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Edited version of your private ruling
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Ruling
Subject: assessable income
Question 1
Is the gross payment amount shown on your payment summary but not fully received included in your assessable in the 2009-10 financial year?
Answer
No.
Question 2
Are you assessable on the gross salary amount received in the 2009-10 financial year?
Answer
Yes.
This ruling applies for the following periods
Year ended 30 June 2010
Year ended 30 June 2011
Year ended 30 June 2012
Year ended 30 June 2013
Year ended 30 June 2014
The scheme commenced on
1 July 2009
Relevant facts
You received some salary payments from your employer for the 20XX-XXfinancial year. Tax was withheld and paid to the Tax office.
Your PAYG payment summary for the year ending 30 June 2010 shows a greater amount of gross payments than what you received and some tax withheld.
You also have an amount of unpaid wages from the 20XX-XX financial year.
You sued your employer for unpaid wages and reached a settlement.
The Deed of Release states that your previous employer owes you money. Under the settlement payment, your previous employer is to pay you an amount each week until the debit is paid in full or until the company has funds to pay the balance in a lump sum.
Unpaid wages are still outstanding.
Relevant legislative provisions
Income Tax Assessment Act 1997 Section 6-5.
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 includes ordinary income derived directly or indirectly from all sources, whether in or out of Australia, during the income year.
Salary and wage income is regarded as ordinary income and therefore assessable under subsection 6-5(2) of the ITAA 1997.
If an amount would be ordinary income apart from the fact that you have not received it, it becomes assessable income as soon as it is applied or dealt with in any way on your behalf or as you direct (subsection 6-5(4) 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.
In your case, your unpaid wages have not been applied or dealt with in any way on your behalf or as you directed. Therefore the unpaid wage amount is not assessable under subsection 6-5(4) of the ITAA 1997.
As you did not receive the unpaid wage amount in the 2009-10 financial year, this amount is not included in your assessable income for that year.
Where you receive an amount for unpaid wages in a later income year, the amount will be assessable in that year.