ATO Interpretative Decision

ATO ID 2001/710 (Withdrawn)

Income Tax

• The ATO ID is withdrawn from the database as it is an application of established principles. Guidance on the concept of income from personal services is provided in Taxation Ruling IT 2639: Income tax: personal services income.
  This document incorporates revisions made since original publication. View its history and amending notices, if applicable.

Issue

Is the receipt of a government grant by the taxpayer assessable income under section 6-5 of the Income Tax Assessment Act 1997 (ITAA 1997)?

Decision

Yes. The receipt of a government grant by the taxpayer is assessable income under section 6-5 of the ITAA 1997.

Facts

The taxpayer received a grant from a government of Australia (Commonwealth, State or Territory). Under the terms of the grant, the taxpayer became the local coordinator for a specific project and was required to:

•

organise all interested parties to meet and discuss what action can be taken to progress the project;

•

facilitate the creation and funding of community events that make a difference to the project;

•

put together a wide cross section of the community to explore building a positive and realistic environment for the project;

•

invent and implement programs that make a difference and build community cohesion;

•

facilitate and promote positive stories on local radio, newspapers and newsletters, including where possible, an appropriate link to the project; and

•

provide regular monthly updates to the Regional Coordinator.

Reasons for Decision

Subsection 6-5(2) of the 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.

Paragraph 3 of Taxation Ruling IT 2639 defines 'income from personal services' and states that:

'3. "Income from personal services" is income that an individual taxpayer earns predominantly as a direct reward for his or her personal efforts by, for example, the provision of services, exercise of skills or the application of labour. The inclusion of predominantly in this definition allows for the situation where personal services involve the use of some equipment, for example the drawing board of an architect.'

Taxation Ruling IT 2639 also provides the following examples of personal services at paragraph 4:

'a.

salary and wages;

b.

income derived by a professional person who practises on his or her own account without professional assistance;

c.

income payable under a contract, for example a fencing contract, where the payment under the contract relates wholly or principally to the labour of the person concerned;

d.

income derived by a professional sportsman or entertainer from the exercise of his or her particular skills.'

The taxpayer is under contract to coordinate a specific community based project. The project requires the taxpayer to provide their personal services in performing the coordinator's role and therefore the income derived from that service is ordinary income. Accordingly, the government grant is assessable income under section 6-5 of the ITAA 1997.

Legislative References:
Income Tax Assessment Act 1997
   section 6-5
   subsection 6-5(2)

Related Public Rulings (including Determinations)
IT 2639

Related ATO Interpretative Decisions
ATO ID 2001/711

Keywords
Government grants income
Assessable income
Personal services income

Business Line:  Small Business/Individual Taxpayers

Date of publication:  30 November 2001

ISSN: 1445-2782