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Ruling

Subject: Assessable income

Question

Is the payment you received from a sporting body assessable income?

Advice/Answers

No

This ruling applies for the following period

Year ending 30 June 2012

The scheme commenced on

1 July 2011

Relevant facts

You are an Australian resident for taxation purposes.

You represented Australia in sport.

You received funding to aid with the costs associated with your training needs and preparation for representing Australia. Such expenses include medical, travel and out of pocket expenses relating to training prior to and on tour.

This was a one-off payment and no contract was signed.

You did not rely on this payment for your regular income.

Your income is made of part time work as an employee, a sporting contract and Centrelink payments.

Relevant legislative provisions

Income Tax Assessment Act 1997 Section 6-5

Reasons for decision

Section 6-5 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.

"Ordinary income' is defined to mean income according to ordinary concepts. The legislation does not provided any specific guidance on what is meant by income according to ordinary concepts. However, a substantial body of case law has evolved to identify various factors that indicate whether an amount is income according to ordinary concepts.

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.

Taxation Ruling TR 1999/17 sets out the Commissioner's view as to whether the receipts and other benefits obtained from involvement in sport are assessable income.

Payments to sportspeople are often made in the absence of any legal obligation of the payer to do so. Such payments are referred to as voluntary payment. Typically, voluntary payments are made as either a series of payments, such as under a grant, or as an occasional payment, such as an award or prize. The fact that a payment is voluntary does not mean that it cannot be assessable income.

The issue of whether voluntary payments are income in the hands of the recipient was considered by the High Court in FC of T v. Dixon (1952) 86 CLR 540: (1952) 10.

Case law shows that:

· to determine if a voluntary payment is income, a broad judgement must be made of all the circumstances in each particular case, there is no fixed set criteria against which a particular receipt has to be measured;

· the form of a receipt is an important factor in determining whether a receipt is income; however, form on its own will seldom determine the issue; and

· scholarships will be income (unless specifically exempted).

Voluntary payments: Financial grants

TR 1999/17 discusses the assessability of voluntary payments received as financial grants. Typically, such payments are not a product of, or received in respect of, any employment, services rendered, or any business. They are paid to a sportsperson by another party when the sportsperson has attained a specific standard. Sportspeople selected to receive a grant possess personal qualities and athletic abilities that show they are in a class of individuals able to pursue sporting excellence.

Although there are no fixed criteria, the decisions of the courts show that voluntary payments, such as under a grant, made to a sportsperson are income where they are:

· made under an agreement or arrangement on provide financial support in the form of periodic, regular or recurrent payments;

· received in circumstances where the sportsperson has an expectation of receiving the payments as part of periodic, regular or recurrent payments, and the sportsperson is able to rely on the payment for his or her regular expenditure; or

· part of periodic, regular or recurrent payments made in substitution of income.

In your case, you were selected to receive the financial grant or support because of your athletic abilities that showed you were in a class of individuals able to pursue sporting excellence. You received the financial support in the 2012 financial year although you also maintained employment during this period which you used for your regular expenditure and support.

Although the payment you received was made under an arrangement with the sporting body, the payment was given to you to assist with costs of medical expenses and other training expenses and not as a substitute for income. The payment was not received on a periodic, regular or recurrent basis and could not be relied upon for your regular income. Therefore, the payment that you received is not assessable income.