Edited version of your private ruling

Authorisation Number: 1012532676405

Ruling

Subject: Income from refereeing sporting matches

Question

Do the payments you received for refereeing sporting matches form part of your assessable income for the year ended 30 June 2013?

Answer

No.

This ruling applies for the following period

Year ended 30 June 2013

The scheme commenced on

1 July 2012

Relevant facts and circumstances

Organisation X run a sporting competition.

You agreed to referee some of the matches as a way of helping out Organisation X.

You entered into a contract with Organisation X. The contract outlined your pay rate and responsibilities as a referee.

You were not obliged to referee any particular match or be available on a particular day.

You view your activity as a hobby.

Reasons for decision

Summary

Your refereeing activities are considered to be a hobby and you are not an employee of Organisation X. As such, the payments you received for your refereeing activities do not form part of your assessable income.

Detailed reasoning

Section 6-5 of the Income Tax Assessment Act 1997 (ITAA 1997) states that the assessable income of an Australian resident includes income derived from all sources whether in or out of Australia, during the income year.

Income from refereeing sporting matches will be assessable where the recipient is carrying on a business of refereeing or the income is earned by the recipient as an employee.

Refereeing as a business activity

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

The question of whether a business is being carried on is a question of fact and degree. The courts have developed a series of indicators that are applied to determine the matter on the facts provided.

Taxation Ruling TR 97/11 provides the Commissioner's view of the factors used to determine if you are in business for tax purposes. These factors 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 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 out 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 a 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.

Application to your circumstances

Based on the information you have provided, the Commissioner has determined that you were not carrying on a business of refereeing sporting matches as:

your activity did not have a significant commercial purpose or character

· you were assisting Organisation X to enable their sporting competition to continue

· your activity is better described as a hobby or a sporting activity.

Refereeing as an employee

Taxation Ruling TR 2005/16 discusses the various indicators the courts have considered in establishing whether a person engaged by another individual or entity is an employee within the common law meaning of the term.

These indicators include:

· the control test: the degree of control which the payer can exercise over the payee

· the organisation or integration test: whether the worker operates on their own account or in the business of the payer

· the results test: whether the worker is free to employ their own means and is paid to achieve the contractually specified outcome

· the delegation test: whether the work can be delegated or subcontracted (with or without the approval or consent of the principal)

· the risk test: whether the worker bears the legal responsibility and expense for the rectification or remedy in the case of unsatisfactory performance, and

· which party provides tools, equipment and payment of business expenses.

Application to your circumstances

Based on the information you have provided, the Commissioner has determined that you were not an employee of Organisation X as:

· you were not obliged to referee any particular match, you set your availability for refereeing duties, and

· whilst Organisation X had some control over which matches they offered to you, you controlled how you performed your referee duties.

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