Edited version of private advice

Authorisation Number: 1051999574581

Date of advice: 15 July 2022

Ruling

Subject: Locally elected member councillor allowance

Question

Is the locally elected member councillor allowance you receive assessable income?

Answer

Yes.

This ruling applies for the following periods:

Year ended 30 June 20XX

Year ended 30 June 20XX

The scheme commenced on:

1 July 20XX

Relevant facts and circumstances

You are a duly elected representative of local Council in Australia (the council).

You receive a monthly Local Government Elected Member's allowance (the allowance) in return for being a representative on the Council.

You have advised that elected members in the state of Australia where you hold an office as a member of a local government council are not employees and are not covered under any workplace agreements, and they do not receive superannuation, nor do they have access to any paid leave entitlements.

The council has issued you with a monthly PAYG payment summary with no tax withheld from the monthly allowance payments received.

You also receive an amount which is attributed to as a sitting fee as a chairman of a Committee for the council (the chairman fee payments), however tax has been withheld on these payments and you have been declaring these payments as assessable income in your income tax return.

As such you do not require us to rule on whether the chairman fee payments are assessable income.

You have also provided a tax statement which shows that the council have been withholding tax from the chairman fee payments.

The allowance you receive from the council is generally intended to cover your contribution to the community as a locally elected member, performing duties as required in that capacity, and the allowance also enables these duties to be fulfilled.

Some examples of the duties you perform as a locally elected member include:

•         Attending public events such as presentations within the community or opening of schools;

•         Other public appearances as required;

•         Meeting with residents to listen to any issues raised or particular concerns; and

•         Taking these issues or concerns to council meetings.

Relevant legislative provisions

Income tax Assessment Act 1997 subsection 6-5

Taxation Administration Act 1953 section 446-5

Reasons for decision

A person who holds office as a member of a local government council is not an employee of the council, except where the council has passed a unanimous resolution to be treated as such and has notified the Commissioner accordingly (section 446-5 of the Taxation Administration Act 1953 (TAA)).

You have advised that elected members in the state of Australia where you hold an office as a member of a local government council are not employees and are not covered under any workplace agreements, and they do not receive superannuation, nor do they have access to any paid leave entitlements.

As such, you are not considered to be an employee of the council.

However, this does not mean that allowances paid to a member of a local governing body are not considered to be ordinary income under the general accessibility provisions in section 6-5 of the Income Tax Assessment Act 1997 (ITAA 1997).

Subsection 6-5(2) of the ITAA 1997 provides that the assessable income of a resident taxpayer includes ordinary income derived directly or indirectly from all sources 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.

All remuneration or rewards for personal services, whether received in the capacity of an employee or otherwise, in connection with personal services, is income according to ordinary concepts (see Scott v C of T (NSW) (1935) 3 ATD 142).

In your case, you are receiving an allowance to remunerate you for the duties you performed as an elected member for the council. The allowance is ordinary income because it is associated with rewards for personal services that you rendered to the council.

The councilor allowance you received is therefore fully assessable to you under subsection 6-5(2) of the ITAA 1997.