Edited version of private ruling

Authorisation Number: 1011792005334

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Ruling

Subject: Income-hobby or business

Question:

Are payments received from an education facility assessable? 

Answer: No

This ruling applies for the following period:

Year ended 30 June 2010
Year ending 30 June 2011

The scheme commenced on:

1 July 2009

Relevant facts:

You operate a business activity not related to any sport.

You previously played a number of sports and you also umpired.

You hold qualifications in a number of sports as an umpire and a coach.

Due to your interest in sport you volunteered to act as a coach and an umpire for an education facility.

You travel to other education facilities and sporting ovals during the sporting season.

You are paid a set amount as a reimbursement to cover some of the costs for your travel.

You spend a small amount of time at these activities.

You do not invoice for your services.

You do not advertise your services for this activity.

You do not keep records for this activity.

Relevant legislative provisions:

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

Reasons for decision

Under subsection 6-5(1) of the Income Tax Assessment Act 1997 (ITAA 1997) an amount is assessable income if it is income according to ordinary concepts.

In determining whether an amount is ordinary income, the courts have established the following principles:  

· what receipts ought to be treated as income must be determined in accordance with the ordinary concepts and usages of mankind, except in so far as a statute dictates otherwise

· whether the payment received is income depends upon a close examination of all relevant circumstances, and

· it is an objective test.

Relevant factors in determining whether an amount is ordinary income include:

· whether the payment is the product of any employment, services rendered, or any business

· the quality or character of the payment in the hands of the recipient

· the form of the receipt, that is, whether it is received as a lump sum or periodically

· the motive of the person making the payment. Motive, however, is rarely decisive as in many cases a mixture of motives may exist.

Where a person's involvement in sporting activities constitutes a pastime or hobby rather than an income-producing activity - money and other benefits received from the pursuit of that pastime or hobby is not assessable income, nor are the expenses allowable deductions.

Taxation Ruling TR 1999/17 outlines the Commissioner of Taxation's view on whether benefits received from sporting involvement are considered to be assessable income.

The Ruling states, at paragraph 33:

Participation in activities generating pastime or hobby receipts is a social or personal pursuit of a non-commercial nature. Pastime receipts are not intended to, nor do they usually, cover expenses. Even regular receipts obtained from a pastime or hobby are still characterised as receipts from a pastime or hobby and accordingly are not assessable income. A receipt that is an incident of a pastime or hobby would also not be assessable, even if it arises from the provision of a service. However, the nature of such a receipt or receipts is relevant in determining whether the pastime has become a business. The receipt or receipts could indicate, for example: a commercial activity; an intention to make a profit from the activity; or an increase in either the size and scale of the activity or the degree of repetition or regularity of the activity.

The Ruling adds that even though a person is engaged in a hobby, a receipt can still constitute income according to ordinary concepts; for example, receipts for the provision of services if not received in respect to the actual hobby activity itself. Whether an activity is an incident of a hobby or is separate from the hobby is a matter of fact that will depend upon the circumstances of each case.

The information you provided indicates that umpiring and coaching activities are a hobby or pastime activity for you. It is not your main employment, nor is it a business activity for you. Rather the umpiring and the coaching are an extension of your interest in the sport, and is merely a hobby which you pursue.

Therefore, the money you receive in respect of these activities is not assessable income under subsection 6-5(1) of the ITAA 1997.

Where income is not assessable because your activities constitute a pastime any expenses associated with the activity are not incurred in the course of gaining assessable income and will therefore, not be deductible.

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