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Ruling

Subject: Assessability of General Practice Rural Incentives Program Government Grant - Registrar Component

Question

Is the General Practice Rural Incentives Program (GPRIP) Registrar Component grant received by you from Medicare Australia considered assessable income?

Answer

Yes.

This ruling applies for the following period:

Year ended 30 June 2011

Relevant facts and circumstances

You are employed as a General Practitioner (GP) Registrar in a location which is considered rural or remote and you qualified for a grant in the year ended 30 June 2011 under the Registrar component of the GPRIP.

The Department of Health and Ageing (DoHA) administers the GPRIP and the payment is made via Medicare Australia.

The GPRIP aims are to encourage medical practitioners to practice in rural and remote communities and to promote careers in rural medicine. It provides an incentive for GP Registrars to undertake all or part of their GP training in rural and remote areas of Australia.

The GPRIP combines two previously separate retention incentive programs available to GP's and Registrars, and provides a new relocation grant.

The GPRIP comprises three components:

Registrar Component (previously known as the Registrars Rural Incentive Payment Scheme - RRIPS)

GP Component (previously known as the Rural Retention Program - RRP)

Rural Relocation Incentive Grant (RRIG).

Relevant legislative provisions

Income Tax Assessment Act 1997, Section 6-5
Income Tax Assessment Act 1997, Section 15-2

Reasons for decision

Unless otherwise stated all legislative references are to the Income Tax Assessment Act 1997 (ITAA 1997).

Subsection 6-5(1) states that 'Your assessable income includes income according to ordinary concepts, which is called ordinary income'. Subsection 6-5(2) provides that the assessable income of a resident taxpayer includes ordinary income derived directly or indirectly from all sources during the income year.

An incentive bonus comes within the meaning of ordinary income. An incentive bonus is an additional reward payment derived by you in your capacity as an employee as a financial incentive to remain in your employment (Dean & Anor v. Federal Commissioner of Taxation (1997) 78 FCR 140; (1997) 37 ATR 52; 97 ATC 4762) (Deans Case). Dean's case also found that the payment need not be paid by your employer.

Application to your circumstance
In your case you received payments under the GPRIP for undertaking your general practice training in a rural or remote area. The payment amounts were based on your remote locality and length of training. The payments are designed to reward and encourage doctors to continue to work in rural and remote areas of Australia.

The payments are considered a bonus you derive as a result of your income earning activity as they are paid to encourage you to continue working in your remote locality.

It follows that for the purposes of section 6-5 the GPRIP grant constitutes ordinary assessable income and should be included in your tax return at 'Question 1 Salary or Wages'.

Note: This receipt could alternatively be considered assessable income under section 15-2 which is entitled 'Allowances and other things provided in respect of employment or services'. This section states that 'Your assessable income includes the value to you of all allowances, gratuities, compensation, benefits, bonuses and premiums provided to you in respect of, or for or in relation directly or indirectly to, any employment of or services rendered by you…'