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Is election funding received by a political party from the Australian Electoral Commission assessable income under subsection 6-5(1) of the Income Tax Assessment Act 1997 (ITAA 1997)?

No. Election funding received by a political party from the Australian Electoral Commission is not assessable income under subsection 6-5(1) of the ITAA 1997.

Following a federal election or by-election, the federal government, through the Australian Electoral Commission, distributes election funding where candidates or groups secure more than 4% of the total number of eligible votes in a particular electorate.

The purpose of the election funding is to assist the payment of election expenses and the amount paid is based on the number of first preference votes gained.

The election funding is paid by the Australian Electoral Commission to a candidate's political party unless the candidate is contesting the election as an independent.

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

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.

In addition, characteristics of ordinary income that have evolved from case law include receipts that: • are earned • are expected • are relied upon, and • have an element of periodicity, recurrence or regularity.

The election funding received by a political party does not exhibit the characteristics of ordinary income as described to such an extent as to be characterised as income according to ordinary concepts. The election funding also does not relate to, or result from the performance of any personal services rendered by the political party, nor is it income from property. While a political party may derive assessable income from investments or activities of a business nature, the election funding is not considered to be income from the proceeds of any business activity carried on by the political party.

Accordingly, the election funding received by a political party is not assessable as ordinary income under subsection 6-5(1) of the ITAA 1997. In addition we do not consider the election funding, when received by a political party, is assessable under any of the statutory income provisions of the ITAA 1997. Note: Where the election funding is received by a candidate, either directly from the Australian Electoral Commission or indirectly from a political party, the election funding may be assessable under the assessable recoupment provisions in subdivision 20-A of the ITAA 1997.

Date of Amendment Part Comment 29 August 2014 Related Public Rulings Remove reference to withdrawn Taxation Ruling IT 2258

Date of Amendment | Part | Comment

29 August 2014 | Related Public Rulings | Remove reference to withdrawn Taxation Ruling IT 2258