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Ruling

Subject: Assessability of carer's payments

Question

Do the payments you received from Organisation X to meet the expenses you incur in providing care to others form part of your assessable income?

Answer

No.

This ruling applies for the following periods

Year ended 30 June 2011

Year ended 30 June 2012

The scheme commenced on

1 July 2010

Relevant facts and circumstances

On behalf of Organisation X, you became a care provider for those in need.

Under the carer agreement you have with Organisation X, you receive reimbursement for the costs associated with your provision of care.

Contributions towards the cost of care are also made to you directly from those to whom care is provided or from their guardians.

Organisation X also provides a home in which those in care reside, pays some of the utility costs for the home and provides a car to allow those in care to be transported.

Relevant legislative provisions

Income Tax Assessment Act 1997 Section 6-5

Income Tax Assessment Act 1997 Section 995-1

Reasons for decision

Summary

The payments you received during the 2010-11 and 2011-12 financial years do not form part of your assessable income. The payments were made under a contract to assist you in meeting the costs of caring for your clients. The payments are considered to be a reimbursement of the costs of your providing care to your clients.

Detailed reasoning

Section 6-5 of the Income Tax Assessment Act 1997 (ITAA 1997) provides that the assessable income of a resident taxpayer includes ordinary income derived directly or indirectly from all sources during the income year. Ordinary income has generally been held to include three categories: personal services income, income from property and income from carrying on a business.

Taxation Ruling IT 2639 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 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. A payment to a volunteer for the reimbursement of expenses is not considered to be assessable income. Paragraph 8 of Taxation Determination TD 2004/75 provides the following example of a reimbursement:

Peter provides volunteer respite care for a child with disabilities for one weekend (Friday evening to Monday morning) per month. Peter is paid an amount of $350 for the weekend by an organisation that arranges respite care for disabled persons. The payment is intended to cover expenses incurred in providing the respite care including food and drink, laundry, recreation activities and transport. The payment is considered to be in the nature of a reimbursement of expenses and therefore is not included in Peter's assessable income.

Similarly, in TD 2006/62, the Commissioner notes that certain payments made to volunteers to allow for their provision of foster care would not amount to assessable income. Such payments would include 'standard or basic foster care subsidies plus additional loadings or allowances' in relation to payments 'made to help meet the costs associated with providing care for foster children'.

TD 2006/62, however, does not apply to payments made to employees of foster care agencies.

Thus:

· if you are not an employee of Organisation X and are receiving monies not as a personal reward for services rendered but as a contribution towards the costs you are expected to incur in undertaking your care duties, the payments would not form part of your assessable income; or, alternatively,

· if you are an employee of Organisation X and/or are receiving the payments with the intention that these be retained by you exclusively as a reward for services rendered, then the payments would likely constitute assessable income.

Based on the facts provided, we have accepted that you are not being paid for your personal services but are receiving monies with the intention that these be used to cover the costs you may incur in providing care to your clients.