited version to be sure that there are no details remaining that you think may allow you to be identified. If you have any concerns about this ruling you wish to discuss, you will find our contact details in the fact sheet. | Relevant facts: You are an employee working as a professional. You also earn other income in your profession on the weekends. You applied for and received a grant. You received a grant which consisted of a one-off lump sum payment. | This grant was open to emerging professionals and involved developing their professional skills. | You submitted a plan when applying for the grant. | After being awarded the grant you attended an induction and workshop sessions and a half day mid-year review. The relevant entity reviews your participation. | You plan to spend the grant over the next several years to help you establish a freelance business.