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Edited version of your written advice

Authorisation Number: 1012714641806

Ruling

Subject: Commission

Question

Are the amounts as shown on your payment summaries assessable in the 2013-14 financial year?

Answer

Yes.

This ruling applies for the following period

Year ended 30 June 2014

The scheme commenced on

1 July 2013

Relevant facts

The arrangement that is the subject of the ruling is described below. This description is based on the following documents. These documents form part of and are to be read with this description. The relevant documents are:

You were employed by entity A as a commission employee.

Your employer pays you a sales commission advance. The payments are conditional on the likely expectation that future commissions will be owed to you for the future sales. The advance of commission is reviewed monthly taking into consideration the number of live job numbers at that time.

Under the employment agreement, when you cease to be contractually engaged with your employer, all payments will stop and any balance of monies outstanding after taking into account advances paid and commissions owed, will become immediately due and payable back to your employer.

You ceased work with this employer in the relevant financial year. You still have ongoing contracts. When these contracts and all transactions are finalised, you may have to repay some of your previous advances back to your employer.

You have not repaid any amounts to your employer prior to 30 June 2014.

You advised that the value of your commissions actually earned for the relevant financial year is less than the amount showing on your payment summaries.

Relevant legislative provisions

Income Tax Assessment Act 1997 Section 6-5.

Reasons for decision

Subsection 6-5(2) of the Income Tax Assessment Act 1997 (ITAA 1997) provides that the assessable income of an Australian resident includes ordinary income derived directly or indirectly from all sources, whether in or out of Australia, during the income year.

Salary and wage income is regarded as ordinary income and therefore assessable under subsection 6-5(2) of the ITAA 1997.

If an amount would be ordinary income apart from the fact that you have not received it, it becomes assessable income as soon as it is applied or dealt with in any way on your behalf or as you direct (subsection 6-5(4) of the ITAA 1997).

Taxation Ruling TR 98/1 Income tax: determination of income; receipts versus earnings sets out the Commissioner's policy on the derivation of income. Paragraph 42 of TR 98/1 states that income from employment would normally be assessable on a receipts basis. Salary, wages or other employment remuneration are assessable on receipt even though they relate to a past or future income period.

In your case, you have received advance commissions from your employer during the relevant financial year.

We acknowledge your specific circumstances, however, as the income has been paid to you in the relevant financial year, this income is derived and assessable to you in that year. You had the benefit of the payments when they were made. As you received the payments, the amounts are assessable under section 6-5 of the ITAA 1997.

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