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Ruling
Subject: Income- back payment of income
Question
Is the back payment of income assessable in the year of receipt?
Answer:
Yes.
This ruling applies for the following period
Year ended 30 June 2012
The scheme commenced on:
1 July 2011
Relevant facts
You received a back payment of income.
You were issued with a payment summary.
The payment related to an earlier income year.
Relevant legislative provisions
Income Tax Assessment Act 1997 section 6-5.
Income Tax Assessment Act 1997 subsection 6-5(2).
Income Tax Assessment Act of 1936 section 159ZR
Income Tax Assessment Act of 1936 section 159ZRD
Reasons for decision
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.
In determining the basis of derivation of income, paragraph 42 of Taxation Ruling 98/1 states that:
Income from employment would normally be assessable on a receipts basis. Salary, wages or other employment remuneration are assessable on receipt even though they relate to a past or future income period.
In your case while the payment relates to earlier period of entitlement, the Commissioner has no discretion to include the income in earlier income years. Therefore, the payment you received is included in your assessable income under section 6-5 of the ITAA 1997 in the income year when the amount was received.