Case V6

Members:
DJ Trowse M

Tribunal:
Administrative Appeals Tribunal

Decision date: 21 December 1987.

D.J. Trowse (Member)

The question for determination in this reference is whether the value of a motor vehicle awarded to the applicant by the Advertiser Newspapers Ltd. (``the Advertiser'') constitutes assessable income within the meaning of subsec. 25(1) of the Income Tax Assessment Act (``the Act''). The vehicle, a Subaru 4WD wagon, was the first prize in an incentive program promoted by the Advertiser for their newsagents. The competition ran throughout the period June to August 1984.

2. At the hearing the applicant was represented by his tax agent and gave evidence under oath. The Commissioner was represented by one of his officers.

3. A partnership, consisting of the applicant, his wife and a family company under their control, had conducted for several years a newsagency business located in a large shopping centre, and as part of that operation it engaged in the sale of the daily newspaper produced by the Advertiser. It was not involved in house-to-house deliveries. The registered name of the partnership indicated the applicant's participation in that business and it seems that he was the guiding force in matters related to management and control.

4. The applicant first became aware of the program in May 1984 when he received through the mail promotional material detailing its machinations, the rules and conditions and the range of prizes to be won. The competition was open to all delivery and bookstall agents alike, although it is clear that the design of the program was to increase circulation by way of home deliveries. Predetermined sales targets were to be set by the Advertiser and the overall winner was to be the agent with the largest percentage increase over and above the selected goal. Any prize won could not be transferred nor could it be substituted for cash. Ironically, the rules went on to stipulate that any liability for tax would be the sole responsibility of the award winner. The major prize was the Subaru wagon and it seems that such vehicle had been chosen because of its ``remarkable versatility'', first for conventional motoring and, secondly, as a unit for the delivery of papers.

5. It appears that the applicant's examination of the promotional material was of a cursory nature, and yet the evidence indicates that he was impressed by the significance of the major prize and that he was aware of his eligibility to participate in the program.

6. Coincidental with that activity, the applicant had established, at the request of the


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shopping centre management, a branch outlet within the centre, and it seems that the additional sales resulting from that expansion contributed to his success in the competition.

7. At the conclusion of the program, the applicant was declared the overall winner with a 13.42% increase over target and was awarded the Subaru wagon. Within two weeks of taking possession, the vehicle had been sold for a consideration of $9,420. Details of that receipt had been disclosed by the applicant in his 1985 income tax return, and it was that amount which the Commissioner included as assessable income in the raising of the applicant's original assessment. As between the parties, there was agreement that, in the event of the Tribunal finding that the value of the car represented assessable income, then such income was derived by the applicant as distinct from the partnership of which he was a member.

8. It was the applicant's submission that the selection of the winner had been made without reference to productivity or performance, and that he had been awarded the car for reasons not associated with the conduct of his business. In support of that assertion, it was suggested that another agent had exceeded the results supposedly achieved by the applicant. His representative contended that the competition was no more than a raffle or lottery and that the prize should be viewed as a windfall to his client personally and in no way connected to his commercial operations. For those reasons, the applicant contended that the receipt of the car should not be regarded as the derivation of assessable income. No evidence was produced to confirm the allegations that another agent had outperformed the applicant nor that the program was conducted in any manner contrary to that originally planned and detailed in the promotional material.

9. It is appropriate to now consider the contents of a letter written by the circulation manager of the Advertiser to the Australian Taxation Office and which was tendered in evidence. That correspondence addressed the question of selection and stated in unequivocal terms that the applicant had been adjudged the overall winner with a 13.42% increase above his predetermined target. The applicant's submission to the contrary was unconvincing and I see no reason to conclude that the awarding of prizes had been based on any concept different to that outlined in the original promotional material. I find as a fact that the selection of the applicant as the winner was directly related to the percentage increase of sales over the previously fixed target.

10. Section 25(1) of the Act provides, inter alia, that the assessable income of a resident shall include gross income derived directly or indirectly from all sources which is not exempt income. Although the Act is silent as to the meaning of ``gross income'', an understanding of same may be gleaned from the definition of ``income from personal exertion'' set out in sec. 6(1) of the Act and which states, so far as is relevant, the following:

```income from personal exertion' or `income derived from personal exertion' means income consisting of earnings, salaries, wages, commissions, fees, bonuses, pensions, superannuation allowances, retiring allowances and retiring gratuities, allowances and gratuities received in the capacity of employee or in relation to any services rendered, the proceeds of any business carried on by the taxpayer either alone or as a partner with any other person...''

11. In addition there are well-established principles developed from cases as to the meaning to be attributed to the term ``gross income''. Whether a particular receipt is income will be determined in accordance with the ordinary concepts and usages of mankind (see comments of Jordan C.J. in
Scott v. C. of T. (N.S.W.) (1935) 3 A.T.D. 142 at pp. 144 and 145). Also, if a taxpayer receives a benefit which cannot be turned to pecuniary account, he has not received income as that term is understood according to ordinary concepts and usages (
F.C. of T. v. Cooke & Sherden 80 ATC 4140).

12. In making his submissions, the Commissioner's representative referred the Tribunal's attention to several cases including
F.C. of T. v. Squatting Investment Company Ltd. (1953-1954) 88 C.L.R. 413, and
F.C. of T. v. Dixon (1952) 86 C.L.R. 540, in which the issue was whether receipts of a voluntary nature represented assessable income. In the light of those authorities it is evident that where the benefit received by a taxpayer is the product or incident or consequence of his income-producing activities, then such receipt is assessable income according to ordinary


ATC 142

concepts. If, however, a payment is made to a taxpayer on personal grounds, as for example out of regard for or affection for him, it is in truth a gift and does not constitute income.

13. The partnership was in the business of selling newspapers at all material times, and in the ordinary course of that trade it sold the daily newspaper produced by the Advertiser. For that reason alone, the applicant was provided with the opportunity to participate in the competition which ultimately gave rise to the award.

14. In my view the receipt of the Subaru wagon by the applicant was clearly a product of his income-producing activities as a partner in the newsagency business and as such the value thereof represents assessable income in terms of sec. 25(1) of the Act. The factual position demonstrates that the benefit was capable of conversion to money and thus the applicant is not assisted by the decision of the Federal Court in Cooke & Sherden (supra).

15. For the above reasons, the Commissioner's decision on the objection is affirmed.


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