Treatment of government contributions

It is not uncommon for privately provided public infrastructure to generate only minor "own sourced revenues" directly to the owner/taxpayer. However, there may be good policy reasons why the government has decided the project should proceed (e.g. to fill a service gap).  In such cases, to ensure investors receive a sufficient rate of return, the PPP arrangements might be part-funded by government contributions. If the contribution is a subsidy payment, this could be regarded as ordinary income of the taxpayer or otherwise included in the taxpayer's assessable income as a 'bounty' or a 'subsidy'. In this case, upon receipt of the subsidy, the taxpayer would incur a tax liability at the relevant marginal tax rate (i.e. 30 per cent for a company). Therefore, the nature of government contributions needs to be considered.