Edited version of private advice

Authorisation Number: 1052340028575

Date of advice: 9 December 2024

Ruling

Subject: Assessable income - reimbursement

Question

Is the reimbursement for Rural Support Loading Payment assessable income?

Answer

No.

Ordinary income

Assessable income includes ordinary income under section 6-5 of the Income Tax Assessment Act 1997 (ITAA 1997) and statutory income under section 6-10 of the ITAA 1997.

Subsection 6-5(1) of the ITAA 1997 states that your assessable income includes income according to ordinary concepts, which is called ordinary income.

Subsection 6-5(2) of the ITAA 1997 states that if you are an Australian resident, your assessable income includes the ordinary income you derived directly or indirectly from all sources, whether in or out of Australia 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.

Other characteristics of income that have evolved from case law include receipts that:

(a) are earned

(b) are expected

(c) are relied upon, and

(d) have an element of periodicity, recurrence or regularity.

If the income has characteristics of the four listed above then it can be considered as ordinary income under section 6-5 of the ITAA 1997.

Under section 6-15 of the ITAA 1997, if an amount is not ordinary income nor statutory income it is not assessable income, being exempt, and you do not have to pay tax on it.

In addition, not for profit organisations such as hospitals don't pay income tax on their income including any funding they receive.

Reimbursements

Taxation Ruling TR 92/15 Income tax and fringe benefits tax: the difference between an allowance and a reimbursement considers the meaning of a reimbursement, stating:

Paragraph 3 - A payment is a reimbursement when the recipient is compensated exactly (meaning precisely, as opposed to approximately), whether wholly or partly, for an expense already incurred although not necessarily disbursed. In general, the provider considers the expense to be its own and the recipient incurs the expenditure on behalf of the provider. A requirement that the recipient vouch expenses lends weight to a presumption that a payment is a reimbursement rather than an allowance. A requirement that the recipient refunds unexpended amounts to the employer adds further weight to that presumption.

Consequently, a payment will only be a reimbursement when the payment exactly matches the expense incurred.

Application to your circumstances

In your case you advised the payment was a reimbursement. The payment does not have an element of periodicity, recurrence or regularity and does not have characteristics of income according to ordinary concepts and therefore, not assessable under section 6-5 of the ITAA 1997.

There are no other provisions listed under section 6-10 of the ITAA 1997 which would apply to your payment and it is therefore not considered to be statutory income.

As the amount paid is not viewed as being either ordinary income or statutory income it is not assessable and you do not have to pay tax on it.

This ruling applies for the following period:

Period Ended 30 June 20XX

The scheme commenced on:

1 July 20XX

Relevant facts and circumstances

You are an Australian resident and not here on a working holiday.

Rural Loading (RL) is funding from the Department of Health and paid to trainees for STP (specialist training program) posts in regional, rural and remote Australia to cover costs associated with training in rural and remote areas.

You received a Rural Support Loading Payment from XXX for $XXX.XX which related to you working in a hospital in a rural location in Australia.

The SPT Rural Loading Funding payment was a reimbursement to you as a trainee for emergency training in the rural sector.

Relevant legislative provisions

Income Tax Assessment Act 1997 Subsection 6-5(1)

Income Tax Assessment Act 1997 Subsection 6-5(2)

Income Tax Assessment Act 1997 Section 6-10

Income Tax Assessment Act 1997 Section 6-15

Income Tax Assessment Act 1997 Section 11-5