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Edited version of private advice
Authorisation Number: 1052116610932
Date of advice: 15 May 2023
Ruling
Subject: Income tax - royalty income
Question
Is Royalty income received from a contribution to a published book assessable income?
Answer
Yes.
This ruling applies for the following periods:
1 July 20XX to 30 June 20XX
The scheme commenced on:
1 July 20XX
Relevant facts and circumstances
You were asked to be part of XX national authors for Australian curriculum resource by a publishing company in 20XX.
First edition of the book was released originally in 20XX.
The series has been updated every XX years to ensure the context is fresh and relevant at time of publishment.
You do have an interest in writing but has only completed this project.
Royalties are paid yearly and based on sales/copywrite.
Relevant legislative provisions
Income Tax Assessment 1997 section 6-5
Income Tax Assessment 1997 section 6-10
Income Tax Assessment 1997 section 15-20
Reasons for decision
Under section 6-5 of the Income Tax Assessment Act 1997 (ITAA 1997) ordinary income is referred to as income 'according to ordinary concepts'. This phrase is not defined under the legislation, but a large body of case law has developed to identify the factors that indicate if an amount is income according to ordinary concepts. Typical examples of ordinary income include salaries, wages, and proceeds of carrying on a business, rent, interest, and dividends.
Section 15-20 of the ITAA 1997 states:
Your assessable income includes an amount you receive as or by way of royalty within the ordinary meaning of 'royalty' (disregarding the definition of royalty in subsection 995-1(1)) if the amount is not assessable income as ordinary income under section 6-5 of the ITAA 1997.
In other words, royalties that are not assessable income under section 6-5 of the ITAA 1997 (ordinary income/ business income) are assessable as statutory income under section 15-20 of the ITAA 1997. Royalty income is assessable regardless of whether your activity is a business or a hobby.
In your case, you were approached by a publishing company to be a part of a group of authors to provide knowledge for a book series to be used within the Australian curriculum. As the book has been published and available for purchase this has resulted in royalties being paid to you on a yearly basis. These royalties' payments are considered income and are assessable.
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