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  • Income tax for nominated representatives

    Where nominated representatives (such as a nominee, parent or guardian) or registered plan management providers (RPMPs) who manage a participant's plan receive NDIS funding:

    • on behalf of the participant, it is treated as the participant's income
    • for themselves, for services provided to the participant, it is treated normally as part of their income.

    Example 1: NDIS funding received by a guardian on behalf of a participant

    Sam is a participant under the NDIS whose plan identifies that he requires carer support. Sam has elected through his plan for $10,000 to be paid directly to his guardian, who uses the entire amount to pay for a care provider.

    For tax purposes, Sam has received the $10,000 NDIS funding and it is therefore exempt from income tax.

    Sam's guardian will not have to pay income tax on this payment as they received it in their role as an agent/trustee.

    End of example

     

    Example 2: NDIS amount received by a RPMP on behalf of a participant

    Claudio is a participant under the NDIS who has arranged for an RPMP to manage his funding on his behalf. Under his plan, $5,000 is allocated for the purchase of a prosthetic limb and care services. The $5,000 is deposited into Claudio's RPMP's nominated trust account.

    The RPMP then deducts $400 from the $5,000 in the trust account for the care services it provides to Claudio and uses the balance ($4,600) to purchase Claudio's prosthetic limb. The RPMP is a commercial provider that earns its assessable income by providing services to people with disability.

    The $5,000 deposited into the RPMP's trust account is Claudio's income, not income of the RPMP.

    However, the fee of $400 that the RPMP deducts from the trust account must be declared as part of the RPMP's assessable income.

    End of example

    If the RPMP's income is exempt from income tax under Division 50 of the Income Tax Assessment Act 1997, the fees it receives for its services will be exempt from income tax.

    Deductions

    Where NDIS funding is used by a representative to purchase equipment or services on behalf of a participant, there is not a:

    • tax deduction for the purchase price of that equipment or service
    • depreciation deduction for that equipment.

    However, if a representative uses NDIS funding in the course of producing their assessable income, such as to pay their own expenses or to acquire equipment for their own benefit, they may be entitled to a deduction, including deductions for depreciation.

    Example 2 continued

    Claudio's RPMP used $4,600 of the funds it was holding for Claudio to purchase Claudio's prosthetic limb. The RPMP used the $400 it deducted to pay the wages of its employees who provide services to participants, including Claudio.

    The RPMP cannot claim a deduction for the $4,600 it paid to purchase the prosthetic limb on behalf of Claudio.

    However, as the RPMP is a commercial provider that is not exempt from income tax, it is entitled to a deduction for the wages it has paid using the $400.

    End of example

    Accounting treatment

    The tax provisions regarding deductions outlined above do not affect the treatment of these items for accounting purposes. This means if an RPMP incurs expenses or purchases assets on its own account, it should treat those expenses and assets in its accounts for accounting purposes in the way it normally would.

    Last modified: 07 Oct 2016QC 50243