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Edited version of private ruling
Authorisation Number: 1011652917455
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Ruling
Subject: income receipt
Is the payment received in July 2010 assessable in the 2010-11 income year?
Yes.
This ruling applies for the following period
Year ended 30 June 2010
Year ended 30 June 2011
The scheme commenced on
1 July 2009
Relevant facts
Documentation shows a workers compensation arrears payment was paid to you by cheque dated 1 July 2010.
Documentation also shows a description of this payment with a date of 29 June 2010.
Your PAYG payment summary for the year ending 30 June 2010 includes this amount.
You received the cheque in July 2010.
Relevant legislative provisions
Income Tax Assessment Act 1997 Section 6-5.
Reasons for decision
Summary
The payment is assessable in the 2010-11 income year as it was received in that year.
You are required to include the payment as assessable income in your 2010-11 income tax return.
Detailed reasoning
Subsection 6-5(2) of the Income Tax Assessment Act 1997 (ITAA 1997) provides that the assessable income of an Australian resident includes ordinary income derived directly or indirectly from all sources, whether in or out of Australia, during the income year.
Salary and wages income is regarded as ordinary income. Similarly, compensation payments that replace salary and wages and similar payments are also regarded as ordinary income and therefore assessable under subsection 6-5(2) of the ITAA 1997.
Taxation Ruling TR 98/1 sets out the Commissioner's policy on the derivation of income. Paragraph 42 of TR 98/1 states that income from employment would normally be assessable on a receipts basis. Salary, wages or other employment remuneration are assessable on receipt even though they relate to a past or future income period. Similarly compensation payments paid to an individual are also considered to be derived when the payment is received.
In your case, the cheque was dated 1 July 2010 and you did not receive the payment until July 2010. As you received the income in the 2010-11 income year, this amount is assessable in that year.
We acknowledge that your payment summary shows the income belonging to the 2009-10 income year. However, as outlined above, you received the amount in July 2010. Therefore, the income is assessable to you in the 2010-2011 income year.