Edited version of private ruling

Authorisation Number: 1011541906935

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Ruling

Subject: Payments from loan of asset

Question 1

Are the payments you received for the loan of your asset to an organisation for emergency use, assessable income?

No.

This ruling applies for the following period

Year ended 30 June 2010

The scheme commenced on

1 July 2008

Relevant facts

An organisation made an appeal to the public for the loan of certain assets to assist with a particular emergency situation.

You loaned an asset to the organisation.

The asset is not used in your income earning activities.

You did not expect any payment for the loan of your asset but the organisation paid you an amount periodically while the asset was borrowed from you. The amount received was nominal and far below both the market value rental and your expenses incurred in relation to the asset.

Relevant legislative provisions

Income Tax Assessment Act 1997 Section 6-5

Reasons for decision

Under subsection 6-5(1) of the Income Tax Assessment Act 1997 an amount is assessable income if it is income according to ordinary concepts (ordinary income). Relevant factors in determining whether an amount is ordinary income include:

whether the payment relates to employment, services rendered or a business

the quality or character of the payment in the hands of the recipient

whether it is received as a lump sum or periodically, and

the motive of the person making the payment - this is rarely a decisive factor.

The fact sheet 'Volunteers and tax' available on the Tax Office website provides guidance on the treatment of payments to volunteers and although you are volunteering an asset rather than your services, this information is useful in considering your situation. The document states:

A payment to a volunteer that is not assessable will have many of the following characteristics:

the payment is to meet incurred or anticipated expenses

the payment has no connection to the recipient's income-producing activities or services

the payment is not received as remuneration or as a consequence of employment

the payment is not relied upon or expected by the recipient for day-to-day living

the payment is not legally required or expected

there is no obligation on the part of the payer to make the payment, and

the payment is a token amount compared to the services provided or expenses incurred by the recipient.

In your case, although the payment was received periodically several of the above characteristics relate to your situation in lending your asset to the organisation:

you did not seek anything in return for providing the asset

the payment had no connection to any income-producing activities

you did not rely on the payment for daily living

the amount you received was far less than the market rental rate for the asset, and

the payment was a token amount compared to the expenses you incurred for the asset.

We consider that the periodic payments you received for the loan of the asset do not constitute ordinary income and are not assessable to you.

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