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This edited version has been archived due to the length of time since original publication. It should not be regarded as indicative of the ATO's current views. The law may have changed since original publication, and views in the edited version may also be affected by subsequent precedents and new approaches to the application of the law.

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Edited version of your written advice

Authorisation Number: 1012768119404

Ruling

Subject: Assessable income

Question 1

Is the portion of the payment received as compensation for lost wages assessable income?

Answer

Yes.

Question 2

Is the portion of the payment received for travel and accommodation assessable income?

Answer

No.

This ruling applies for the following periods:

Year ended 30 June 2013

The scheme commences on:

1 July 20XX

Relevant facts and circumstances

You were required to go to court by a subpoena.

You received a witness expenses payment.

The payment comprised of compensation for lost wages, travel and accommodation.

Relevant legislative provisions

Income Tax Assessment Act 1997 Subsection 6-5(2)

Reasons for decision

Subsection 6-5(2) of the Income Tax Assessment Act 1997 (ITAA 1997) provides that the assessable income of an Australian resident taxpayer includes ordinary income derived directly or indirectly from all sources during the income year.

Ordinary income has been held to include income from providing personal services, income from property and income from carrying on a business. Other characteristics of income that have evolved from case law include receipts that:

A compensation amount normally assumes the nature of that which it is designed to replace.

Payments that replace salary or wages are income according to ordinary concepts and are included in assessable income under section 6-5 of the ITAA 1997 (Federal Commissioner of Taxation v. Inkster (1989) 24 FCR 53; 89 ATC 5142, (1989) 20 ATR 1516))

In your case, you received a witness expenses payment that comprised of compensation for lost wages, travel and accommodation.

The portion of the payment that relates to wages has the characteristics of ordinary income and the payment is assessable under subsection 6-5(2) of the ITAA 1997.

Travel and accommodation expenses are generally private in nature. The compensation you received for these expenses is not considered to meet the ordinary definition of income and therefore is not assessable.

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