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Edited version of your private ruling
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Ruling
Subject: Assessability of compensation payments
Question and answer:
Is the domestic assistance carer's payment that you receive assessable?
Yes.
This ruling applies for the following period
Year ended 30 June 2012
Year ended 30 June 2013
Year ended 30 June 2014
Year ended 30 June 2015
The scheme commenced on
1 July 2011
Relevant facts
You are an Australian resident for tax purposes.
Your spouse was involved in a motor vehicle accident.
The accident rendered your spouse severely disabled.
After the accident your spouse requires 24 hour supervision.
As a result of the accident your spouse has been in receipt of periodic compensation payments from an insurance company.
Due to a change in policy the periodic payments made by the insurance company will now be paid directly to you via an ABN.
The periodic payments that are made are referred to by insurance company as a 'domestic assistance carer's payment'.
Relevant legislative provisions
Income Tax Assessment Act 1997, Section 6-5
Reasons for decision
Section 6-5 of the ITAA 1997 provides that the assessable income of a resident taxpayer includes income according to ordinary concepts, known as 'ordinary income', derived directly or indirectly from all sources during the income year.
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.
Your circumstance
You are paid a periodic amount by an insurance company to provide home care to your incapacitated spouse. As these payments are being received for personal services rendered by you in providing care for your spouse they are income according to ordinary concepts.
Accordingly, the payments that you receive are considered to be ordinary income and therefore assessable under section 6-5 of the ITAA 1997.
Further information
Deductions
A taxpayer may be entitled to claim losses and outgoings to the extent to which they are incurred in gaining or producing assessable income as a carer except where the outgoings are of a capital, private or domestic nature.
For further information on deductions that you may be eligible to claim you can log onto www.ato.gov.au.