Edited version of private advice

Authorisation number: 1052384733295

Date of advice: 24 April 2025

Ruling Subject: Foreign government payment

Question 1

Is the payment you received under the Wealth Partaking Scheme assessable in Australia?

Answer 1

Yes

This ruling applies for the following periods:

Year ended 30 June 20XX

Year ended 30 June 20XX

Year ended 30 June 20XX

The scheme commenced on:

XX XXXX 20XX

Relevant facts and circumstances

In 20XX, the payment scheme commenced in Country A.

The aim of the payment scheme is to share the achievements of economic development with residents. The scheme was initiated to the impact of the financial crisis on the social economy, to lessen the life pressure brought about by fighting inflation, as well as to enhance regional economic benefits resulting from the sustainable development of the gaming industry.

The scheme for each year will set a specific date on or before which those holding a valid or renewable Country A permanent or non-permanent identity card issued in accordance with Country A's laws may receive an amount of wealth partaking stipulated by law for the year concerned. Country A's citizens or Country A permanent residents.

You are not required to apply or complete anything every year to receive the payment, only meet the eligibility criteria.

The payment is considered a welfare benefit (gift) for its citizens and is not taxable in Country A.

The payment scheme is a discretionary benefit provided when the Country A economy is performing well. Eligible participants will receive the payments every year if the government provides the benefit.

You are eligible because you are a Country A citizen.

Before 20XX, your Country A identity card was expired. The identity card is required to verify your Country A citizenship to receive the payment.

From 20XX, you became eligible for the payment after travelling from Australia to Country A to renew your identity card.

Since 20XX, you have received payment every year.

The Country A government deposits the payment directly into your Country A bank account, which you can only access while in Country A.

Relevant legislative provisions

Income Tax Assessment Act 1997 section 6-5

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

Income Tax Assessment Act 1997 section 6-20

Income Tax Assessment Act 1997 subsection 6-20(1)

Income Tax Assessment Act 1997 section 11-5

Reasons for decision

Summary

The payments have the characteristics of social security payments for Australian taxation purposes, and therefore are assessable income under section 6-5 of the ITAA 1997. The payments are also not made exempt under section 6-20 of the ITAA 1997 or by any double tax agreement.

Detailed reasoning

Assessable income

Under section 6-5 of the Income Tax Assessment Act 1997 (ITAA 1997) assessable income includes income according to ordinary concepts, which is called ordinary income. Typical examples of ordinary income include salary, wages, allowances, bonuses, dividends, rent, and proceeds from carrying on a business.

Subsection 6-5(2) of the ITAA 1997 provides that an Australian resident's assessable income includes the ordinary income derived directly or indirectly from all sources, whether in or out of Australia, during the income year.

There is no single test to determine whether an amount is 'income according to ordinary concepts', however there are three principal categories in which income is considered to be 'ordinary income':

•                income from rendering personal services, including employment income;

•                income from property, such as rent, interest and dividends; and

•                income from carrying on a business.

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

•                the receipt is earned;

•                the receipt is expected;

•                the receipt is relied upon;

•                the receipt has an element of periodicity, recurrence or regularity; or

•                the receipt is for the replacement of income.

Exempt income

Subsection 6-20(1) of the ITAA 1997 provides that an amount of ordinary income is exempt income if it is made exempt from income tax by a provision of the ITAA 1997 or another Commonwealth law. Section 11-15 of the ITAA 1997, includes a list of ordinary or statutory income which is exempt.

There is no relevant double tax agreement.

Application to your circumstances

You have a continuing expectation of receiving periodic payment, an expectation arising out of the established Country A's government policy with respect to lessening the life pressures of Country A's citizens brought about by inflation, as well as to enhance regional economic benefits. The payments made by the Country A government are to share the achievements of economic development within its residents. The payments form part of the receipts upon which a recipient depends on for support against inflation.

The payments have the characteristics of social security payments for Australian taxation purposes, and therefore are assessable income under section 6-5 of the ITAA 1997. The payments are also not made exempt under section 6-20 of the ITAA 1997 or by any double tax agreement.