Private ruling: Assessable income
Date of advice: 25 July 2016
Published: September 2016
Ruling period: Year ended 30 June 2016
Date scheme commenced: 1 July 2015

Ruling: Q1: Are lease payments for the use of part of your property for an entry fence to the housing estate taxable as ordinary income? | A1: Yes

Relevant facts and circumstances: You purchased a property. You were approached by a department to lease a small section of your land. A Lease agreement was signed. The term of the lease is 5 years with an amount paid per annum.

Relevant legislative provisions: Income Tax Assessment Act 1997 Subsection 6-5(2)

Reasons for decision: Detailed Reasoning - Detailed reasoning: Subsection 6-5(2) of the Income Tax Assessment Act 1997 (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. Ordinary income has generally been held to include 3 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, and • Have an element of periodicity, recurrence or regularity. In your case the annual payments paid to you for the use of your land are rental payments made pursuant to a lease agreement. They are expected (and perhaps relied upon) as your entitlement to the payment arises under the lease agreement. They also have an element of recurrence and regularity as they are paid annually. Accordingly, the annual payments received by you are considered ordinary income and are assessable under section 6-5(2) of the ITAA 1997. You must include your share of the full amount of rent you earn in your tax return.