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Ruling

Subject: Incentive Program payments

Question:

Do payments received under the Incentive Program form part of your assessable income?

Answer:

Yes

This ruling applies for the following periods

Year ending 30 June 2013
Year ending 30 June 2014
Year ending 30 June 2015

The scheme commenced on

1 July 2012

Relevant facts and circumstances

You are a medical practitioner.

You participate in a program which aims to link specialists and consultant physicians with patients in remote, regional and outer metropolitan areas, and in eligible aged care facilities throughout Australia.

As part of the program, medical practitioners are eligible to receive various incentive payments which are paid in addition to the Medicare benefit for the service provided.

A payment is made to encourage eligible practitioners to adopt Incentive Program X as part of their normal practice. It is paid on the first occasion a Medicare Benefit is paid for a program Medicare Benefits Schedule (MBS) item billed against a practitioner's provider number.

For a service provided during the 2011-12 financial year, this payment was a one-off payment.

A further payment is an ongoing payment based on the number of program consultations hosted by the practitioner during a quarterly period. The incentive accrues each time a Medicare benefit is processed for a program MBS item and a single payment is paid quarterly.

A further payment is an ongoing payment based on the number of time a practitioner bulk bills a program service. The incentive accrues during a quarterly period and is paid in a single payment each quarter.

During the 2012-13 financial year you received payments.

You will continue to receive payments whilst the Program operates.

Relevant legislative provisions

Income Tax Assessment Act 1997 Subsection 6-5(2).

Reasons for decision

Subsection 6-5(2) of the Income Tax Assessment Act 1997 (ITAA 1997) provides that the assessable income of an Australian resident includes 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.

Based on case law, it can be said that ordinary income generally includes receipts that:

· are earned

· are expected

· are relied upon, and

· have an element of periodicity, recurrence or regularity.

A government payment that provides income support for businesses or paid to assist with business operating costs is generally assessable under subsection 6-5(2) of the ITAA 1997.

In your case you received payments for providing your professional services as part of the program.

As these payments relate to the operation of your business, that is, the provision of your professional medical services, they are regarded as ordinary income. Therefore the payments are regarded as assessable income under subsection 6-5(2) of the ITAA 1997.