Private ruling: Assessable income
Date of advice: 3 June 2016
Published: July 2016
Ruling period: Year ended 30 June 2015
Date scheme commenced: 1 July 2014

Ruling: Q1: Is interest income derived from the investment of membership fees assessable income for the purposes of section 6-5 of the Income Tax Assessment Act 1997 ? | A1: Yes

Relevant facts and circumstances: The Company is an incorporated association. The funds of the Company come from membership subscriptions and investment income. The Company has invested surplus funds in an investment account. Interest is derived from the investment of funds.

Relevant legislative provisions: Section 6-5 of the Income Tax Assessment Act 1997

Reasons for decision: Summary: Subsection 6-5(1) of the ITAA 1997 states that 'assessable income includes income according to ordinary concepts, which is called ordinary income'. Subsection 6-5(2) of the ITAA 1997 provides that the assessable income of a resident taxpayer includes ordinary income derived directly or indirectly from all sources during the income year. Tax law does not provide a meaning of 'ordinary income' other than that provided in subsection 6-5(1) of the ITAA 1997. The courts have identified a number of characteristics for determining whether a receipt is 'ordinary income'. The characteristics include the receipt being: • received periodically and regularly • relied upon or expected, and • earned Ordinary income has generally been held to include three categories, namely, income from rendering personal service, income from property or investments returns and income from carrying on a business. Income received from investment returns is income according to ordinary concepts. As such, the income received by the Company from its investment of membership fees in an investment account is assessable income under section 6-5 of the ITAA 1997.