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Ruling

Subject: reimbursement payments

Question

Are the reimbursement payments you receive from the organisation assessable income?

Answer

No.

This ruling applies for the following period:

Year ended 30 June 2013

The scheme commences on:

1 July 2012

Relevant facts and circumstances

The organisation acts as an agent and coordinator of care arrangements for someone with a disability (the client).

You are a carer that provides supported accommodation for the client in a family home.

You do not have any qualifications that relate to the activities you undertake in caring for the client.

Part of the provision of care and assistance includes providing financial support, whereby you would contribute to the cost of accommodation and living expenses of the household which you share with the client.

In addition to contributing to such expenses, you have also contributed to other costs of the client such as the cost of medication and the cost of food for your client's pets.

The organisation recognises that you incur costs as part of your provision of care for the client and you receive a fixed monthly reimbursement payment.

The reimbursement is adjusted annually in line with indexation.

The organisation does not consider your reimbursement payments to be assessable income and consequently does not withhold any tax from the payment. Further the organisation does not contribute to any superannuation fund on your behalf nor provide you with workers' compensation, rather it recommends that you purchase a personal and accident insurance policy.

Relevant legislative provisions

Income Tax Assessment Act 1997 section 6-5.

Reasons for decision

Summary

The payments you received from the organisation do not form part of your assessable income. The reimbursement payments were made to assist you in meeting the costs of caring for your client.

Detailed reasoning

Section 6-5 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. Ordinary income has generally been held to include three categories: personal services income, income from property and income from carrying on a business.

Taxation Ruing IT 2639 describes income from personal services as 'income that an individual earns predominantly as a direct reward for his or her personal efforts, for example, the provision of services, exercise of skills or the application of labour'.

The receipt of payment as a reward for services (which would be considered assessable income) can be contrasted with the receipt of a payment to a volunteer to reimburse them for costs incurred by them in the carrying out of their activities. A payment to a volunteer for the reimbursement of expenses is not considered to be assessable income.

Paragraph 8 of Taxation Determination TD 2004/75 provides the following example of a reimbursement:

Peter provides volunteer respite care for a child with disabilities for one weekend (Friday evening to Monday morning) per month. Peter is paid an amount of $350 for the weekend by an organisation that arranges respite care for disabled persons. The payment is intended to cover expenses incurred in providing the respite care including food and drink, laundry, recreation activities and transport. The payment is considered to be in the nature of a reimbursement of expenses and therefore is not included in Peter's assessable income.

Similarly in TD 2006/62, the Commissioner notes that certain payments made to volunteers to allow for their provision of foster care would not amount to assessable income. Such payments would include 'standard or basic foster care subsidies plus additional loadings or allowances' in relation to payments 'made to help meet the costs associated with providing care for foster children'. TD 2006/62 does not apply to payments made to employees of foster care agencies.

Based on the facts provided, we accept that you are not being paid for your personal services but are receiving monies from the organisation with the intention that these be used to cover the costs you may incur in providing care to your client. Therefore, the payments do not form part of your assessable income.