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Edited version of private advice
Authorisation Number: 1051660949432
Date of advice: 8 May 2020
Ruling
Subject: Assessable income - Government Grant
Question 1
Is the funding you received under the Government Grants program included in your assessable income under section 6-5 of the Income Tax Assessment Act 1997 (ITAA 1997)?
Answer
Yes
This ruling applies for the following periods
Financial year ended 30 June 20XX
Financial year ending 30 June 20XX
Financial year ending 30 June 20XX
Financial year ending 30 June 20XX
The scheme commenced on
1 July 20XX
Relevant facts and circumstances
You carry on a business.
You were awarded a Grant in the 20XX-XX financial year.
The Grant was paid to you in the 20XX-XX in a lump sum payment.
Under condition X of this Grant if any of the money granted to you under this agreement is not required you are required to pay this money back to the Commonwealth.
As part of this Grant you are required to undertake various activities over the duration of the agreement, and the funding is to facilitate the activities detailed in your Grant application and Project Budget.
The Project Budget shows that there are numerous different activities that the Grant has been paid to fund over the 20XX-XX, 20XX-XX and 20XX-XX financial years.
Relevant legislative provisions
Income Tax Assessment Act 1997 section 6-5
Reasons for decision
Your assessable income includes income according to ordinary concepts, which is called ordinary income (section 6-5 of the ITAA 1997).
Ordinary income has generally been held to include 3 categories, namely, income from rendering personal services, income from property and income from carrying on a business.
Taxation Ruling TR 2006/3 Income tax: government payments to industry to assist entities (including individuals) to continue, commence or cease business (TR 2006/3) contains the Commissioner's opinion on how the income provisions apply to various grants paid or funded by the Commonwealth Government.
A Government payment to assist with business operating costs or liabilities is ordinary income in the hands of the recipient and is assessable under section 6-5 in the income year in which it is derived (paragraph 12 of TR 2006/3).
The Grant you have received for your project is intended to provide funding for the specified activities you are required to perform as outlined in the Agreement and Project Budget. The Grant has been received in the course of carrying on your business and is included in your assessable income under section 6-5 of the ITAA 1997 when it is derived.