Edited version of private advice

Authorisation Number: 1051663548637

Date of advice: 28 May 2020

Ruling

Subject: Assessable income - fellowship grant

Question

Is the receipt of the Fellowship grant assessable income?

Answer

Yes

This ruling applies for the following period:

Year ended 30 June 20XX

The scheme commences on:

01 July 20XX

Relevant facts and circumstances

You submitted a formal application for a Fellowship grant which enables artists, practitioners and arts/cultural workers to undertake self-directed professional development programs or significant opportunities to support their personal creative and career advancement.

You were required to meet the following criteria:

·   be an Australian citizen or permanent resident

·   be a resident of the relevant state

·   be a practitioner working in the relevant discipline

·   you needed to demonstrate a degree of training, professional experience or manner of working within the discipline

You identify yourself as an emerging professional in the relevant discipline. This was recognised when you were advised of the success of your application on XX/XX/20XX due to the 'high level of achievement of your practice so far and your potential for development'.

You wish to enhance your standing in the relevant sector.

You received payment of your successful grant application on XX/XX/20XX. The funded activity was for a mentorship and research in the relevant discipline

You will undertake research on a specific subject matter and create a number of resources on the subject.

You will retain copyright to the resources you create, produced through your activities supported by the grant.

Expenditure of the Fellowship grant was identified as follows in your application:

·         Your salary - $XX,XXX

·         W costs - $X,XXX

·         Y costs - $XXX

·         Z costs - $XXX

You are required to acquit the funding by XX/XX/20XX.

You are not a student, neither are you an employee of the organisation that provided the Fellowship grant.

In addition to working on the activities in relation to the Fellowship, you are separately employed on a part time fixed term employment contract that will expire on XX/XX/20XX and won't be renewed.

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 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.

Ordinary income has generally been held to include three categories, namely, income from rendering personal services, income from property and income from carrying on a business.

Other characteristics of income that have evolved from case law include receipts that:

·   are earned,

·   are expected,

·   are relied upon, and

·   have an element of periodicity, recurrence or regularity.

It is not necessary for all of the above indicators to be present for a receipt to be considered ordinary income.

Ordinary income includes amounts received in return for personal services, whether received in the capacity of an employee or otherwise, and amounts received which the recipient relies on for the maintenance of themselves and/or their dependants. This will be so even if the receipt is not directly related to any service provided by the recipient to the donor (Federal Commissioner of Taxation v. Dixon (1952) 86 CLR 540 (Dixon's case)). In Dixon's case it was held that an amount paid to supplement income had the character of income under ordinary concepts.

In determining whether a reward, prize or gift is ordinary income, the courts have established that consideration of the whole of the circumstances is necessary and that the following factors need to be taken into account:

·   how, in what capacity, and for what reason the recipient received the prize or gift (Squatting Investment Co Ltd v. Federal Commissioner of Taxation (1953) 86 CLR 570, (1953) 5 AITR 496; (1953) 10 ATD 126 (Squatting Investment case)

·   whether the prize or gift is of a kind which is a common incident of the recipient's calling or occupation (Scott v. Federal Commissioner of Taxation (1966) 117 CLR 514; (1966) 10 AITR 367; (1966) 14 ATD 286 (Scott's case)

·   whether the prize or gift is made voluntarily

·   whether the prize or gift is solicited (Hayes v. Federal Commissioner of Taxation (1956) 96 CLR 47; (1956) 6 AITR 248; (1956) 11 ATD 68 (Hayes' case) and Scott's case)

·   whether the prize or gift can be traced to gratitude engendered by some service rendered by the recipient to the prize or gift donor (Squatting Investment case)

·   the motive of the prize or gift donor (though this factor is rarely decisive in itself) (Hayes' case); and

·   whether the recipient relies on the prize or gift for regular maintenance of themselves and any dependants (Dixon's case) and FC of T v. Blake (1984) 75 FLR 315; (1984) 15 ATR 1006; 84 ATC 4661).

In your case, you solicited the Fellowship grant through your application to the funding body. The grant whilst provided as a lump sum is related to your services in creating resources on the nominated subject matter. As detailed in your application, the vast majority of the grant was identified as being for your salary and therefore it is considered that it would supplement your part time employment income and you would rely on the amount received to assist with living expenses.

Having regard to all of the above, it is considered that the Fellowship grant is ordinary income and therefore is included in assessable income.

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