Edited version of your private ruling

Authorisation Number: 1012452792764

Ruling

Subject: Settlement payments from former spouse

Question

Were the settlement payments received from your former spouse assessable income?

Answer

No.

This ruling applies for the following period

Year ended 30 June 2011

The scheme commenced on

1 July 2010

Relevant facts and circumstances

This ruling is based on the facts stated in the description of the scheme that is set out below. If your circumstances are materially different from these facts, this ruling has no effect and you cannot rely on it. The fact sheet has more information about relying on your private ruling.

The arrangement that is the subject of the Ruling is described below. This description is based on the following documents. These documents form part of and are to be read with this description. The relevant documents are:

§ the application for private ruling and

§ a copy of the Financial Agreement made pursuant to the Family Law Act 1975.

You were married.

You separated from your spouse.

You had children from your former marriage.

You and your former spouse have reached an agreement in relation to property settlement, spousal maintenance, superannuation splitting and child support.

Under the Financial Agreement your former spouse paid you some money for a period of X years from the date of the agreement. The payments were made monthly for your maintenance. The payments were from a private family arrangement and were not paid as a trust distribution.

You also received property settlement payments and child support payments from your former spouse.

Relevant legislative provisions

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

Income Tax Assessment Act 1997 Section 51-50

Detailed reasoning

Subsection 6-5(2) of the Income Tax Assessment Act 1997 (ITAA 1997) provides that the assessable income of an Australian resident includes income according to ordinary concepts (ordinary income) derived directly or indirectly from all sources, whether in or out of Australia, during the income year.

An amount will not be included in assessable income if the amount is exempt income (subsection 6-15(2) of the ITAA 1997).

Section 51-1 of the ITAA 1997 provides that certain listed amounts will be exempt from income tax. Item 5.1 of section 51-30 of the ITAA 1997 includes in the list periodic payments in the nature of maintenance that meet the requirements of section 51-50 of the ITAA 1997.

Section 51-50 of the ITAA 1997 sets out the conditions on which a periodic payment to a spouse or child which is in the nature of maintenance is exempt from tax. That section provides that the maintenance payment is exempt from income tax only if it is made:

· by an individual ( the maintenance payer) or is attributable to a payment made by the maintenance payer ; and

· to an individual who is or has been the maintenance payer's spouse; or

· to or for the benefit of an individual who is or has been,

· a child of the maintenance payer; or

· a child who is or has been a child of an individual who is or has been a spouse of the maintenance payer.

You received regular maintenance payments from an individual who was your spouse. These payments are exempt from income tax in accordance with section 51-50 of the ITAA 1997 and therefore are not assessable income under section 6-5 of the ITAA 1997.

The property settlement payments and child support payments from your former spouse are also not regarded as ordinary assessable income. There are no other provisions that make these payments assessable.

Therefore the payments received as a result of your marriage separation settlement are not assessable income.