| Disclaimer This edited version has been archived due to the length of time since original publication. It should not be regarded as indicative of the ATO's current views. The law may have changed since original publication, and views in the edited version may also be affected by subsequent precedents and new approaches to the application of the law. You cannot rely on this record in your tax affairs. It is not binding and provides you with no protection (including from any underpaid tax, penalty or interest). In addition, this record is not an authority for the purposes of establishing a reasonably arguable position for you to apply to your own circumstances. For more information on the status of edited versions of private advice and reasons we publish them, see PS LA 2008/4. |
Edited version of your written advice
Authorisation Number: 1051285490087
Date of advice: 21 September 2017
Ruling
Subject: PAYG withholding
Question
Is there an obligation on you to withhold from payments made to players under section 12-35 of Schedule 1 to the Taxation Administration Act 1953 (TAA)?
Answer
No.
This ruling applies for the following periods:
Year ended 30 June 2018
Year ended 30 June 2019
Year ended 30 June 2020
Year ended 30 June 2021
Year ended 30 June 2022
The scheme commences on:
1 July 2017
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 rely on the payments to pay their living expenses.
Relevant legislative provisions
Taxation Administration Act 1953 Section 12-35 to Schedule 1
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.
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 recepts 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 matches they have participated in.
The players all study or work in other professions during the working week, are pursuing an interest in the game and do not rely on the payments to cover their regular living expenses. Therefore the match payments the player receives will be considered to be income relating to a pastime or hobby and the payments to the player will not form part of their assessable income.
Consequently, it is considered that there is no obligation on the club to withhold from payments made to players as they are not employees.
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).
