Issue
Is an amount of financial assistance to assist with personal hardship, received by the taxpayer from a charitable organisation, assessable income under section 6-5 of the Income Tax Assessment Act 1997 (ITAA 1997)?
Decision
No. An amount of financial assistance to assist with personal hardship, received by the taxpayer from a charitable organisation, is not assessable income under section 6-5 of the ITAA 1997 as it is not income according to ordinary concepts.
Facts
The taxpayer is an individual who suffered personal hardship as the result of a disaster or emergency.
The taxpayer received financial assistance from a charitable organisation.
The financial assistance is a one-off, or non-periodic, payment.
The payment is provided for personal living expenses to address immediate needs, such as food, clothing and short term accommodation that arose as a result of the disaster or emergency.
The taxpayer is not carrying on a business.
Reasons for Decision
Section 6-5 of the ITAA 1997 provides that the assessable income of a resident taxpayer includes income according to ordinary concepts (ordinary income) derived directly or indirectly from all sources.
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: • are earned • are expected • are relied upon, and • have an element of periodicity, recurrence or regularity.
The financial assistance the taxpayer received was not earned by the taxpayer as it does not relate to personal services performed. The payment is also a one off, or non-periodic, payment and thus, it does not have the element of regularity. Although the payment may be said to be expected and relied upon, this expectation and reliance arises from personal hardship suffered as the result of a disaster or emergency, rather than from a relationship to personal services performed.
The financial assistance is not income according to ordinary concepts and therefore is not ordinary income. Accordingly, the financial assistance is not assessable under section 6-5 of the ITAA 1997.
Amendment History
Date of Amendment Part Comment 24 March 2016 Reasons for decision Updated to improve clarity
Date of Amendment | Part | Comment
24 March 2016 | Reasons for decision | Updated to improve clarity