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Ruling
Subject: Assessability of foreign government payment
Question and answer
Is the one off foreign government payment you received assessable in Australia?
No.
This ruling applies for the following periods:
Year ended 30 June 2012
The scheme commenced on:
1 July 2011
Relevant facts and circumstances
You are an Australian resident for income tax purposes.
Country X announced that it would pay each holder of a valid Identity Card aged 18 years or above a one off government payment.
You hold a valid Identity Card and are over 18 years of age.
You met the eligibility criteria and you received the payment.
Relevant legislative provisions
Income Tax Assessment Act 1997 Subsection 6-5
Income Tax Assessment Act 1997 Section 6-10
Income Tax Assessment Act 1997 Subsection 6-15(1)
Reasons for decision
Section 6-5 and section 6-10 of the Income Tax Assessment Act 1997 (ITAA 1997) provides that the assessable income of a taxpayer includes ordinary and statutory income derived directly and indirectly from all sources, whether in or out of Australia, during the income year.
Ordinary income
Ordinary income has generally been held to include three categories, namely income from rendering personal services, income from property and income from carrying on a business.
Other characteristics of income that have evolved from case law include receipts that:
· are earned
· are expected
· are relied upon
· have an element of periodicity, recurrence or regularity.
The payment you received is not considered to be earned by you as it does not relate to services performed or income from carrying on a business. The payment is also a one off payment and thus it does not have an element of recurrence or regularity. Although the payment may be said to be expected, and perhaps relied upon, this expectation arises following the announcement by the foreign government that if you are an eligible person under the scheme you will receive a one off payment.
The Country X foreign government payment is not considered to be ordinary income.
Statutory income
Statutory income is not ordinary income, but is included in assessable income by specific provisions of the income tax law (section 6-10 of the ITAA 1997).
There is no specific provision in the income tax law that would include the payment you received from the foreign government as assessable income in Australia.
Conclusion
Subsection 6-15(1) of the ITAA 1997 provides that if an amount is not ordinary or statutory income it is not assessable income.