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Edited version of your private ruling
Authorisation Number: 1012221290740
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Ruling
Subject: Repayment of previously assessable income
Question
Is the amount of XXX that you received but are now required to refund included in your assessable income?
Answer
No
This ruling applies for the following period
Year ended 30 June 2011
The scheme commences on:
1 July 2010
Relevant facts and circumstances
This ruling is based on the facts stated in the description of the scheme that is set out below. If your circumstances are materially different from these facts, this ruling has no effect and you cannot rely on it. The fact sheet has more information about relying on your private ruling.
You received an amount of YYY as income which was received from an entity for professional services for a subdivision application.
The amount of YYY included fees to be paid to a governmental department for an amount of XXX.
You anticipated the amount equivalent to the fee would be offset by a similar sum you would have paid to the governmental department. However, they never proceeded to finalise this job and the fee was not paid to the governmental department. As a result, you have paid tax on the amount of XXX.
As this project did not proceed the entity has requested that you repay the fee.
For the purpose of this ruling, you do repay this amount.
Relevant legislative provisions
Income Tax Assessment Act 1997 section 6-5
Income Tax Assessment Act 1997 section 59-30
Income Tax Assessment Act 1936 subsection 170(10AB)
Summary
You are entitled to remove the amount of XXX from your 2010-11 income tax assessment as you are required to repay this amount to the entity. There is no time limit for requesting this amendment.
Assessable income
In your case you were in receipt of YYY payment from the entity for professional services from a subdivision application which contained a taxable component. Therefore the taxable component received is ordinary income under section 6-5 of the Income Tax Assessment Act 1997 (ITAA 1997) and is included in your assessable income for the 2010-11 income year.
Non-assessable non-exempt income
An amount of ordinary income is non-assessable non-exempt income if a provision of the ITAA 1997 or another Commonwealth law states that it is not assessable income and is not exempt income (section 6-23 of the ITAA 1997). A summary list of provisions about non-assessable non-exempt income is contained in Subdivision 11-B of the ITAA 1997. Included in this list is section 59-30 of the ITAA 1997 which deals with repayable amounts.
Under section 59-30 of the ITAA 1997, an amount you receive is not treated as assessable income for an income year if:
(a) you must repay it
(b) you must repay it in a later income year, and
(c) the repayment is not deductible in any income year.
It is irrelevant whether the amount repaid had originally been received as part of a larger amount, or whether the obligation to repay the amount arose before or after the amount was received.
In your case, you were in receipt of YYY payment from the entity for professional services which contained a taxable component. This amount of YYY included fees to be paid to the governmental department for an amount of XXX.
You anticipated the amount of XXX would have been offset by a similar sum paid by you to this authority thus negating the amount however, the governmental department never proceeded to finalise this job and the particular fee was not paid to the governmental department as such you have paid tax on the amount of XXX.
In this situation, you will be able to have the original assessment amended to exclude the amount repaid as non-assessable non-exempt income.
Under this provision, the amount received by you is not assessable income for an income year as:
(a) you are required to repay it and do so in a later income year; and
(b) the repayment is not deductible in any income year.
The assessment for the 2010-11 income year can therefore be amended; irrespective of whether the normal time for amendment of assessments has expired. It is irrelevant whether the amount repaid had originally been received as part of a larger amount, or whether the obligation to repay arose before or after the amount was received.
The repaid amount of fee is non-assessable non-exempt income under section 59-30 of the ITAA 1997 and should be removed from your assessable income in the 2010-11 income year.