Issue
Are levies collected by the taxpayer from livestock producers included in the taxpayer's assessable income under section 6-5 of the Income Tax Assessment Act 1997 (ITAA 1997)?
Decision
Yes. The levies are included in the assessable income of the taxpayer in accordance with section 6-5 of the ITAA 1997 as ordinary income.
Facts
The taxpayer is an association of stock and station agents.
The taxpayer manages and operates the local sale yards, which are owned by the local council.
The taxpayer imposed a levy on livestock producers who use the sale yards to sell their livestock. The levy was initiated by the taxpayer and is payable by the sellers of the livestock. The levy is based upon the number of livestock that each livestock producer puts through the sale yards. The levies are payable on a regular basis through out the year.
The money received from the levy is used by the taxpayer to maintain, repair and improve the sale yards. The taxpayer has complete discretion on when and how to apply the money for the benefit of the sale yards.
Reasons for Decision
Section 6-5 of the ITAA 1997 provides that a taxpayer's assessable income includes income according to ordinary concepts, which is called ordinary income.
Characteristics of what is ordinary income have evolved from case law and include receipts that: • are earned; • are expected; • are relied upon; and • have an element of periodicity, recurrence or regularity.
The taxpayer receives the levies from livestock producers on a regular basis throughout the income year. The levy is received or earned in return for providing a service to the livestock producers (i.e. managing and operating the sale yards). The levies are relied upon by the taxpayer in order to maintain the sale yards.
Consequently, the levies have the characteristic of income according to ordinary concepts. Accordingly they are ordinary income and are included in the taxpayer's assessable income under section 6-5 of the ITAA 1997.