Edited version of private ruling

Authorisation Number: 1011518049450

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Ruling

Subject: Assessable income

Question

Do the payments made to you in relation to producing a community radio show constitute assessable income?

Answer

Yes

This ruling applies for the following period

1 July 2009 to 30 June 2010

The scheme commenced on

1 July 2009

Relevant legislative provisions

Income Tax Assessment Act 1997 section 6-5,

Income Tax Assessment Act 1997 section 6-10

Income Tax Assessment Act 1997 subsection 15-2(1)

Income Tax Assessment Act 1997 section 995-1.

Relevant facts and circumstances

You are employed full time. You and two others volunteered to produce a radio program for a community radio station and once a fortnight, you taped two one hour shows (one show for each week).

The radio station encouraged you to apply for a grant that was available from a community broadcasting organisation. This application was successful and the grant was paid to the radio station. From this grant the volunteers were paid an honorarium intended to cover expenses. The remaining money stayed with the radio station and you do not know how this was spent.

You invoiced the radio station, however the hours you actually spent in producing the program were considerably more than the hours shown on the invoice.

The grantor didn't stipulate how the grant was to be spent other than it was to be used to produce the radio show.

The payments to you were an honorarium intended to cover expenses incurred by you and they more than did this.

Your records consist of an invoice issued monthly and the Statement by Supplier. Both of these documents were raised at the request of the radio station management.

You do not expect to be producing the program after the particular month in the recent year.

Reasons for decision

Carrying on a business

Section 995-1 of the Income Tax Assessment Act 1997 (ITAA 1997) defines 'business' as 'including any profession, trade, employment, vocation or calling, but not occupation as an employee'.

Taxation Ruling TR 97/11 provides the Commissioners view of the factors used to determine if you are in business for tax purposes.

In the Commissioner's view, the factors that are considered important in determining the question of business activity are:

· whether the activity has a significant commercial purpose or character

· whether the taxpayer has more than just an intention to engage in business

· whether the taxpayer has a purpose of profit as well as a prospect of profit from the activity

· whether there is regularity and repetition of the activity

· whether the activity is of the same kind and carried on in a similar manner to that of ordinary trade in that line of business

· whether the activity is planned, organised and carried on in a businesslike manner such that it is described as making a profit

· the size, scale and permanency of the activity, and

· whether the activity is better described as a hobby, a form of recreation or sporting activity.

No one indicator is decisive. The indicators must be considered in combination and as a whole. Whether a 'business' is carried on depends on the large or general impression.

Business Indicators applied to your circumstances

You started as a volunteer producing the radio program before any grant money was received and a portion subsequently paid to you.

Your activity is conducted on a small scale, working one day per fortnight.

You commenced the activity for your own enjoyment.

Your recompense for the actual work undertaken is minimal.

You do not have a business plan.

You do not maintain businesslike records.

All these factors taken together support the view that you are not carrying on a business for tax purposes.

Ordinary income and statutory income

Subsection 6-5(2) of the ITAA 1997 provides that the assessable income of a resident taxpayer includes ordinary income derived directly or indirectly from all sources during the income year.

Ordinary income has generally been held to include 3 categories, namely, income from rendering personal services, income from property and income from carrying on a business.

Paragraph 3 of Taxation Ruling IT 2639 defines income from personal services and states that:

Income from personal services is income that an individual taxpayer earns predominantly as a direct reward for his or her personal efforts by, for example, the provision of services, exercise of skills or the application of labour. The inclusion of predominantly in this definition allows for the situation where personal services involve the use of some equipment, for example the drawing board of an architect.

Other characteristics of income that have evolved from case law include receipts that:

· are earned;

· are expected;

· are relied upon; and

· have an element of periodicity, recurrence or regularity.

In your case the payments are expected as invoices are issued. The payments are not earned, as they do not directly relate to the services performed, rather they relate to personal expenses incurred in order to perform the volunteer duties. You do not appear to rely on the payments, as you remained employed full time in another profession. However, the payments do have an element of regularity. The element of regularity, however, is not sufficient to characterise the payments as income according to ordinary concepts. Thus, the payments are not assessable under section 6-5 of the ITAA 1997.

Section 6-10 of the ITAA 1997 provides that amounts that are not ordinary income but are included in assessable income by another provision, are called statutory income and are also included in assessable income.

Subsection 15-2(1) of the ITAA 1997 provides that the value of all allowances, gratuities, compensation, benefits etc. given or granted in respect of employment or services rendered are included in assessable income.

Paragraph 2 of Taxation Ruling TR 92/15 states:

that a payment is an allowance when a person is paid a definite predetermined amount to cover an estimated expense. It is paid regardless of whether the recipient incurs the expected expense. The recipient has the discretion whether or not to expend the allowance.

If a volunteer worker receives an allowance, with no regard to expenses actually incurred and with no requirement to repay unspent monies, the payment is generally regarded as assessable income.

You received a regular amount to cover estimated expenses incurred. The amount is not paid to reimburse you for expenses actually incurred. The amount is therefore an allowance under subsection 15-2(1) of the ITAA 1997 and is included in assessable income under section 6-10 of the ITAA 1997.

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