Private ruling: Assessability of government payment
Date of advice: 15 August 2016
Published: September 2016
Ruling period: 1 July 20 16 to 30 June 2038
Date scheme commenced: In the income year to be ended on 30 June 2017

Ruling: Q1: Will the government payments received by Company A be assessable under section 6-5 of the Income Tax Assessment Act 1997 (ITAA 1997)? | A1: No. | Q2: Will the government payments received by Company A be assessable under section 15-10 of the ITAA 1997? | A2: No. | Q3: Will the government payments received by Company A be assessable under section 102-5 of the ITAA 1997? | A3: No. | Q4: If the answers to Questions 1, 2, and 3 are ‘no’, will the government payments received by Company A be assessable under Subdivision 20-A of the ITAA 1997? | A4: Yes.

Relevant facts and circumstances: Company A is the head company of a tax consolidated group. Company B, a member of the Company A tax consolidated group, is a special purpose company newly established to conduct certain new project. Company B has applied for certain payments from a government agency in respect of the new project.

Relevant legislative provisions: Income Tax Assessment Act 1997 section 6-5 | Income Tax Assessment Act 1997 section 15-10 | Income Tax Assessment Act 1997 section 102-5 | Income Tax Assessment Act 1997 Subdivision 20-A

Reasons for decision: Summary: Section 6-5 of the ITAA 1997 will not apply as the government payments do not constitute ordinary income. Section 15-10 of the ITAA 1997 will not apply as the government payments will not be made in relation to the carrying on a business by Company A. Due to the application of paragraph 118-37(2)(a) of the ITAA 1997, the government payments will not be assessable under section 102-5 of the ITAA 1997. The government payments are assessable under Subdivision 20-A as they constitute an assessable recoupment.