Private ruling: Income received after death and subsequently repaid
Published: May 2012
Ruling period: 1 July 2001 - 30 June 2011.

Ruling: Q1: Is the trustee of a deceased estate required to include as income, any payments paid after death, and subsequently repaid? | A1: No .

Relevant facts and circumstances: You were in receipt of a regular payment which was paid directly into a bank account. Tax had been withheld from the payment. The recipient of the payment passed away. The payer was not advised of the death and continued to make payments for a number of years. The payer recovered the total net amount of the payments. The tax that had been withheld was forwarded to the Australian Taxation Office (ATO) in the relevant financial years. Income tax returns have not been lodged.

Relevant legislative provisions: Income Tax Assessment Act 1997 , section 6-5 | Income Tax Assessment Act 1997 , section 59-30 | Income Tax Assessment Act 1936 , section 161 | Taxation Administration Act 1953 , section 18-70

Reasons for decision: Summary: Pension income that has been received and that has been subsequently repaid is not assessable income and is not exempt income. The income does not need to be included in an income tax return. However this exclusion from including income that has been repaid on an income tax return does not exempt a taxpayer from their responsibilities under section 161 of the Income Tax Assessment Act 1936 (ITAA 1936). | 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, whether in or out of Australia, during the income year. Some major characteristics of a payment made under ordinary concepts have been recognised by the courts and used to determine whether a payment is assessable income. These characteristics include: · it is received periodically · it is expected · it replaces income. Therefore, the payments you received were expected and received periodically and as such must be included in your assessable income. | Detailed Reasoning - Repayment of income: Section 59-30 of the ITAA 1997 provides that an amount received by a taxpayer is not assessable income for an income year if: · the taxpayer is required to repay it and does so in a later income year; and · the repayment is not deductible in any income year. It is irrelevant whether the amount paid had originally been received as part of a larger amount, or whether the obligation to repay arose before or after the amount was received. | Detailed Reasoning - In your case: The payments were paid into the bank account of the deceased. As the total amount of the payments that had been made was subsequently recovered by the payer, section 59-30 of ITAA 1997 applies. The payments paid subsequent to the deceased's death are not assessable income.

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