ATO Interpretative Decision

ATO ID 2002/762

Income Tax

Income: Traineeship program
FOI status: may be released

CAUTION: This is an edited and summarised record of a Tax Office decision. This record is not published as a form of advice. It is being made available for your inspection to meet FOI requirements, because it may be used by an officer in making another decision.

This ATOID provides you with the following level of protection:

If you reasonably apply this decision in good faith to your own circumstances (which are not materially different from those described in the decision), and the decision is later found to be incorrect you will not be liable to pay any penalty or interest. However, you will be required to pay any underpaid tax (or repay any over-claimed credit, grant or benefit), provided the time limits under the law allow it. If you do intend to apply this decision to your own circumstances, you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed. You may wish to obtain further advice from the Tax Office or from a professional adviser.

Issue

Is the amount received by the taxpayer from a traineeship program included in assessable income under section 6-5 of the Income Tax Assessment Act 1997 (ITAA 1997)?

Decision

Yes, the amount received by the taxpayer from a traineeship program is included in assessable income under section 6-5 of the ITAA 1997.

Facts

The taxpayer is the employer of a trainee under a traineeship program. The traineeship program is providing sponsorship for the trainee during the 2002 income year. The entity providing the traineeship pays the sponsorship amount to the taxpayer.

Reasons for Decision

Subsection 6-5(1) of the ITAA 1997 provides that the assessable income of a taxpayer is made up of ordinary income and statutory income. Exempt income is not included in assessable income even when it is also ordinary or statutory income.

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 amount received by the taxpayer from the traineeship program is assessable income under section 6-5 of the ITAA 1997, as it was received as a consequence of carrying on a business and has the character of income. As such, it constitutes ordinary income.

The amount received is not exempt from income tax by a provision of the ITAA 1997 or any other Commonwealth law.

Date of decision: 8 May 2002

Year of income: Year ending 30 June 2002

Legislative References:
Income Tax Assessment Act 1997
section 6-5

Keywords
Income
Assessable income test
Exempt income

Siebel/TDMS Reference Number: DW416330

Business Line: Small Business/Individual Taxpayers

Date of publication: 31 July 2002

ISSN: 1445-2782

Copyright notice

You are free to copy, adapt, modify, transmit and distribute material on this website as you wish (but not in any way that suggests the ATO or the Commonwealth endorses you or any of your services or products).