Taxation Ruling

TR 2002/8

Income tax: assessability of payments received from strike funds

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FOI status:

may be released

Contents Para
What this Ruling is about
Date of effect
Ruling
Explanations
Cross references of provisions
Examples
Detailed contents list

Preamble

The number, subject heading, Class of person/arrangement, Date of effect and Ruling parts of this document are a 'public ruling' for the purposes of Part IVAAA of the Taxation Administration Act 1953 and are legally binding on the Commissioner. The remainder of the document is administratively binding on the Commissioner. Taxation Rulings TR 92/1 and TR 97/16 together explain when a Ruling is a public ruling and how it is binding on the Commissioner.

[ Note: This is a consolidated version of this document. Refer to the ATO Legal Database (http://law.ato.gov.au) to check its currency and to view the details of all changes.]

What this Ruling is about

Class of person/arrangement

1A. All legislative references in this Ruling are to the Income Tax Assessment Act 1997 (ITAA 1997) unless otherwise stated.

2. The Ruling examines:

(i)
whether the payment is assessable under section 6-5 ;
(ii)
whether a non-cash benefit can be assessable income with reference to section 21 of the Income Tax Assessment Act 1936 (ITAA 1936); and
(iii)
the application of section 15-2

3. This ruling does not cover the assessability of return to work payments under section 15-3.

4. Taxation ruling TR 2002/7 considers whether contributions to strike funds are deductible.

Date of effect

5. This Ruling applies to years commencing both before and after its date of issue. However, the Ruling does not apply to taxpayers to the extent that it conflicts with the terms of settlement of a dispute agreed to before the date of issue of the Ruling (see paragraphs 75 and 76 of Taxation Ruling TR 2006/10).

Ruling

Application of section 6-5: income according to ordinary concepts

6. We understand the usual practice is for a strike fund to make a one-off voluntary payment to a member in financial hardship during the period of industrial action. The member has no right or entitlement to the payment, which is made because the member satisfies financial hardship criteria. Further, the member has no expectation of receiving regular, fixed payments from the strike fund. A one-off voluntary payment in these circumstances is not income according to ordinary concepts and is therefore not included in assessable income.[F1]

7. Although it is not the common practice, if a member has an expectation of receiving regular, fixed payments from the strike fund, and is accordingly able to rely on the payments for his or her regular expenditure, the payments will be assessable income.

Application of section 21 of the ITAA 1936: non-cash benefits

8. The provision of a non-cash benefit to a striking member in financial hardship, in the circumstances outlined in paragraph 6, will not form part of the member's assessable income.

Application of section 15-2: provided in respect of employment or services

9. Payments are made to striking members because of their membership of a trade union or other employee group. As the payments are not made in respect of, or in relation directly or indirectly to any employment of or services rendered by the member, section 15-2 will not apply to the payment.

Explanations

Nature and form of strike payments

10. Payments to striking members to which this Ruling applies are usually made from either general funds or a specific strike fund established by the member's union or employee group, although payments can also come from other unions or employee groups.

11. Where a strike fund is established in relation to specific industrial action a special levy is usually placed on members not involved in that dispute. However, once established the fund may continue to operate past the dispute to support employees involved in future industrial action. It is more common, however, for funds to cease when the current dispute is resolved.

Application of section 6-5: income according to ordinary concepts

12. Whether or not a particular receipt is income according to ordinary concepts depends upon its character in the hands of the recipient.[F2] Regard must be had to the whole of the circumstances in which the payment is received.[F3]

13. The usual practice is for a strike fund to provide a one-off voluntary payment to members who are in financial hardship during the period of industrial action. The decision to establish a strike fund and offer this assistance to members will usually not be made by the union or employee group until it is quite clear that the industrial action is likely to continue for some period of time.

14. There is no right or entitlement to receive a payment, nor is there an expectation of receiving regular, fixed payments from the strike fund. We have been advised by the ACTU that whether or not a payment is made depends on factors such as:

(i)
whether the member has found alternative employment during the dispute;
(ii)
whether his or her spouse is employed; and
(iii)
the number of any dependent children.

15. Accordingly, a payment will only be made if the member satisfies a financial hardship criteria. Also, we have been advised that the amount of the payment to a striking member is usually small, not being related in any way to the member's wage.

16. Where a one-off voluntary payment is made from a strike fund to a member in financial hardship during industrial action in the manner outlined in paragraphs 14 and 15, it is not income according to ordinary concepts. Consequently, the payment does not form part of assessable income.

17. Although we understand it is not the common practice, if regular, fixed payments are made to striking members during industrial action under an agreement or arrangement to make such payments, the payments will be assessable income in the hands of the striking member.[F4] The fact that a payment is voluntary, in the sense that the union is not under a legal obligation to make it, does not prevent it being income in such circumstances.

Application of section 21 of the ITAA 1936: non-cash benefits

18. A non-cash benefit provided to a striking member will not be assessable unless it is convertible into money.[F5] A non-cash benefit provided to a striking member will only form part of the member's assessable income if the circumstances surrounding the provision of the benefit are such that the amount would be assessable income if paid as money.

Application of section 15-2: Allowances and other things provided in respect of employment or services

19. Broadly speaking, section 15-2 provides that a taxpayer's assessable income includes the value to the taxpayer of all allowances, gratuities, compensations, benefits, bonuses and premiums which are allowed, given, or granted to the taxpayer in respect of, for, or in relation (directly or indirectly) to any employment or services rendered by the taxpayer.

20. While a striking member would not have received a payment but for the fact that he or she was an employee, this does not make the payment in respect of, or for or in relation directly or indirectly to, the employment[F6]. There must be some causal relationship between the payment to the taxpayer and the employment or services rendered. We consider a payment is made to a member as a consequence of his or her membership of a trade union or employee group and therefore section 15-2 does not apply.

21. [Omitted.]

Examples

22. Helen is a member of a trade union. The union embarks on industrial action resulting in Helen and her colleagues going out on strike. The union subsequently establishes a strike fund to assist its members who are in financial hardship during the dispute.

23. Helen is a single parent with three dependent children. The union gives Helen a one-off payment of $150 to help her meet her personal commitments. Other colleagues receive varying one-off payments based on their individual circumstances. Some colleagues receive no assistance because their partners work.

24. Helen did not have any right or entitlement to receive the payment from the strike fund, nor was it received in circumstances where she can expect to receive regular, fixed payments from the fund. The payment does not form part of Helen's assessable income.

Detailed contents list

25. Below is a detailed contents list for this Ruling:

  Paragraph
What this Ruling is about 1
Class of person/arrangement 1
Date of effect 5
Ruling 6
Application of section 6-5: income according to ordinary concepts 6
Application of section 21 of the ITAA 1936: non-cash benefits 8
Application of section 15-2: provided in respect of employment or services 9
Explanations 10
Nature and form of strike payments 10
Application of section 6-5: income according to ordinary concepts 12
Application of section 21 of the ITAA 1936: non-cash benefits 18
Application of section 15-2: provided in respect of employment or services 19
Examples 22
Detailed contents list 25

Commissioner of Taxation
24 April 2002

Footnotes


1 A contribution to a strike fund in such circumstances will not be deductible to the contributor. Refer to Taxation Ruling TR 2002/7.


2 Refer to Scott v. FC of T (1966) 117 CLR 514 at 526; (1966) 14 ATD 286 at 293.


3 Refer to The Squatting Investment Co Ltd v. FC of T (1953) 86 CLR 570 at 627; (1953) 10 ATD 126 at 146; FC of T v. Dixon (1952) 86 CLR 540 at 555; (1952) 10 ATD 82 at 85. A generally decisive consideration is whether the payment is the product in a real sense of any employment, services or business carried on by the recipient. However, the payments covered by this Ruling are not considered to be a product of any employment, services or business carried on by the member.


4 Refer to FC of T v. Dixon (1952) 86 CLR 540; (1952) 10 ATD 82; Keily v. Federal Commissioner of Taxation 83 ATC 4248; 14 ATR 156; Federal Commissioner of Taxation v. Blake 84 ATC 4661; 15 ATR 1006; Federal Commissioner of Taxation v. Hyteco Hiring Pty Limited 92 ATC 4694; 24 ATR 218


5 Refer to Tennant v. Smith (1892) 3 TC 158; (1892) AC 150; FC of T v. Cooke & Sherden 80 ATC 4140; (1980) 10 ATR 696


6 Refer to Dixon's case and Payne v. FC of T 96 ATC 4407; (1996) 32 ATR 516.

Previously released as TR 2001/D11

References

ATO references:
NO T2001/000117

ISSN: 1039-0731

Related Rulings/Determinations:

TR 2006/10
TR 2002/7

Subject References:
assessable payments
strike funds

Legislative References:
ITAA 1936 21
ITAA 1997 6-5
ITAA 1997 15-2
ITAA 1997 15-3

Case References:
FC of T v. Blake
84 ATC 4661
15 ATR 1006


FC of T v. Cooke & Sherden
80 ATC 4140
(1980) 10 ATR 696

FC of T v. Dixon
86 CLR 540
(1952) 10 ATD 82

FC of T v. Hyteco Hiring Pty Limited
92 ATC 4694
24 ATR 218

Keily v. FC of T
83 ATC 4248
14 ATR 156

Payne v. FC of T
96 ATC 4407
(1996) 32 ATR 516

Scott v. FC of T
(1966) 117 CLR 514
(1966) 14 ATD 286

The Squatting Investment Co Ltd v. FC of T
(1953) 86 CLR 570
(1953) 10 ATD 126

Tennant v. Smith
(1892) 3 TC 158
(1892) AC 150

TR 2002/8 history
  Date: Version: Change:
  24 April 2002 Original ruling  
  29 November 2006 Original ruling + note Repeal provision note
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