Edited version of your private ruling

Authorisation Number: 1012361838179

This edited version of your ruling will be published in the public register of private binding rulings after 28 days from the issue date of the ruling. The attached private rulings fact sheet has more information.

Please check this edited version to be sure that there are no details remaining that you think may allow you to be identified. If you have any concerns about this ruling you wish to discuss, you will find our contact details in the fact sheet.

Ruling

Subject: PAYG withholding

Question

Are you required to deduct pay as you go (PAYG) withholding from payments made to players where the payments received do not form part of the players' assessable income?

Answer

No.

This ruling applies for the following periods

Year ending 30 June 2013

Year ending 30 June 2014

Year ending 30 June 2015

Year ending 30 June 2016

Year ending 30 June 2017

The scheme commenced on

1 July 2012

Relevant facts and circumstances

You are a sporting club.

You make participation payments to your players.

The amount of the payment varies and depends on the outcome of each match.

All players participate in another form of paid employment.

All players play for social reasons and do not play for other teams or receive any other form or income relating to playing this sport.

Relevant legislative provisions

Taxation Administration Act 1953 Schedule 1 Section 12-1

Taxation Administration Act 1953 Schedule 1 Section 12-35

Reasons for decision

Summary

You are not required to deduct PAYG withholding from payments to a player where the payments are considered to be a receipt relating to a pastime or hobby in the hands of the recipient.

Division 12 to Schedule 1 of the TAA also provides for other situations where PAYG withholding is required to be deducted from a payment. These situations do not apply to your circumstances.

Detailed reasoning

Division 12 in Schedule 1 of the Taxation Administration Act 1953 (TAA) outlines the situations where a paying entity is obliged to withhold part of an amount paid to another entity. The withheld amount is referred to as PAYG Withholding.

PAYG withholding must be deducted where a payment of salary, wages, commission, bonuses or allowances is made to an individual as an employee or office holder.

An entity is not required to deduct PAYG withholding from a payment where the whole of the payment is not included as part of the recipient's assessable income.

Taxation Ruling TR 1999/17 discusses the Commissioner's views on the assessability of receipts and other benefits by sportspeople.

The ruling states that a payment or other benefit received by a sportsperson is assessable income if it is:

· income in the ordinary sense of the word, or

· an amount or benefit that through the operation of the provisions of the tax law is included in assessable income. This includes non-cash benefits that may not be ordinary income.

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

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.

Example 7 of the Ruling describes a situation where a person receives regular payments for participating in sports but the payments received do not form part of their assessable income:

Tony is an accountant by profession. Tony plays football on the weekends. The club he plays for gives him $100 for every game he plays. Tony does not play football to earn income for his regular expenditures. Nor are his receipts paid to provide financial support for Tony or relied on by Tony for that purpose. His motivation in playing football is personal; he does not do it as, nor does he intend it to become, an income producing activity. In a year Tony receives $3000 for playing football. Tony's expenses exceed $3000.

Tony lodges an 'Application for a Private Ruling' at his local branch of the Australian Taxation Office (ATO) requesting a determination of whether his receipts from football are assessable income.

The ATO advises Tony that based on the facts supplied by him, his receipts are not assessable income.

In your situation you make payments to players based on the outcome of games they have participated in.

Where a player has another form of paid employment which is their vocation, plays the sport for social reasons, does not receive any other income or benefit as a result of their playing the sport and does not rely on the payments to cover their regular living expenses the game payments the player receives will be considered to be income relating to a pastime or hobby. Thus, the payments to the player will not form part of their assessable income.

You are not required to deduct PAYG withholding from payments to a player where the payments are considered to be a receipt relating to a pastime or hobby in the hands of the recipient.

Copyright notice

© Australian Taxation Office for the Commonwealth of Australia

You are free to copy, adapt, modify, transmit and distribute material on this website as you wish (but not in any way that suggests the ATO or the Commonwealth endorses you or any of your services or products).