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Edited version of your private ruling
Authorisation Number: 1012410187772
This edited version of your ruling will be published in the public register of private binding rulings after 28 days from the issue date of the ruling. The attached private rulings fact sheet has more information.
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Ruling
Subject: Payment for relocation
Question 1
Is the relocation allowance you received assessable?
Answer
Yes
Question 2
Are you entitled to a deduction for relocation expenses?
Answer
No.
This ruling applies for the following period
Year ended 30 June 2013
The scheme commenced on
1 July 2012
Relevant facts and circumstances
This ruling is based on the facts stated in the description of the scheme that is set out below. If your circumstances are materially different from these facts, this ruling has no effect and you cannot rely on it. The fact sheet has more information about relying on your private ruling.
You are relocating from one place of residence to another for your job at the request of your employer.
Your employer is offering a once-off payment to assist with the costs of relocation. This payment was expected in your salary payment prior to your relocation.
You will be providing receipts for the costs of relocation and these costs will exceed the amount received.
Relevant legislative provisions
Income Tax Assessment Act 1997 Section 6-5
Income Tax Assessment Act 1997 Section 15-2
Income Tax Assessment Act 1997 Section 6-10
Income Tax Assessment Act 1997 Section 8-1.
Reasons for decision
Assessable Income
Sections 6-5 and 6-10 of the Income Tax Assessment Act 1997 (ITAA 1997) provide that the assessable income of a resident taxpayer includes ordinary income and statutory income derived directly or indirectly from all sources.
Section 15-2 of the ITAA 1997 includes in a persons assessable income all allowances provided in respect of, or for or in relation directly or indirectly to, any employment.
Paragraph 12 of Taxation Ruling IT 2614 provides that an allowance is a payment of a definite predetermined amount to cover an estimated expense. It is an amount contributed towards the defraying of a particular type of expense an employee incurs, and is made regardless of whether the employee incurs more or less than the amount of the allowance.
In your case you have been requested to relocate interstate by your employer. As a result, you will incur expenses such as removalist costs.
In order to assist in defraying the costs incurred, your employer is offering a once off relocation allowance.
This allowance:
· is a definite predetermined sum
· could be more or less than the expenses incurred
· is paid to assist in defraying the cost of your expenses, and
· is paid in connection with your employment.
As such, the payment it is considered an allowance for the purposes of section 15-2 of the ITAA 1997 and is assessable to you.
Relocation Expenses
Section 8-1 of the ITAA 1997 allows a deduction for all losses and outgoings to the extent to which they are incurred in gaining or producing assessable income except where the outgoings are of a capital, private or domestic nature, or relate to the earning of exempt income.
Taxation Ruling IT 2614 examines the deductibility of relocation expenses. The ruling states that expenses incurred in relocating to take up an appointment with a new or existing employer are not allowable deductions as they are private or domestic in nature. This is so, regardless of whether an allowance has been paid, or if the relocation was involuntary.
Such expenses are considered not to have the necessary connection with the derivation of assessable income, and are of a private or domestic nature. Therefore no deduction is allowed.
Witholding from the allowance
As the amount paid to you by your employer is an assessable allowance and not deductible tax is required to be withheld from the payment.
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