ATO Interpretative Decision

ATO ID 2002/778 (Withdrawn)

Income Tax

• This ATO ID is withdrawn and is replaced by ATO ID 2006/72.
  This document incorporates revisions made since original publication. View its history and amending notices, if applicable.

Issue

Are funds received by a political party from the Australian Electoral Commission assessable income under subsection 6-5 (1) of the Income Tax Assessment Act 1997 ('ITAA 1997')?

Decision

No, funds received by a political party from the Australian Electoral Commission are not assessable income under subsection 6-5 (1) of the ITAA 1997.

Facts

Following a federal election or by-election, the federal government, through the Australian Electoral Commission, distributes funds to candidates or groups that secured more than 4% of the vote in a particular electorate. Funding is paid on the number of votes gained.

Public funding represents a form of reimbursement of expenses incurred by a candidate or group in running an election campaign.

Reasons for Decision

Subsection 6-5(1) of the ITAA 1997 provides that the assessable income of a taxpayer includes income according to ordinary concepts, which is called ordinary 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.

It is evident that the receipt by political parties of public funding does not relate to or result from the performance of any services rendered. Nor is it income from property.

Some activities of political parties may be commercial in nature, but they are, as was found in Terranora Lakes Country Club Limited v. FC of T 93 ATC 4078; (1993) 25 ATR 294, pursued as a means of and for the purpose of raising funds to meet the party's main objectives - that is, the election of its members to the Parliament and the pursuit by various means of the policy objectives espoused by the party. These purposes are far remote from those associated with the carrying on of a business.

Election funding provided to a political party by the Australian Electoral Commission is, therefore, not income under ordinary concepts. Public funding represents a form of reimbursement of expenses incurred in running an election campaign.

Given the purpose of the election funding and the finding that political parties are not carrying on a business, payments received by political parties by way of public funding do not constitute assessable income under subsection 6-5(1) or any other provision of the ITAA 1997.

Year of income:  30 June 2002

Legislative References:
Income Tax Assessment Act 1997
   subsection 6-5(1)
   section 50-5

Case References:
Terranora Lakes Country Club Ltd v. Federal Commissioner of Taxation
   93 ATC 4078
   25 ATR 294

Keywords
Public funds
Political organisations
Grants of financial assistance & funding
Exempt income
Carrying on a business

Business Line:  Private Groups and High Wealth Individuals

Date of publication:  31 July 2002

ISSN: 1445-2782