Edited version of private advice

Authorisation Number: 1052194937601

Date of advice: 24 November 2023

Ruling

Subject: Non-assessable non-exempt income

Question

Are the other rebates (reimbursement) payments you received from the Rural Assistance Authority (RAA) considered non-assessable non-exempt (NANE) income under section 6-23 of the Income Tax Assessment Act 1997 (ITAA 1997)?

Answer

No.

This ruling applies for the following period:

Period Ended 30 June 20XX

The scheme commenced on:

1 July 20XX

Relevant facts and circumstances

You, Person B and Person C are in partnership (the partnership) in a small farming.

On a specified date, the partnership entered into a written agreement as to how income from the business would be distributed. Your distribution of the partnership's income or loss from trading was a specified percentage.

On a specified date, the partnership entered into an oral agreement that amended the previous agreement to incorporate that up to a specified value of any profit from the business would be allocated to you each year in recognition of your work managing the farm.

The partners signed a restatement of the oral agreement on a specified date, confirming the fact, that any profit above the outlined value or any loss, be continued to be distributed to the partners as per the percentages outlined in the previous agreement.

The partnership owned an apiary with a specified number of beehives which you managed.

The department of Primary Industries (DPI) declared biosecurity emergency order Biosecurity (Yarroa Mite) Emergency Order (No.28) 2022 on 15 September 2022.

All your beehives were destroyed under the emergency order to prevent the spread of the Yarroa Mite.

You received the other rebates (reimbursement) payments from the Royal Assistance Authority into your personal bank account on behalf of the partnership. You provided the dates, and amounts received.

Relevant legislative provisions

Income Tax Assessment Act 1997 section 6-15

Income Tax Assessment Act 1997 section 6-23

Income Tax Assessment Act 1997 section 11-15

Income Tax Assessment Act 1997 section 11-55

Income Tax Assessment Act 1997 section 15-10

Income Tax Assessment Act 1997 section 51-125

Income Tax Assessment Act 1997 section 52-40

Income Tax Assessment Act 1997 section 59-55

Income Tax Assessment Act 1997 section 59-60

Income Tax Assessment Act 1997 section 59-85

Income Tax Assessment Act 1997 section 59-86

Income Tax Assessment Act 1997 section 59-99

Income Tax Assessment Act 1997 section 59-105

Reasons for decision

Section 6-23 of the ITAA 1997 provides that ordinary or statutory income may be non-assessable non-exempt income if the income legislation, or another Commonwealth law, states that the income is both not assessable and not exempt.

Usually, payments received as a government support grant or payment to help recover from the effects of natural disaster are counted as assessable income unless they are made non-taxable by parliament. Under Income Tax Assessment Act 1997 (ITAA 1997) section 11-15, the following disaster payments have been declared as ordinary or statutory income which is exempt:

•         2018 Storms - relief payments (51-125 of the ITAA 1997)

The following disaster payments have been declared NANE income under section 11-55 of the ITAA 1997:

•         2019-20 bushfires - payments for volunteer work with fire services (59-55 of the ITAA 1997)

•         2019-20 disaster relief payments and non-cash benefits (59-60 of the ITAA 1997)

•         2019 floods - recovery grants (59-85 of the ITAA 1997)

•         2019 floods - on-farm grant program (59-86 of the ITAA 1997)

•         2021 floods and storms - recovery grants (59-99 of the ITAA 1997)

•         Cyclone Seroja - recovery grants (59-105 of the ITAA 1997)

Division 59 of the ITAA 1997 list types of NANE income. The following natural disaster recovery grants have been listed as NANE:

•         Category C measure recovery grants - November 2010 Australian Floods

•         Category C measure recovery grants - Cyclone Yasi (January to February 2011)

•         Category C or D measure recovery grants - 2019 Australian flood (25 January 2019-28 February 2019).

Conclusion

The other rebates (reimbursement) payments that you have received has not been declared by parliament as NANE as per section 11-55 of ITAA 1997 and is therefore considered taxable. The payments received must be distributed through the partnership according to the signed agreement and reported in the income tax year they are received.