Published: May 2013
Ruling period: Year ending 30 June 2014
Date scheme commenced: 1 July 2013

Ruling: Question and answer | Is the loan from your overseas relative assessable income to you in Australia? | No.


Relevant legislative provisions: Income Tax Assessment Act 1997 Section 6-5 | Income Tax Assessment Act 1997 Section 8-1 | Income Tax Assessment Act 1997 Section 26-25 | Taxation Administration Act 1953 Section 12-245 | Taxation Administration Act 1953 Section 16-140 | Taxation Administration Act 1953 Section 16-150

Reasons for decision: Summary: 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, whether in or out of Australia. Ordinary income is income according to ordinary concepts. 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. The legislation does not provide a definition of 'ordinary income' therefore it is necessary to turn to case law. Statutory income consists of those amounts that are specifically included in your assessable income by a provision of the taxation legislation. In this case, the funds loaned to you are not ordinary income and is not statutory income rather it is a principal amount of a loan. Therefore, the amount is not assessable income.

Relevant facts: Your relative will be lending you a sum of $X from overseas. | You will repay this loan with interest. | You will be using this loan in order to open up a business.