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Edited version of your private ruling
Authorisation Number: 1012442558385
Ruling
Subject: Reimbursement payment
Question
Are the reimbursement payments you receive from the organisation assessable income?
Answer
No.
This ruling applies for the following periods
Year ending 30 June 2013
Year ending 30 June 2014
Year ending 30 June 2015
Year ending 30 June 2016
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.
The organisation recognises that you incur costs as part of your provision of care for the client and you receive a fortnightly 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.
You are not an employee of the organisation and you are not in the business of providing full-time or part-time care.
Relevant legislative provisions
Income Tax Assessment Act 1997 Section 6-5
Income Tax Assessment Act 1997 Section 6-10
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 resident taxpayer includes ordinary and statutory income derived directly and indirectly from all sources during the income year.
In determining if an amount is income according to ordinary concepts, consideration must be given to whether the amount is the product of any income producing activity.
Such an activity could include employment, carrying on a business or rendering a service.
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 by, 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 Taxation Determination 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. Such payments are not considered to be ordinary income or statutory income.
Therefore, the payments do not form part of your assessable income and you are not required to include the amounts anywhere in your tax return.