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19 Sep 1111 Decision Impact Statement - Carberry

On 15 September 2011, the ATO issued a Decision Impact Statement in relation to the AAT's decision in Carberry and FCT [2011] AATA 303; 2011 ATC 10-181. The case concerned whether a payment made under a state government program was assessable income as ordinary income, as statutory income as a bounty or subsidy, or as a capital gain from a CGT event.

The AAT has held that a payment received by the taxpayer from the New South Wales Government, described in a brochure published by the NSW Department of Land and Water Conservation as "financial assistance to help licence holders adjust to changes in groundwater access over the ten years of the Water Sharing Plan", was neither ordinary income nor a bounty or subsidy within s 15-10 ITAA 1997.

In his Decision Impact Statement, the Commissioner observes, however, that the AAT, in coming to this conclusion, suggested that it may have been accurate to describe the payment as financial assistance of the type contended by the Commissioner, if the applicant had been required to comply with the last two steps of the program (see paragraph 46 of the AAT's decision). In this regard, the Commissioner notes that this statement highlights the importance of considering the individual circumstances of recipients of GSAP payments on a case by case basis.

The AAT went on to decide that CGT event C2 occurred when the groundwater bore licences were "replaced" two years after the time of the payment. However, the taxpayer's objection against an assessment including the payment in the taxpayer's assessable income in the year of payment was allowed in full.

The Commissioner concludes: "Depending on the particular facts and circumstances, the...payment may be ordinary income, statutory income or the proceeds of a CGT event."


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