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Edited version of private advice
Authorisation Number: 1012621808586
Ruling
Subject: Compensation - domestic assistance
Question
Are the payments you receive for domestic assistance, assessable income?
Answer
Yes.
This ruling applies for the following periods
Year ended 30 June 2013
Year ending 30 June 2014
Year ending 30 June 2015
Year ending 30 June 2016
Year ending 30 June 2017
Year ending 30 June 2018
The scheme commences on
1 July 2012
Relevant facts and circumstances
Your spouse sustained a workplace injury that has resulted in you having to provide assistance/care for your spouse around the home.
As of a result of providing the assistance/care, you have been unable to work on a full-time basis.
Your spouse filed an Application to Resolve a Dispute in the Workers Compensation Commission.
The claim was arbitrated by the Workers Compensation Commission and it was agreed between the parties that your spouse's former employer would pay you (on a voluntary basis) for domestic assistance.
You received lump sum amounts and continue to receive fortnightly payments. PAYG withholding tax was withheld from the lump sum payments.
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 a resident taxpayer includes ordinary income derived directly or indirectly from all sources, whether in or out of Australia, 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.
Other characteristics of income that have evolved from case law include receipts that:
• are earned
• are expected
• are relied upon, and
• have an element of periodicity, recurrence or regularity.
An amount paid to compensate for loss generally acquires the character of that for which it is substituted (Federal Commissioner of Taxation v. Dixon (1952) 86 CLR 540; (1952) 5 ATR 443; ATD 82). Compensation payments which substitute income have been held by the courts to be income according to ordinary concepts (FC of T v. Inkster 89 ATC 5142; (1989) 20 ATR 1516 and Tinkler v. FC of T 79 ATC 4641; (1979) 10 ATR 411.
In your case, you have been awarded, after arbitration, a lump sum payment plus ongoing weekly payments for domestic assistance as you provide care to your incapacitated spouse.
As the amounts you have received are payments received for personal services rendered they are income according to ordinary concepts.
We do not consider that the fact you are related to the person you are being paid to care for changes the essential character of the payment. The payment has been made to an approved person to provide personal care to an injured worker in respect of a compensable disability.
The payments you have received for domestic assistance are assessable income under subsection 6-5(2) of the ITAA 1997 and will need to be included in your income tax return in the financial year the payments were received.