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Edited version of private ruling
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Ruling
Subject: Copyright payment
Question 1
Should a copyright payment be included in your tax return as assessable income?
Answer: Yes.
Question 2
Is the gifting of this payment to an association considered to be an allowable deduction?
Answer: No.
This ruling applies for the following period:
Year ending 30 June 2011
The scheme commences on:
1 July 2010
Relevant facts and circumstances
You have given papers to various associations.
In the 2011 income year, you received a letter from an association informing you that they had collected a sum of money on your behalf.
This payment represented copyright fees collected from educational institutions that have reproduced your article from a conference.
You propose to gift these monies back to the association.
The association is not a Deductible Gift Recipient.
Relevant legislative provisions
Income Tax Assessment Act 1936 Subsection 6(1).
Income Tax Assessment Act 1997 Subsection 30-15.
Reasons for decision
(1) Copyright payment:
Section 6(1) of the Income Tax Assessment Act 1936 (ITAA 1936) defines royalty/royalties. It states that royalties include:
· any amount paid or credited
· whether the payment or credit is periodical or not
· however the amount is described or computed, and
· is for one of the things in the list.
One of the reasons in the list is for the use of any copyright, patent, design or model.
The payment that you are entitled to receive is in relation to copyright fees collected from educational institutions. Therefore, it will be a royalty payment under the definition of royalty in section 6(1) of the ITAA 1936.
There is no law that places an obligation on a payer of a royalty payment to withhold any tax unless the person receiving the royalty payment is a non-resident. Therefore the payer has no obligation to include the amount in a payment summary.
If the person receiving the payment is a resident, it would be the responsibility of that person to declare that amount of income on their income tax return. For the 2010 income year, this would be declared as 'other income' at item 24 of the TaxPack 2010 Supplement. Page 32 of that document lists what is 'other income' and includes a royalty payment.
(2) The deductibility of gifts:
Division 30 of the Income Tax Assessment Act 1997 (ITAA 1997) outlines the guidelines for the deductibility of gifts and donations. Section 30-15 of the ITAA 1997 provides that a gift to any funds or institutions listed is allowable as a deduction in the income year in which the gift is made, provided the gift meets the various conditions of the relevant subsections.
To be able to claim a tax deduction for a gift, it must:
1) be made to a deductible gift recipient (DGR)
2) be a gift of money or property that is covered by a gift type, and
3) be truly a gift.
1). Deductible Gift Recipient (DGR)
Only gifts made to a DGR are tax deductible. Division 30 of the ITAA 1997 provides that a taxpayer will be able to claim a deduction for a gift or contribution made during the year to nominated funds (including prescribed private funds), authorities, institutions or specified persons.
The association is not an endorsed DGR, and therefore, the gifting of your payment is not an allowable deduction.
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