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Edited version of your private ruling
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Ruling
Subject: Assessable Income
Question and answer:
Is the contribution your parent pays for living with you assessable income?
No.
This ruling applies for the following periods:
Year ended 30 June 2012
Year ended 30 June 2013
The scheme commenced on:
1 July 2011
Relevant facts:
You have not been employed for some time.
Your parent moved into your home.
Your parent moved in with you due primarily because of their deteriorating poor health.
Your parent is a severe sufferer being on medication and treatment.
You and your spouse possess enduring powers of attorney over the financial affairs of your parent.
You have interim access under a signed authority to your patent's savings account in order to attend to payment of utilities, food, medication, clothing and accommodation incurred on a regular basis.
Your parent pays a weekly amount to you.
There is no formal receipt system in place for the payment made by your parent to you.
You are under a "Nominee Arrangement" with Centrelink whereby you conduct all matters with Centrelink on your parent's behalf.
You receive a carer allowance.
As your parent's carer you attend to all domestic duties and coordinate all medical appointments and transfers to hospitals and clinics.
Assumptions:
N/A
Relevant legislative provisions:
Subsection 6-5(2) of the Income Tax Assessment Act 1997
Reasons for decision
Assessable income
Subsection 6-5(2) 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.
Rental income
Income Tax Ruling IT 2167 deals with rental properties, specifically non-economic rental, holiday home, and share of residence cases. This includes the letting of property to relatives. IT 2167 states that ordinarily, where a taxpayer grants a lease or licence of property, the amount received as rent payment is assessable income.
IT 2167 also makes reference to FCT v Groser (1982) 13 ATR 445; 82 ATC 4478, where the nature of ordinarily received income is qualified. Cases where a payment arrangement is established in return for living arrangements, for example an invalid mother living with her son, will not be at arms length. Such contributions will not be considered ordinary income, and therefore not assessable.
In case FCT v Groser (1982), a taxpayer permitted his invalid brother to live in a house which the taxpayer owned. The taxpayer arranged to receive his brother's invalid pension so that he could provide for the brother's maintenance.
It was arranged that $X per week would be deducted for rent of the taxpayer's house. The court held that the weekly amounts of $X were not assessable income, as they were a contribution to funds intended to maintain the invalid brother. The courts stated that this payment was not a receipt of income as normally understood.
Income Tax Ruling IT 2167, paragraphs 13 - 16, discuss the letting of property to relatives. Where property is let to relatives the essential question for decision is whether the arrangements are consistent with normal commercial practices in this area. If they are, the owner of the property would be treated no differently for income tax purposes from any other owner in a comparable arm's length situation.
The ultimate resolution of the matter would depend upon the purposes of the taxpayer in acquiring the property and in letting out to relatives.
You live in the home with your parent as their full time carer. You have a private arrangement where you receive an amount from your parent for board, and a contribution for running expenses of the home. Any monies received assist to maintain your invalid parent. You have no intention to profit from the arrangement.
As such the amounts received from your invalid parent are of a private nature and do not constitute assessable income.