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Edited version of private ruling

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Ruling

Subject: Government grant

Question:

Is your farming related interest rebate assessable income?

Answer:

Yes.

Relevant facts and circumstances

The relevant State Government's farming interest rebate scheme was designed to alleviate the financial burden of new commercial loans taken up for a range of land-based farming activities in state X.

You have been carrying on a business of primary production since at least 1 July 200X. During the year ended 30 June 2009, a grant from the farming interest rebate scheme was approved on your behalf. Your grant was based on an "Approved Loan Amount" borrowed by you after 1 July 2008.

Subject to the terms of the Deed, the grantor would provide you with a grant of up to X% of the Approved Loan Amount to a maximum of $X0,000 in the first year of the agreed period and up to X% of the Approved Loan Amount on the first anniversary of it being advanced, to a maximum of $X0,000 in the second year of the agreed period.

Relevant legislative provisions

Income Tax Assessment Act 1997 Section 6-5

Reasons for decision

Taxation Ruling TR 2006/3 is about government payments to industry (GPI). It applies to the class of schemes which are bounties, subsidies, grants and rebates paid or funded by the Commonwealth or a State, Territory or local governments, or government agencies.

Paragraph 12 states a GPI to assist (an existing business) with business operating costs or liabilities is ordinary income in the hands of the recipient and is assessable under section 6-5 of the ITAA 1997 in the income year in which it is derived.

In your case, your grant is to assist you with business operating costs, namely, loan interest. It follows your grant payments are assessable under section 6-5 of the ITAA 1997 in the income year in which they were derived.


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