Edited version of private ruling

Authorisation Number: 1011567472507

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Ruling

Subject: Income and deductions

1. Are you assessable on the value of the gifts you received for services provided when you were overseas?

Yes.

2. Are you assessable on the value of the gift you received from the person who acted as your driver when you were overseas?

No.

3. Are you entitled to a deduction for a portion of your airfares to and from Country A?

Yes.

This ruling applies for the following period

Year ended 30 June 2010

The scheme commenced on

1 July 2009

Relevant facts

You have full-time employment.

You and your spouse travelled to Country A to visit relatives, study the Bible and to teach. You study the Bible when you are on holidays as you do not have time as you work full-time.

You were in Country A for a period of time.

While you were in Country A, you attended and spoke at gatherings. You informed some people that you were coming to Country A and they emailed inviting you to attend and read at their gatherings.

You are not a religious minister but you do the gatherings on a voluntary basis.

Your church in Australia did not arrange any of the gatherings for you.

As a thank you for your services, you were given money by the congregations.

You also received gifts from the person who drove you around Country A for the gatherings. One gift was returned as it was faulty.

You also received a gift from a small group.

You did not ask for the payments.

Relevant legislative provisions

Income Tax Assessment Act 1936 Section 21

Income Tax Assessment Act 1997 Section 6-5

Income Tax Assessment Act 1997 Subsection 6-5(1)

Income Tax Assessment Act 1997 Section 6-10

Income Tax Assessment Act 1997 Section 8-1

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

Income Tax Assessment Act 1997 Subsection 15-2(2)

Reasons for decision

Income

Section 6-5 of the Income Tax Assessment Act 1997 (ITAA 1997) states that if you are an Australian resident, your assessable income includes the ordinary income you derive directly or indirectly from all sources, whether in Australia or overseas in the income year.

Ordinary income is income according to ordinary concepts (subsection 6-5(1) of the ITAA 1997).

Section 6-10 of the ITAA 1997 provides that amounts that are not ordinary income may be included in assessable income under another provision as statutory income.

Subsection 15-2(1) of the ITAA 1997 provides that the value to you of all allowances, gratuities, compensation, benefits, bonuses and premiums provided to you in respect of, or for, or in relation directly or indirectly to, any employment or services rendered by you will be included in your assessable income. This is so whether the things were provided in money or in any other form (subsection 15-2(2) of the ITAA 1997).

Section 21 of the Income Tax Assessment Act 1936 also provides that where a transaction or payment is paid or given in a form other than cash, you are deemed to have received the money value of that item.

Taxation Ruling IT 2674 provides guidelines for determining whether gifts received by church workers (including ministers of religion) are assessable income. The ruling is mainly concerned with whether gifts received by church workers are income according to ordinary concepts, but also discusses whether the gifts are assessable income under subsection 15-2(1) of the ITAA 1997.

IT 2674 states that if a church worker receives a gift because of, in respect of, for, or in relation to any income producing activity of the church worker (whether the church worker's office or occupation or some service rendered or to be rendered by the church worker), the gift is assessable income, even if:

· the donor is not legally obliged to make the gift

· the gift is made by a family member, fellow worker or friend

· the gift is received in kind rather than in money, or

· the church worker is not in any way motivated by the prospect of receiving the gift but is motivated only by a genuine commitment to religious beliefs.

On the other hand, a personal gift received by a church worker for personal reasons, not related to any income producing activity on the part of the church worker, is not assessable income.

In your case, you travelled to Country A for holidays and prior to leaving Australia you informed some congregational members that you would be in Country A. Some of these members invited you to attend and speak at gatherings for a number of groups while you were in Country A. You received payment in the form of cash and gifts for your services at the gatherings. The driver of the vehicle used by you gave you a gift. One item was returned for repair and never given back to you.

The Commissioner considers that the payments you received for your attendance and speaking at the gatherings are in a relevant sense a product or incident of the service you performed on these occasions. Accordingly, the payments in cash and the gift from the small group are to be included in your assessable income under section 6-10 of the ITAA 1997.

The amount to be included for the value of the gift from the small group is the money value of the items.

It is considered that the gift given by the driver of the vehicle was a gift given on a personal basis, and the value of which is therefore, not assessable income.

Deductions

Section 8-1 of the ITAA 1997 allows a deduction for any loss or outgoing to the extent that it is incurred in gaining or producing your assessable income. However, you cannot deduct a loss or outgoing to the extent that it is a loss or outgoing of a capital, private or domestic nature.

It has been determined that the income you received in Country A for attending and speaking at the prayer meetings is assessable income. Therefore, expenses incurred in earning this income are deductible under section 8-1 of the ITAA 1997.

However, where an expense is incurred for more than one reason, the expenses need to be apportioned between those reasons.

Apportionment

In cases where an overseas trip is primarily for a holiday but part of the time is devoted to work pursuits, it must be determined whether any of the trip expense should be apportioned.

The Commissioner's view is that where the main purpose of the trip was the gaining or producing of income, the related expenses will be fully deductible. If, however, the gaining or producing of income was merely incidental to the private purpose, apportionment of the expenses is necessary and only the expenses directly attributable to the income earning purpose will be allowable. Where both purposes are equal, 50% of the expenses incurred will be deductible.

In your case, you travelled overseas for different purposes and stayed for a period of time. The main purpose of your trip was for you and your spouse to have a holiday with relatives, during which you took some private time out to study the Bible. You also carried out income earning activities while you were in Country A which had been arranged prior to leaving Australia. Therefore, it is considered that there was a dual purpose for the trip overseas, part for private purposes and part for work-related purposes.

Accordingly, the expense for your airfare to Country A and return will need to be apportioned between the two purposes.

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