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ATO Interpretative Decision

ATO ID 2002/1090 (Withdrawn)

Income Tax
Assessable income: Grant to undertake a feasibility study

Attention This ATO ID is withdrawn. The ATO view in respect to the income tax consequences of receiving a government grant are stated Taxation Ruling TR 2006/3 Income tax: government payments to industry to assist entities (including individuals) to continue, commence or cease business .
Attention This document has changed over time. View its history.
FOI status: may be released
Status of this decision: Decision withdrawn 17 November 2017.

CautionCAUTION: This is an edited and summarised record of a Tax Office decision. This record is not published as a form of advice. It is being made available for your inspection to meet FOI requirements, because it may be used by an officer in making another decision.

This ATOID provides you with the following level of protection:

If you reasonably apply this decision in good faith to your own circumstances (which are not materially different from those described in the decision), and the decision is later found to be incorrect you will not be liable to pay any penalty or interest. However, you will be required to pay any underpaid tax (or repay any over-claimed credit, grant or benefit), provided the time limits under the law allow it. If you do intend to apply this decision to your own circumstances, you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed. You may wish to obtain further advice from the Tax Office or from a professional adviser.


Is a grant received by the taxpayer to conduct a feasibility study assessable income under section 6-5 of the Income Tax Assessment Act 1997 (ITAA 1997)?


Yes. A grant received by the taxpayer to conduct a feasibility study is included in assessable income under section 6-5 of the ITAA 1997.


The taxpayer was established for the specific purpose of obtaining grants from the government so that it could undertake a feasibility study.

The taxpayer was successful in obtaining the grants and used the funds to engage experts and conduct trials as part of the feasibility study.

Reasons for Decision

Subsection 6-5(1) of the ITAA 1997 provides that the assessable income of a taxpayer includes income according to ordinary concepts, which is called ordinary income.

Ordinary income has generally been held to include three categories:

 income from providing personal services
 income from property; and
 income from carrying on a business.

The nature of a receipt in the hands of a taxpayer is determined by the circumstances in which it is received by the taxpayer. In GP International Pipecoaters Pty Ltd v. Federal Commissioner of Taxation [1990] HCA 25; (1990) 170 CLR 124; 90 ATC 4413; (1990) 21 ATR 1 ( GP International Pipecoaters ) the taxpayer, a company established for the sole purpose of undertaking a contract to coat gas pipes, received 'establishment costs' to pay for the construction of a plant to carry out the pipe-coating process. The High Court held that the 'establishment costs' were income in the taxpayer's hands, even though they were received for the purpose of construction of the plant.

The relevant factor in characterising the receipt in GP International Pipecoaters was the scope of the taxpayer's business and its purpose for engaging in it. The High Court took the view that, since the taxpayer's business was the construction of a plant for the purpose of coating the pipes, any payments received in relation to the construction of that plant were in the ordinary course of the taxpayer's business.

If an entity is brought into existence for the sole purpose of performing a contract, then all payments received under that contract are likely to be income rather than capital. This is because the business of such an entity is the performance of the contract, and any receipts related to the performance of that contract are in the ordinary course of that business.

In this case, the taxpayer was established in order to conduct a feasibility study. The taxpayer is in the business of conducting a feasibility study; therefore, any amounts received in relation to the feasibility study are income from the carrying on of the business. The receipt, in these circumstances, is income according to ordinary concepts. Therefore the grant is ordinary income and assessable under section 6-5 of the ITAA 1997.

Amendment History

Date Part Comment
15 August 2014 Reasons for Decision Italicise case name, remove unnecessary spaces,
  Reasons for Decision and Case References Updated to include medium neutral citation.

Date of decision: 3 October 2002

Year of income:Year ended 30 June 2001
 Year ended 30 June 2002

Legislative references:
Income Tax Assessment Act 1997
   section 6-5

Case references:
GP International Pipecoaters Pty Ltd v. Federal Commissioner of Taxation
   [1990] HCA 25
   (1990) 170 CLR 124
   90 ATC 4413
   (1990) 21 ATR 1

Government grants income

Siebel/TDMS reference number: CW3130499; 1-5PITVR2

Business line: Small Business/Individual Taxpayers

Date of publication: 30 November 2002

ISSN: 1445-2782

ATO ID 2002/1090 (Withdrawn) history   Top  
   Date   Version 
    3 October 2002   Original statement   
   15 August 2014   Original statement   
 You are here ®  17 November 2017   Withdrawn   


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