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Edited version of your written advice
Authorisation Number: 1013140840754
Date of advice: 19 December 2016
Ruling
Subject: Incentive grant
Question
Is the Grant received by you included in your assessable income?
Answer
Yes.
This ruling applies for the following period:
Year ended 30 June 2016
Year ended 30 June 2017
The scheme commenced on
1 July 2015
Relevant facts and circumstances
You successfully applied for a Grant. The grant is given to encourage regional relocation for employment.
To be eligible for the grant you must have commenced employment in a regional job and be employed in one or more regional jobs on a full time basis for a period.
You are employed in a relevant area.
You received grant payments.
Relevant legislative provisions
Income Tax Assessment Act 1997 Section 6-5.
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.
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.
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)).
An incentive bonus generally comes within the meaning of ordinary income. An incentive bonus is an additional reward payment derived in the capacity as an employee as a financial incentive to remain in employment (Dean and Anor v. Federal Commissioner of Taxation (1997) 78 FCR 140; (1997) 37 ATR 52; 97 ATC 4762) (Deans case). Dean's case also found that the payment need not be paid by your employer.
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 received payments for relocating and working in a regional area for a period.
The payments are considered a bonus you derive as a result of your employment in a regional area as they are paid to encourage you to continue working in your regional locality. That is, the payments are designed to reward and encourage people to work in regional areas. The grant relates to the services you provide and is assessable income under section 6-5 of the ITAA 1997.