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Edited version of your written advice
Authorisation Number: 1051229246347
Date of advice: 25 May 2017
Ruling
Subject: National Award for Professional Development
Question
Is the award assessable income?
Answer
No.
Year ending 30 June 2017
The scheme commences on
1 July 2016
Relevant facts and circumstances
You are a professional.
You received an award for professional development.
The award was a once off payment.
Relevant legislative provisions
Income Tax Assessment Act 1997 Section 6-5
A payment or other benefit received by a taxpayer is assessable income if it is:
● income in the ordinary sense of the word (ordinary income); or
● an amount or benefit that through the operation of the provisions of the tax law is included in assessable income (statutory income).
Subsection 6-5(1) states that the assessable income of a taxpayer includes income according to ordinary concepts (ordinary income). The legislation does not provide specific guidance on the meaning of income according to ordinary concepts. However, a substantial body of case law exists which identifies likely characteristics.
In GP International Pipecoaters Pty Ltd v. Federal Commissioner of Taxation, the Full High Court stated:
To determine whether a receipt is of an income or of a capital nature, various factors may be relevant. Sometimes the character of receipts will be revealed most clearly by their periodicity, regularity or recurrence; sometimes, by the character of a right or thing disposed of in exchange for the receipt; sometimes, by the scope of the transaction, venture or business in or by reason of which money is received and by the recipient's purpose in engaging in the transaction, venture or business.
Amounts that are periodical, regular or recurrent, relied upon and expected on a periodic basis by the recipient for their regular expenditure and paid to them for that purpose are likely to be ordinary income, as are amounts that are the product in a real sense of any employment of, or services rendered by, the recipient. Amounts paid in substitution for salary or wages foregone or lost may also be ordinary income.
Ultimately, whether or not a particular receipt is ordinary income depends on its character in the hands of the recipient. The whole of the circumstances must be considered and the motive of the payer may be relevant to this consideration.
The award you received was a once off lump sum payment for professional development. The payment was not received periodically by you, was not relied on, was not earned or was not a replacement of income.
The payment is therefore not ordinary income and is not assessable under section 6-5 of the ITAA 1997. This payment is not required to be declared in your tax return.