Edited version of private ruling

Authorisation Number: 1011656113608

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Ruling

Subject: Assessability of income

Do you need to include as assessable income, the income from EBAY sales made by your child while using your EBAY account?

No.

This ruling applies for the following periods:

Year ended 30 June 2011

Year ended 30 June 2012

Year ended 30 June 2013

Year ended 30 June 2014

The scheme commences on:

1 July 2010

Relevant facts and circumstances

This ruling is based on the facts stated in the description of the scheme that is set out below. If your circumstances are materially different from these facts, this ruling has no effect and you cannot rely on it. The fact sheet has more information about relying on your private ruling.

You created an EBAY account which was used to purchase and sell personal items.

As your child is less than 18 years of age, they are not able to create an EBAY profile. However, EBAY does allow minors to use an EBAY account under adult supervision by the account owner

You have supervised your child while they sell items using your EBAY account. You are not involved in the sales activities using your EBAY account.

As your child is also too young to have a PayPal account, they have linked their bank account to your Paypal account, which they use for some transactions. Funds accumulate in your PayPal account and are transferred to your child's bank account periodically.

Payments from an EBAY sale that do not use your PayPal account are paid directly to your child's bank account by bank transfer.

Relevant legislative provisions

Income Tax Assessment Act 1997 Subsection 6-5(2)

Income Tax Assessment Act 1997 Subsection 6-5(4).

Reasons for decision

Subsection 6-5(2) of the Income Tax Assessment Act 1997 (ITAA 1997) provides that the assessable income of a resident taxpayer includes ordinary income derived directly or indirectly from all sources during the income year.

In this statement, the word 'derived' and the phrase 'ordinary income' require further explanation. Subsection 6-5(4) of the ITAA 1997 states that:

In working out whether you have derived an amount of ordinary income, and (if so) when you derived it, you are taken to have received the amount as soon as it is applied or dealt with in any way on your behalf or as you direct.

Taxation law does not contain a clear definition of ordinary income. Over the years the Courts have identified several different characteristics of ordinary income. The main characteristics that have been identified may include the receipt being:

· received periodically and regularly

· relied upon or expected, and

· earned.

Earned ordinary income has generally been held to include three categories, namely income from:

· personal services, such as salary and wages

· property or investment returns, such as dividends and interest, and

· carrying on a business, such as proceeds from providing goods or services.

Sales made by your child

The money your child receives from sales made using your EBAY account is not applied or dealt with in any way by you. You do not receive any of the income from the sales and this income is not expected or relied upon by you. You only supervise your child's use of the EBAY account as required by EBAY, and are not involved in the actual sale of the goods.

It is clear that the income from sales made by your child using your EBAY account is not considered ordinary income in your hands. Therefore, the income from the sales is not assessable to you under section 6-5 of the ITAA 1997.