Edited version of your written advice

Authorisation Number: 1051315964943

Date of advice: 1 December 2017

Ruling

Subject: Assessable income

Question

Is the State Government Travel and Accommodation Allowance that you received assessable income?

Answer

Yes

This ruling applies for the following period:

Year ended 30 June 2017

The scheme commences on:

1 July 2016

Relevant facts and circumstances

You are a full time first year apprentice with your Employer.

You are undergoing an apprenticeship with your Employer which means you are required to complete a trade qualification.

You are doing a trade qualification with an education facility.

It will take you X years to complete the trade qualification.

You are required to attend trade school one week per month; however, you are required to attend trade school for two weeks in a month occasionally.

You receive a travel and accommodation allowance from the State Government.

You provided a Travel and Accommodation Allowance Fact Sheet (Fact Sheet).

The Fact Sheet provides the following information:

1. To be eligible to receive an allowance, apprentices and trainees must:

● have an approved Training Contract in that State;

● be required to travel in excess of Y km (round trip) between his/her normal place of residence and the nearest training venue offering the apprenticeship/ traineeship qualification;

● reside within a non-metropolitan area, unless the travel allowance relates to interstate travel pre-approved.

2. Applicants must lodge an Application for Travel and Accommodation Allowance.

3. Travel allowances will be based on a pre-determined rate depending on the distance travelled; Accommodation allowances are set at per day of training delivered in State and per day for pre-approved training delivered in all other states.

4. The maximum allowance payable for each apprentice or trainee per calendar year is limited to eight return trips and accommodation for 48 days.

5. If an applicant chooses to travel to a Registered Training Organisation that is not the closest provider offering the course, an allowance will only be paid for the distance that would be travelled to reach the closest provider. All further travel will be at full cost to the applicant.

6. All allowances will be paid via electronic funds transfer.

7. Many modern awards require employers to reimburse apprentices for the cost of training fees and text books required for the apprenticeship, as long as the apprentice makes satisfactory progress.

8. These modern awards also state that employers of apprentices attending block release training as part of their apprenticeship must pay for travel to and from training, including meals whilst travelling. The amount payable by an employer can be reduced by the amount the apprentice is eligible to receive through State Government travel and accommodation allowances, provided the employer has notified the apprentice in writing that the allowance is available, or the apprentice has received the allowance.

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, whether in or out of Australia, during the income year.

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 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.

In your case, you are an apprentice and are doing approved trade qualification training with an educational facility; you are eligible to receive State Government travel and accommodation allowance, which is the State Government’s contribution to the costs incurred by apprentices and trainees while travelling to the trade school which delivers their course.

This allowance is a contribution only and is not intended to cover the total travel and accommodation costs incurred by an apprentice or trainee. Your employer must pay for travel including meals whilst travelling to attend your apprenticeship trainings; the amount payable by your employer can be reduced by the amount through State Government travel and accommodation allowance.

The State Government travel and accommodation allowances are periodical and regular payments; these allowances are paid to you to cover part of your expenditure while travelling to attend trade school.

Accordingly, the State Government (X) travel and accommodation allowances are assessable as ordinary income.

Further issues for you to consider

Section 8-1 of the ITAA 1997 allows a deduction for all losses and outgoings to the extent to which they are incurred in gaining or producing assessable income except where the outgoings are of a capital, private or domestic nature, or relate to the earning of exempt income.

For details, please refer to Taxation Ruling TR 98/9 Income Tax: deductibility of self-education expenses incurred by an employee or a person in business.