Edited version of your written advice

Authorisation Number: 1012886983868

Date of advice: 1 October 2015

Ruling

Subject: Income - assessable

Question

Are the amounts you receive for reporting faulty infrastructure assessable income?

Answer

Yes.

This ruling applies for the following periods

Year ended 30 June 2013

Year ended 30 June 2014

Year ended 30 June 2015

Year ended 30 June 2016

The scheme commences on

1 July 2012

Relevant facts and circumstances

You are employed on a fulltime basis.

You have been receiving payments which relate to the timeliness of repairing faulty infrastructure.

You are not an employee of the company.

You first became aware of the payments after reading an article in your local newspaper.

There is a required timeframe in which the infrastructure needs to be repaired.

The payment is made to the first person to report the fault, if the reported item is not repaired within the required timeframe.

You use the company's online reporting system to report the fault.

You provide details of the type of fault, your first and last name, contact number and postal address. Once you have completed the required information you submit the online report form.

You have received numerous payments over an extended period of time which amount to significant sums.

You do not have a lot of time outside your fulltime work and do not go out of your way to find the faulty items. You are merely observant and trying to provide a community service.

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 Australia resident taxpayer includes ordinary income derived directly or indirectly from all sources 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.

Whether or not a particular amount is ordinary income depends on the nature and character of the receipt in the hands of the taxpayer. The motive of the payer is immaterial. Characteristics of what is ordinary income have evolved from case law and include:  

• receipts that are earned

• are expected

• are relied upon and

• have an element of periodicity, recurrence or regularity.

Ordinarily the receipt of these types of payments would not be considered ordinary income as it would not be a regular activity for an individual who is not employed within the industry.

However, from the facts you have provided it can be seen that in your case the reporting of faulty infrastructure has become far more than an occasional, infrequent or uncommon activity. The sums you have received are substantial. It cannot be said in your situation that the reporting of the fault is done on an ad hoc basis, given the frequency and volume of reporting you have demonstrated over the past few years.

Even though you may not rely on the payments for living expenses as you are employed on a fulltime basis, it can be considered that the payments are expected due to the process you have established and the period of time you have been consistently reporting the faults.

After applying the facts you have provided to the indicators above, we consider the payments you receive are assessable income under subsection 6-5(2) of the ITAA 1997 and should be recorded under 'other' income in your income tax return.