Edited version of private ruling

Authorisation Number: 1011839538930

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Ruling

Subject: Income - winnings

Question

Is the amount you received as a result of being a shareholder who opened an account with your bank assessable income?

Yes.

This ruling applies for the following periods

Year ended 30 June 2011

The scheme commenced on

1 July 2010

Relevant facts

You are a shareholder of a banking institution.

You attended the bank's annual general meeting (AGM).

At the AGM you were advised that there were packages randomly placed containing application forms to open a special account.

If you opened a special account it would be credited with $X.

To win the $X you had to open a special account.

Only shareholders who were present at the AGM were eligible to win.

You were not advised before the AGM that you were eligible to win, it was announced on the day.

You actually won the $X when you completed the application form to open the account.

Relevant legislative provisions

Income Tax Assessment Act 1936 section 6(1)

Income Tax Assessment Act 1997 subsection 6-5(1)

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

Income Tax Assessment Act 1997 subsection 6-5(4)

Income Tax Assessment Act 1936 subsection 44 (1)(a)

Reasons for decision

Subsection 6-5(1) of Income Tax Assessment Act 1997 (ITAA 1997) states that a persons assessable income includes income according to ordinary concepts, which is called ordinary income.

The definition is further explained under subsection 6-5(2) of ITAA 1997 that where a person is an Australian resident, the person's assessable income includes the ordinary income they derived directly or indirectly from all sources, whether in or out of Australia, during the income year.

Under subsection 6-5(4) of the ITAA 1997 provides that a taxpayer is taken to have received the amount as soon as it is applied or dealt with in any way or on the taxpayers behalf or as directed by the taxpayer.

Under Subsection 44 (1) (a) of Income Tax Assessment Act 1936 (ITAA1936), the assessable income of resident shareholders in a resident company includes: 

(i) dividends (other than non-share dividends) that are paid to the shareholder by the company out of profits derived by it from any source; and 

(ii) all non-share dividends paid to the shareholder by the company 

A dividend is defined under subsection 6(1) of the ITAA 1936 to include:-

(a) any distribution made by a company to any of its shareholders, whether in money or other property; and

(b) any amount credited by a company to any of its shareholders as shareholders;

A shareholder is defined under subsection 6(1) of the ITAA 1936 as a member or a stockholder. 

In the Full High Court decision in FC of T v Patcorp Investments Ltd (1976) 76 ATC 4225, it was found: 

that a shareholder of a company is a person whose name is entered in the register of members as the holder of shares in it.

While you did not expect to be one of four shareholders that were given the opportunity of opening an account which would be credited with $X, it cannot be said that you won the $X as you had to make a decision as to whether you would open the account. The amount was then credited to you as a result of you being a shareholder who opened an account.

The $X you received is considered to be a dividend as defined in subsection 44 (1) (a) of the ITAA1936 as it is received a result of being a shareholder who opened a savings account.

Therefore, the $x is assessable income and must be included in your income tax return in the relevant income year.