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Edited version of your written advice
Authorisation Number: 1012701698604
Ruling
Subject: Carer payment
Question
Are the carer payments assessable income?
Answer
No.
This ruling applies for the following periods:
Year ended 30 June 2015
Year ended 30 June 2016
Year ended 30 June 2017
Year ended 30 June 2018
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 including
• information on the funding.
You are a full time foster parent.
You have been receiving tax free payments from entity A. This payment is government funded.
Entity A is no longer able to provide the payments.
Your foster child has special needs and you incur significant costs in looking after them.
You are now to receive your payments directly from the relevant government department. The payment is to help cover the costs of your foster child's needs.
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 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.
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.
Based on case law, it can be said that ordinary income generally includes receipts that are earned, expected, are relied upon, and have an element of periodicity, recurrence or regularity.
Whether or not a particular receipt is ordinary income depends on its character in the hands of the recipient. Regard must be given to the full circumstances in which the payment is received.
In your case, the payments are not paid for the amount of your time or to reward you for personal services provided. The purpose of the payment is to assist in defraying some of the costs that you incur in providing for your foster child's needs.
Although the payment can be said to be expected, and relied upon, this expectation does not arise from a relationship to personal services performed.
The payments to you are considered to be in the nature of a reimbursement of expenses. That is, your payments are intended to cover expenses incurred in providing care for your foster child. Therefore, the payments are not assessable as ordinary income under section 6-5 of the ITAA 1997.
Section 6-10 of the ITAA 1997 refers to assessable amounts that are not ordinary income. These amounts are called statutory income. A list of the statutory income provisions can be found in section 10-5.
None of the provisions listed are relevant in your circumstances.
As your payments are neither ordinary nor statutory income, they are not assessable income.