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Edited version of your written advice
Authorisation Number: 1012695307449
Ruling
Subject: Bonus
Question
Is the bonus payment assessable?
Answer
Yes.
This ruling applies for the following periods
Year ending 30 June 2015
Year ending 30 June 2016
The scheme commenced on
1 July 2014
Relevant facts
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
• information on the program and bonus.
Upon completion of a program in a specified location, you are eligible for a bonus payment.
The program is a government initiative to support professionals.
The program provides salary including annual leave and personal leave.
Relevant legislative provisions
Income Tax Assessment Act 1997 Section 6-5
Income Tax Assessment Act 1997 Section 6-10
Income Tax Assessment Act 1997 Section 6-15
Income Tax Assessment Act 1936 Section 11-15
Income Tax Assessment Act 1997 Section 15-2
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, whether in or out of Australia, during the income year.
Generally speaking, a receipt will be income according to ordinary concepts if it is a receipt arising out of a taxpayer's employment, business activities or income producing activities. This will be so even if the receipt is not directly related to any service provided by the recipient to the donor (FC of T v Dixon (1952) 86 CLR 540 (Dixon's case)).
Section 6-10 of the ITAA 1997 includes amounts of statutory income in assessable income, that is, amounts that are specifically listed as assessable income in Division 10 of the ITAA 1997. The provision applicable in your case is section 15-2 of the ITAA 1997.
Section 15-2 of the ITAA 1997 states that your assessable income includes the value to you of all allowances, gratuities, compensation, benefits, bonuses and premiums provided to you in respect of, or for or in relation directly or indirectly to, any employment of or services rendered by you.
In your case, you are providing services as required under the program. The bonus is only paid on the successful completion of the program.
Although the payment is government funded and may not be paid by your employer, it is considered that the bonus payment relates to the services you provide under the program. Therefore the bonus payment is assessable under section 15-2 of the ITAA 1997.
Subsection 6-15(2) of the ITAA 1997 provides that if an amount is exempt income, it is not assessable income.
Section 11-15 of the ITAA 1997 list certain types of exempt income. However, Division 51 of the ITAA 1997 or any other provision does not make the bonus payment exempt from income tax.
Therefore the payment is assessable income under section 15-2 of the ITAA 1997.