BLAW30002 Chap.5 Assessable and Non-Assessable Income
Assessable and Non-Assessable Income
Assessable income combines ordinary income under section 6-5 and statutory income under specific provisions. Ordinary income is developed through judicial concepts and depends on the receipt's character in the taxpayer's hands. The materials test an income nexus, money or money-convertibility, realisation and real gain, while treating periodicity and recurrence as helpful rather than decisive.
Statutory income includes amounts such as dividends, royalties, allowances and net capital gains. Section 6-25 prevents double inclusion. Exempt income and NANE income are both excluded from assessable income but remain distinct statutory categories with different downstream consequences.
What this chapter covers
- 01
Section 6-1 income architecture
- 02
Ordinary income under section 6-5
- 03
Services, business and property nexus
- 04
Money, convertibility, realisation and real gain
- 05
Capital boundary and compensation principle
- 06
Statutory income under specific provisions
- 07
Overlap and constructive receipt
- 08
Exempt income and NANE income
Worked example · free
A payment labelled as a gift
- 1Identify the services nexus: the payment follows and rewards the six workshops.
- 1The amount is money, realised and a real economic gain to the presenter.
- 1Explain that the payer's label is evidence but does not override the factual cause of payment.
- 1Conclude that ordinary income is strongly supported unless evidence shows an independent personal relationship caused the payment.
Key terms
- Income nexus
- The connection between a receipt and services, business, property or another recognised income-producing activity.
- Constructive receipt
- Treatment of an amount as received where it is dealt with on the taxpayer's behalf or as the taxpayer directs.
- Real gain
- An economic benefit to the taxpayer rather than a mere transfer, reimbursement or return of the taxpayer's own capital.
- Statutory income
- Income included by an express provision, such as the rules for dividends, royalties, allowances or net capital gains.
- Exempt income
- Income expressly excluded from assessable income under an exemption, with consequences that may differ from NANE treatment.
- NANE income
- Non-assessable non-exempt income excluded by statute but maintained as a category distinct from exempt income.
Assessable and Non-Assessable Income FAQ
What is ordinary income?
It is income according to ordinary concepts under section 6-5. Courts have developed the category through factors such as the services, business or property nexus, money or convertibility, realisation, real gain and capital character.
Does a one-off receipt fall outside ordinary income?
Not automatically. A one-off sign-on fee, service reward or business receipt can be ordinary income when its factual connection supports that character. Recurrence is helpful evidence, not an indispensable requirement.
What happens when ordinary and statutory income overlap?
Identify both possible provisions, then apply section 6-25 and the terms of the specific rule so the amount is included once. Statutory income generally has priority, subject to the particular provision.
Are all capital receipts outside tax?
No. A capital amount may fall outside ordinary income but enter statutory income through the capital gains rules or another provision. Characterising it as capital begins the next inquiry rather than ending the analysis.
How is compensation classified?
Compensation generally takes the character of what it replaces. A payment replacing lost income points toward income; compensation for destruction or surrender of a capital asset points toward capital and possible statutory treatment.
Are exempt and NANE income the same?
No. Both are excluded from assessable income, but they are separate statutory categories and can have different effects on losses, deductions or other calculations. Use the exact category supported by the provision.
How should an unfamiliar receipt be classified?
Begin with what produced the receipt and its character in this taxpayer's hands. Test whether it is money or convertible, realised, a real gain and connected to services, business or property. Then consider capital character and any specific statutory provision. If two inclusion rules appear to overlap, explain the priority rule and include the amount once.
If an exclusion applies, name the precise exempt or NANE category and note that the classification can still affect deductions, losses or later calculations.
Exam move
Build a four-channel map for ordinary income, statutory income, exempt income and NANE income. For ordinary income, memorise questions rather than a fixed definition: what produced the receipt, is it money or convertible, has it been realised, is it a real gain, and is it income or capital in the recipient's hands?
Practise compensation, voluntary payment and prize scenarios because labels and lump-sum form often distract from causation. For statutory income, keep a small section map for dividends, royalties, allowances and net capital gains. Always run an overlap check and include the amount once. In conclusions, name the taxpayer, the category and the provision.
If an amount is excluded, state exempt or NANE rather than writing only tax free.
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