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This edited version has been archived due to the length of time since original publication.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: 1051382890729

Date of advice: 6 July 2018

Ruling

Subject: Assessable Income

Question

Are the carer payments you receive considered assessable income?

Answer

Yes

This ruling applies for the following periods:

Year ending 30 June 2017

Year ending 30 June 2018

The scheme commences on:

1 July 2016

Relevant facts and circumstances

You, being B and C provide full time care for a child with a disability. The child has resided with you for over a year.

B entered into a contractor agreement (agreement) with a not for profit organisation to provide care to the child.

B is defined as a contactor (contractor) within the agreement.

B and B’s spouse through a partnership provide the following services to the child:

Other obligations required to be performed by you as outlined in the agreement include:

You are required to have the requisite qualification and skills to perform the obligations within the agreement including the following qualifications:

The agreement allows you to employ or engage staff to perform the role and functions within the agreement, subject to the staff meeting the minimum qualifications above. You do not engage any staff and only care for one child. The not for profit organisation will arrange for another contractor to look after the child you care for when you go on holidays, although you tend to arrange for the child to accompany you on holidays.

The not for profit organisation receives funding from a government department for each child participating in the respite out of home care program.

Each fortnight or month, you send an invoice to the not for profit organisation, specifying the:

Upon you submitting either a fortnightly or monthly invoice to the not for profit organisation, you receive payment for the 24 hour care you provide. You receive a higher daily rate for care provided on Saturday, Sunday and Public holidays.

The child’s medical costs, including visits to the doctor and other practitioners, in addition to medication, nappies, entertainment and social and recreational expenses and general clothing are paid by you and are not reimbursed by the not for profit organisation. Damage caused by the child and repairs to these damages are paid by you and are not reimbursed.

While the agreement you entered into provides for the not for profit organisation to contribute a proportion of the above 24 hour payments to a complying superannuation fund on behalf of the contractor, the organisation does not make any superannuation contribution on behalf of you. The agreement also states that the not for profit organisation may deduct PAYG withholding tax from the daily payments to you, but no such PAYG instalments are withheld.

Either party to the agreement may terminate the contract by giving notice in the following circumstances:

B has worked part time while providing care to the child, but currently cares for a family member.

Relevant legislative provisions

Income Tax Assessment Act 1997 Section 6-5

Income Tax Assessment Act 1997 Section 6-10

Reasons for decision

Your activity in providing respite care to the disabled child is considered personal services income and is assessable.

Detailed reasoning

Sections 6-5 and 6-10 of the Income Tax Assessment Act 1997 (ITAA 1997) provides that the assessable income of a resident taxpayer includes ordinary and statutory income derived directly and indirectly from all sources during the income year.

In determining if an amount is income according to ordinary concepts, consideration must be given to whether the amount is the product of any income producing activity.

Personal services income

Taxation Ruing IT 2639 Income Tax: personal services income describes income from personal services as ‘income that an individual earns predominantly as a direct reward for his or her personal efforts, for example, the provision of services, exercise of skills or the application of labour’.

The receipt of payment as a reward for employment or rendering services (which would be considered assessable income) can be contrasted with the receipt of a payment to a volunteer to reimburse them for costs incurred by them in the carrying out of their activities.

Payments provided in respect of, or in relation to rendering services are considered assessable income.

Application to your circumstances

The income derived under your contract is personal services income as it is a reward for your personal efforts or skills, namely providing support and respite care to a disabled child in your home.

Note:

As your income is assessable, any expenses you incur in relation to your earning your assessable income are deductible.


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