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Edited version of your written advice
Authorisation Number: 1012963176985
Date of advice: 11 February 2016
Ruling
Subject: Living and rental allowance
Question 1
Are your living assistance amounts assessable income?
Answer
Yes.
Question 2
Are your rental assistance amounts assessable income?
Answer
No.
This ruling applies for the following period
Year ended 30 June 2015
The scheme commenced on
1 July 2014
Relevant facts
You are a full time student.
Under the terms of enrolment you were required to move from city A and live in city B while studying full time.
You applied for and were granted living and rental assistance. The assistance was paid monthly in arrears.
You were required to provide signed documentation from your landlord confirming your weekly rent.
You are not an employee of entity A.
Relevant legislative provisions
Income Tax Assessment Act 1997 Section 6-5.
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 during the income year.
The courts have identified a number of factors which indicate whether an amount is regarded as ordinary income. Characteristics of ordinary 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.
In FC of T v. Dixon (1952) 86 CLR 540; (1952) 10 ATD 82 (Dixon's case) it was found that even if the receipts are not directly attributable to employment or services rendered, the expected regular periodical payments had the character of ordinary income.
In Dixon's case the payments were made voluntarily and the amount received by the taxpayer was held to be part of his assessable income as being an expected periodical payment, and because it formed part of the receipts upon which he depended for the regular expenditure upon himself and his dependants and was paid to him for that purpose.
In FC of T v. Blake (1984) 75 FLR 315, the characteristics of the payments in question were looked at to decide if they were assessable income. The periodical nature of the payment, the recipient's reliance or otherwise on the payment for regular expenditure on himself and his dependents, led to the decision that the payments were assessable income.
Another basic principle is that the character of the receipt must be determined from the point of view of the recipient and not from the standpoint of the payer or some other person.
Taxation Ruling TR 92/15 Income tax and fringe benefits tax: the difference between an allowance and a reimbursement states that a payment is an allowance when a person is paid a definite predetermined amount to cover an estimated expense. It is paid regardless of whether the recipient incurs the expected expense.
A payment is a reimbursement when the recipient is compensated exactly (meaning precisely, as opposed to approximately), whether wholly or partly for an expense already incurred although not necessarily disbursed. Where a taxpayer receives a reimbursement for an expense the payment does not, generally, constitute assessable income.
In your case, you received payments for living and rent expenses.
We acknowledge that you are not an employee of entity A. However, as highlighted in Dixons case, this fact does not mean that the income is not assessable. It should be noted that pensions and other living allowances may not be in connection with employment, yet are regarded as ordinary assessable income.
In your case, you received a monthly living assistance allowance in order to assist you with living expenses. The payments will provide you with an income support during the period of your study which you will be able to rely on for your day to day living expenses.
The regularity of your living assistance payments and the full circumstances surrounding your case indicate an income nature. Your monthly living assistance payments have the major characteristics of ordinary income identified above and the payments are assessable under subsection 6-5(2) of the ITAA 1997.
The rental assistance payments were received after you had provided proof of expenditure. These payments are considered to be reimbursements and are not regarded as assessable income.