Class Ruling

CR 2002/19

Income tax: assessable income: football umpires: Tasmanian Football League Umpires Association (TFLUA) receipts

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FOI status:

may be released

Preamble

What this Class Ruling is about

1. This Ruling sets out the Commissioner's opinion on the way in which the 'tax laws' identified below apply to the defined class of persons, who take part in the arrangement to which this Ruling relates.

Tax law(s)

2. The tax laws dealt with in this Ruling are sections 6-5 and 8-1 of the Income Tax Assessment Act 1997 ('ITAA 1997') and paragraphs 26(e) and 26(eaa) of the Income Tax Assessment Act 1936 ('ITAA 1936').

Class of persons

3. The class of persons to whom this Ruling applies are Australian Rules football umpires who are members of the Tasmanian Football League Umpires Association Inc. (TFLUA) and derive match payments totalling no more than $70 per week in any of the following Tasmanian Football Leagues:

•

The Southern Football League;

•

The Old Scholars Football Association;

•

The Football Tasmania Southern Under 17 Competition; and

•

The Southern Tasmania Junior Football League.

Qualifications

4. The Commissioner makes this Ruling based on the precise arrangement identified in this Ruling.

5. The class of persons defined in this Ruling may rely on its contents provided the arrangement described below at paragraphs 10 to 28 is carried out in accordance with the details of the arrangement provided in this Ruling.

6. If the arrangement described in this Ruling is materially different from the arrangement that is actually carried out:

(a)

this Ruling has no binding effect on the Commissioner because the arrangement entered into is not the arrangement on which the Commissioner has ruled; and

(b)

this Ruling may be withdrawn or modified.

7. This work is copyright. Apart from any use as permitted under the Copyright Act 1968, no part may be reproduced by any process without written permission from the Commonwealth available from the Department of Communications, Information Technology and the Arts. Requests and inquiries concerning reproduction and rights should be addressed to:

The Manager

Copyright Services, Info Access

GPO Box 1920

CANBERRA ACT 2601.

Date of effect

8. This ruling applies from 1 January 2001. 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 21 and 22 of Taxation Ruling TR 92/20).

Withdrawal

9. This Ruling is withdrawn and ceases to have effect after 31 December 2003. The Ruling continues to apply, in respect of the tax laws ruled upon, to all persons within the specified class who enter into the specified arrangement during the term of the Ruling. Thus, the Ruling continues to apply to those persons, even following its withdrawal, for arrangements entered into prior to withdrawal of the Ruling. This is subject to there being no change in the arrangement or in the persons' involvement in the arrangement. Arrangement

10. The arrangement that is the subject of the Ruling is described below.^[F1]

11. Football Tasmania (FT) is the peak administrative body for Australian Rules football in Tasmania. It receives funding of over $1 million from the Australian Football League (AFL). The funding is supplemented by limited source revenue. FT is also responsible for the development of Australian Rules football in Tasmania.

12. The Tasmanian Football League Umpires Association Inc. (TFLUA) acts a billing agent for its members for the purpose of invoicing the football associations to which members provide their services.

13. Invoices are sent separately for (a) members' match fees and (b) football associations' contributions to both the personal injury insurance obtained on members behalf by the TFLUA and training ground hire. Invoices in relation to (a) are sent on behalf of the members of the TFLUA.

14. The money collected from the football associations is distributed to individual umpires by the TFLUA.

15. The TFLUA calculates the contribution of each football association to training ground hire and personal injury insurance on a proportional basis. The proportion of each association's contribution is calculated relative to each association's share of total appointments for a season.

16. Members of the TFLUA provide their services to the following Tasmanian Football Associations :

•

the Southern Football League;

•

the Old Scholars Football Association;

•

the Football Tasmania Southern Under 17 Competition; and

•

the Southern Tasmanian Junior Football League.

17. TFLUA members are paid for each match they umpire. The amount paid varies from league to league, is dependent on what grade (Seniors, Reserves, Under 17's etc) is umpired and whether the umpire is a field, goal or boundary umpire.

18. Members may choose to be paid weekly, fortnightly, monthly or annually. Members also choose a preferred method of payment (cash, cheque or Electronic Funds Transfer into a nominated bank account).

19. A 'travel allowance' is paid to the owner of one 'official car' per game when members officiate at those Southern Football League matches more than 25 kilometres from the Hobart GPO. This is currently paid at the rate of 43 cents per kilometre. Individual members have the choice of travelling via the nominated vehicle or finding their own transport.

20. Members do not receive any allowances and benefits other than their match fee and the 'travel allowance' (refer paragraph 19).

21. The completion of a TFLUA registration form is the only condition precedent of individual membership of the TFLUA from year to year. The registration form records the member's name and address, absolves the TFLUA from liability for injury arising from the use of its gymnasium facilities and requires members to follow the directions (in relation to the manner in which games are umpired) set by Football Tasmania coaching staff.

22. No contract (written or verbal) exists between the TFLUA and individual football associations. The TFLUA and the football associations negotiate annually to determine the quantum of the match fee paid to each category of umpire. Each association's share of additional expenses (training ground hire and personal injury insurance) is accorded on a simple proportionate basis.

23. Individual umpire performance is evaluated on a regular basis by the Regional Umpiring Manager (RUM), the Field, Boundary or Goal Umpires' Coaches, or one of several volunteer umpires' observers. The RUM is appointed by Football Tasmania and has ultimate responsibility for the selection of umpires for particular matches. Football Associations have no role in relation to the evaluation of umpire performance, nor do they have any control over the selection of umpires for particular games.

24. Umpiring appointments are made solely on the basis of merit, such that the best available umpires are appointed to the most important games. Where an umpire's performance has been judged unsatisfactory, the most likely course of action is that they will be demoted to a lesser grade or competition.

25. Members are required to incur expenditure upon their own shoes (white running shoes or football boots), training gear, track suits, whistles, wrist bands, shirts and trousers (for goal umpires) and other equipment (liniment, bandages etc.).

26. If an umpire advises, at short notice, that they are not available, the Appointment Secretary (TFLUA) liaises with the relevant coach (field, boundary or goal) with a view to finding a suitable replacement.

27. Where match payments total no more than $70 per week, they are not intended to, nor do they usually, cover expenses. The purpose of the payment is to encourage members of the community to participate in local sporting activities by subsidising that participation. Individual umpires contend that the primary motivation for their involvement in umpiring is:

'a love of Australian Rules (football) and a desire to contribute to the communities in which the game is played. Umpiring also provides the opportunity to achieve greater fitness and to enjoy the social camaraderie provided by the membership of the TFLUA'.

28. No administrative body, including Football Tasmania, the TFLUA or the football associations deduct Pay-As-You-Go instalments from the match payments.

Ruling

29. Match payments totalling no more than $70 per week and the car allowance received by members of the Tasmanian Football League Umpires Association Inc (TFLUA) are not assessable income.

30. Losses and outgoings incurred deriving the match payments and car allowance cannot be deducted from assessable income.

31. Where match payments exceed $70 per week, an analysis of each individual umpire's circumstances is required to determine whether the receipts are assessable income.

Explanations

32. A payment or other benefit received by an umpire is assessable income if it is:

•

income in the ordinary sense of the word (ordinary income); or

•

an amount of benefit that through the operation of the provisions of the tax law is included in assessable income (statutory income).

Ordinary Income

33. Under subsection 6-5(1) of the ITAA 1997 an amount is assessable income if it is income according to ordinary concepts (ordinary income).

34. In determining whether an amount is ordinary income, the courts have established the following principles:

•

what receipts ought to be treated as income must be determined in accordance with the ordinary concepts and usages of mankind, except in so far as a statute dictates otherwise;

•

whether the payment received is income depends upon a close examination of all relevant circumstances; and

•

whether the payment received is income is an objective test.

35. Relevant factors in determining whether an amount is ordinary income include:

•

whether the payment is the product of any employment, services rendered, or any business;

•

the quality or character of the payment in the hands of the recipient;

•

the form of the receipt, that is, whether it is received as a lump sum or periodically; and

•

the motive of the person making the payment. Motive, however is rarely decisive as in many cases a mixture of motives may exist.

36. Where an umpire's activities constitute a pastime or hobby rather than an income-producing activity, money and other benefits received from the pursuit of that pastime or hobby are not assessable income, nor are the expenses allowable deductions.

37. Participation in activities generating pastime or hobby receipts is a social or personal pursuit of a non-commercial nature. Pastime receipts are not intended to, nor do they usually, cover expenses. Even regular receipts obtained from a pastime or hobby are still characterised as receipts from a pastime or hobby and accordingly are not assessable income. A receipt that is an incident of a pastime or hobby would also not be assessable, even if it arises from the provision of a service. However, the nature of such a receipt or receipts is relevant in determining whether the pastime has become a business. The receipt or receipts could indicate, for example: a commercial activity; an intention to make a profit from the activity; or an increase in either the size and scale of the activity or the degree of repetition or regularity of the activity.

38. The sporting activities of TFLUA members who receive match payments of no more than $70 per week are considered to constitute a pastime or hobby and therefore, the match payments received from the pursuit of that pastime or hobby are not assessable income.

39. Their participation in umpiring activities is a social or personal pursuit of a non-commercial nature. Individual TFLUA members have stated their primary motivation for umpiring is their love of Australian Rules (football) and a desire to contribute to the communities in which the game is played. In addition, participation also provides the opportunity to maintain fitness and enjoy the social camaraderie of association membership.

40. Where match payments total no more than $70 per week, they are not intended to, nor do they usually, cover expenses. The purpose of the payment is to encourage members of the community to participate in local sporting activities by subsidising that participation.

41. In forming the opinion that the TFLUA members who comprise the class of persons to whom this Ruling applies are engaged in a pastime or hobby, we have taken into account the number of games that the umpires officiate, the seniority of the football leagues, the links with the community of those leagues, particularly the social benefits of participation and the quantum of the fees that they can receive.

Provisions relating to statutory income

42. Section 6-10 of the ITAA 1997 includes in assessable income amounts that are not ordinary income; these amounts are statutory income.

43. The currently relevant two provisions of the ITAA 1936 are:

paragraph 26(e), which provides that the assessable income shall include '... the value to the taxpayer of all allowances, gratuities, compensations, benefits, bonuses and premiums allowed, given or granted to him in respect of, or for or in relation directly or indirectly to, any employment of or services rendered ...';

paragraph 26(eaa), which provides that the assessable income shall include '... a benefit that, but for section 22 of the Fringe Benefits Tax Assessment Act 1986, would be an expense payment fringe benefit within the meaning of that Act - the amount of the reimbursement referred to in that section ...'

The Commissioner considers that Paragraphs 26(e) and 26(eaa) will not apply to match payments but need to be considered when determining whether any allowances or reimbursements are assessable income.

Car Allowance

44. A 'travel allowance' is paid to one 'official car' per Southern Football League game, usually the car of a goal umpire, where the match is more than 25 kilometres from the Hobart GPO. The 'allowance' is currently paid at the rate of 43 cents per kilometre.

45. Both paragraphs 26(e) and 26(eaa) include certain allowances, benefits and reimbursements in assessable income, where those allowances or reimbursements are given or granted in relation, directly or indirectly to any employment or services rendered.

46. Paragraph 26(eaa) specifically includes car expense reimbursements that would be expense payment fringe benefits under the Fringe Benefits Tax Assessment Act 1986 ('FBTAA 1986') but for the exemption contained in section 22 of that Act. The 'allowance' received by TFLUA members does not constitute an 'expense payment benefit' under section 20 of the FBTAA 1986 as there is no employer/employee relationship, the prerequisite that characterises a fringe benefit.

47. The main issue to consider with respect to paragraph 26(e) is whether the payment is 'given or granted to him in respect of ...... any employment of or services rendered ...'. Whilst the TFLUA members are not considered 'employees', paragraph 26(e) also includes in assessable income those allowances etc, which are paid in respect of 'services rendered'.

48. The match receipts of TFLUA members are considered to be 'receipts incidental to a pastime' (refer paragraphs 36 to 41). As such, the related 'travel allowance' is not assessable under paragraph 26(e) because the umpires are not considered to be employees, nor are they 'rendering services'.

49. In addition, the 'travel allowance' does not constitute 'ordinary income' as it is considered a partial reimbursement of a member's expenditure on a private or personal pursuit.

General Deductions

50. As the fees received by the umpires are not assessable income, all losses and outgoings that are incurred in respect of deriving the fees are not allowed as a deduction under section 8-1 or any other provision of the ITAA 1997.

Match Payments Exceeding $70.00 Per Week

51. Where match payments exceed $70 per week a detailed analysis of each umpire's circumstances is required. It is recognised that for some umpires who receive match payments exceeding $70 per week, the payment will be incidental to a pastime and not assessable income. For other umpires, the circumstances surrounding their umpiring activities will be such as to lead to the conclusion that the match payments are ordinary income.

52. Umpires who receive match payments exceeding $70 per week should discuss their circumstances with their taxation adviser or the Australian Taxation Office.

Detailed contents list

53. Below is a detailed contents list for this Class Ruling:

Commissioner of Taxation
10 April 2002

Not previously released in draft form

References

ATO references:
NO 2002/004016

Related Rulings/Determinations:

TR 92/1
TR 92/20
TR 97/16
CR 2001/1

Subject References:
allowances
assessable income
hobby v business
motor vehicle allowances
sport
sporting organisations
sports people
travel allowances

Legislative References:
FBTAA 1986 20
FBTAA 1986 22
ITAA 1936 26(e)
ITAA 1936 26(eaa)
ITAA 1997 6-5
ITAA 1997 6-5(1)
ITAA 1997 6-10
ITAA 1997 8-1
Copyright Act 1968