ATO Interpretative Decision

ATO ID 2002/123 (Withdrawn)

Income Tax

• This ATO ID is withdrawn as it fails to consider any potential impacts of the tax treaty between Australia and the United Kingdom.
  This document incorporates revisions made since original publication. View its history and amending notices, if applicable.

Issue

Is a cash prize received by a taxpayer in their capacity as the holder of a United Kingdom (UK) investment assessable under section 6-10 of the Income Tax Assessment Act 1997 (ITAA 1997)?

Decision

Yes. A cash prize received by a taxpayer in their capacity as the holder of a UK investment is assessable under section 6-10 of the ITAA 1997 as it is statutory income under section 26AJ of the Income Tax Assessment Act 1936 (ITAA 1936).

Facts

The taxpayer is an Australian resident.

The taxpayer holds an investment in the UK with an investment body. No interest is paid on the investment but the holder of the investment is entitled to participate in a regular lottery for cash prizes. The lottery is only available to investment holders and was organised by the investment body.

The cash prizes are not subject to income tax or capital gains tax in the UK.

The taxpayer received a cash prize in their capacity as an investment holder in the current year of income.

Reasons for Decision

Section 6-10 of the ITAA 1997 provides that a taxpayer's assessable income includes statutory income amounts that are not ordinary income but are included in assessable income by another provision. The assessable income of an Australian resident includes statutory income from all sources, whether in or out of Australia (subsection 6-10(4) of the ITAA 1997).

Section 10-5 of the ITAA 1997 lists provisions about assessable income. Included in the list is section 26AJ of the ITAA 1936 which deals with investment-related lottery winnings, including cash prizes. The effect of subsection 26AJ(1) of the ITAA 1936 is that where an amount is paid to a taxpayer and:

•

the payment is by way of winnings from betting, lottery or another form of gambling or game with prizes,

•

the chance to participate in, for example the lottery, was provided wholly or partly in respect of an investment held by the taxpayer in or with an investment body, and

•

the lottery or game was organised by the investment body

then the amount received by the taxpayer is included in their assessable income.

The taxpayer received the amount as winnings from a lottery which was organised by the investment body. The chance to participate in the lottery was provided wholly in respect of an investment the taxpayer held with the investment body. The amount received by the taxpayer meets the requirements of subsection 26AJ(1) of the ITAA 1936. This amount is therefore statutory income and is included in the taxpayer's assessable income under section 6-10 of the ITAA 1997.

Legislative References:
Income Tax Assessment Act 1936
   section 26AJ
   subsection 26AJ(1)

Keywords
Foreign income
Foreign investment funds
Government bonds
Investment related lottery winnings
Lottery winnings
Prizes and awards

Business Line:  Small Business/Individual Taxpayers

Date of publication:  31 January 2002

ISSN: 1445-2782