Mature Age Worker Tax Offset - Definition of net income from working

Does a taxpayer's 'net income from working' as defined in section 61-570 of the Income Tax Assessment Act 1997 (ITAA 1997) include income received from leasing an asset

No. A taxpayer's 'net income from working' as defined in section 61-570 of the ITAA 1997 does not include income received from leasing an asset.

The taxpayer owns an asset, being a taxi licence.

They lease the licence to another person who uses it in running a taxi business.

The taxpayer receives lease payments on a monthly basis from the lessee.

Subdivision 61-K of the ITAA 1997 provides for a mature age worker tax offset. The amount of the tax offset is dependant on the amount of the taxpayer's net income from working.

Subsection 61-570(2) of the ITAA 1997 defines 'net income from working' as excluding, among other things, 'passive income' as defined in subsection 160AEA(1) of the Income Tax Assessment Act 1936 (ITAA 1936).

Section 6 of the ITAA 1936 defines 'passive income' as 'income derived by the taxpayer by way of rent (within the meaning of Part X). Section 317 of Part X of the ITAA 1936, in turn, defines 'rent' to mean '... any consideration ... paid or given by a lessee under a lease and includes consideration ... in the nature of a rental consideration.'

In the present case the taxpayer receives consideration in return for leasing their taxi licence. As such, this income is 'passive income' and is not included in the taxpayer's 'net income from working' for the purposes of section 61-570 of the ITAA 1997. Note: Passive income is excluded regardless of whether such income is received directly by a taxpayer or indirectly through a business which they carry on (Explanatory Memorandum to the Taxation Laws Amendment (2005 Measures No.1) Bill 2005).