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Edited version of private advice
Authorisation Number: 1052235483300
Date of advice: 2 April 2024
Ruling
Subject: Assessable income - loan repayments
Question
Are the loan repayments you receive from your former partner included in your assessable income?
Answer
No.
You are an Australian resident. Your assessable income includes the ordinary income you derive directly or indirectly from all sources, whether in or out of Australia, during the income year.
If an amount is not ordinary income, and is not statutory income, it is not assessable income (so you do not pay income tax on it).
The loan of funds to your former partner do not relate to income-earning or business-like activity. The repayment of the loaned funds is not assessable income and do not need to be declared in your income tax returns.
Where the repayments are not paid, your former partner is liable to pay you an amount of interest. The interest amounts are assessable income and must be declared in your annual income tax return.
This ruling applies for the following periods:
Year ending 30 June 20XX
Year ending 30 June 20XX
The scheme commences on:
1 July 20XX
Relevant facts and circumstances
You are a resident of Australia for tax purposes.
You were in a relationship with your former partner.
Your former partner is a resident of XX.
Under a verbal agreement, you used your own funds and took out several personal loans to provide financial support to your former partner in the form of interest free loans to assist their business in XX.
You provided your former partner with your X bankcard to use for withdrawals against your account.
Your relationship broke down.
You commenced civil proceedings in XX against your former partner for repayment of the loaned funds to the amount of $XXXX.
Court mediation determined that your former partner would repay you in instalments under a repayment schedule. The first payment is due on XX XX 20XX and the last repayment is due on XX XX 20XX.
Your former partner will be liable for a penalty interest amount should they fail to repay any instalment that will accrue until the date of actual payment.
You have provided a certified translation of the mediation settlement.
Additional information
You should keep records that support the claims you make in your tax return. In your case, you will need to keep records that substantiate the original amounts lent and payments received. You made need to provide us a copy of the records if we review a tax return you lodge. Further information regarding records you need to keep can be found on the ATO website by searching for the Quick Code QC 72206.
Relevant legislative provisions
Income Tax Assessment Act 1997 section 6-5
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