Private ruling: Investment payments
Published: November 2013
Ruling period: Year ended 30 June 2013
Date scheme commenced: 1 July 2012

Ruling: Q1: Do the quarterly payments from your investment form part of your assessable income? | A1: Yes.


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

Reasons for decision: Summary: Assessable income Subsection 6-5(2) of the Income Tax Assessment Act 1997 (ITAA 1997) provides that the assessable income of an Australian resident includes ordinary income derived directly or indirectly from all sources during the income year. Ordinary income has generally been held to include interest income. Based on case law, it can be said that ordinary income generally includes receipts that: § are earned, § are expected, § are relied upon, and § have an element of periodicity, recurrence or regularity. Under section 6-10 of the ITAA 1997, assessable income also includes statutory income. An Australian resident shareholder is assessed on all dividends paid by a company out of profits derived from any source under section 44 of the Income Tax Assessment Act 1936 (ITAA 1936). Taxation Ruling TR 98/1 sets out the Commissioner's policy on the derivation of income and states that investment income such as interest is generally derived when it is received or credited. Your quarterly payments are not dividends under section 44 of the ITAA 1936 and have the characteristics of ordinary income. You derive the payments when they are credited to your account. That is, the payments are assessable in the income year of receipt and not at the maturity of your investment. Therefore the quarterly payments are ordinary assessable income under subsection 6-5(2) of the ITAA 1997.

You are paid a quarterly amount at a minimum rate of X% per annum. | You receive a quarterly payment in your bank account. | The quarterly statement calls your payment interest. | The bank refers to your quarterly payments as a dividend on your bank statement. | You are not in the business of investments.