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ATO Interpretative Decision

ATO ID 2001/413

Income Tax

Assessable Income: Royalties - Author not carrying on business
FOI status: may be released

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CAUTION: 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you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed.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.

Issue

Are royalties received from writing activities included in the assessable income of an author where the writing activities do not constitute the carrying on of a business as an author?

Decision

Yes. Royalties are statutory income under section 15-20 of the Income Tax Assessment Act 1997 (ITAA 1997) and are included in assessable income under section 6-10 of the ITAA 1997, regardless of whether a taxpayer's writing is a business or hobby.

Facts

The taxpayer is writing a booklet for the purpose of publication from which the taxpayer hopes to earn income.

The taxpayer proposes to seek a publisher to publish the booklet. The taxpayer has not yet approached any publishers, but is hopeful that it will be published at some time in the future.

The taxpayer has no plans to self-publish the booklet.

Reasons for Decision

If the booklet is published any royalty income will be assessable, regardless of whether the taxpayer's writing is a business or hobby. Section 15-20 of the ITAA 1997 assesses royalties that are not 'ordinary income'.

Date of decision:  5 September 2001

Legislative References:
Income Tax Assessment Act 1997
   section 6-10
   section 15-20

Keywords
Hobby v business
Authors & writers

Business Line:  Small Business/Individual Taxpayers

Date of publication:  29 September 2001

ISSN: 1445-2782

history
  Date: Version:
You are here 5 September 2001 Original statement
  6 June 2008 Archived

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