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Ruling

Subject: Assessability of payments

Question

Do the payments you receive from Organisation X form part of your assessable income?

Answer

Yes.

This ruling applies for the following period

Year ended 30 June 2012

The scheme commenced on

1 July 2011

Relevant facts and circumstances

You and your spouse are volunteers who are members of Organisation X.

People and organisations donate money to Organisation X which is then given to you. Sometimes the donors specifically request the money be allocated to you. In other instances, the donation is made to Organisation X and then designated to you.

Some people and organisations make donations on a regular basis whilst others donate one-off sums.

Family members give donations each month. The donations are given to Organisation X and then passed on to you and your spouse. These payments would be given to you if you were a member of a group with similar aims to those of Organisation X.

Your work with Organisation X is voluntary and you do not have written or verbal employment contracts with any of the donors.

You and your spouse used the payments for training expenses, resources, travel expenses and general living costs.

In the year ended 30 June 2012, neither you nor your spouse received income from sources other than Organisation X.

Relevant legislative provisions

Income Tax Assessment Act 1997 Section 6-5.

Reasons for decision

Summary

The payments you receive are considered to be assessable income in your hands as it is possible to relate the funds to recognition of your activities with Organisation X.

Detailed reasoning

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

Taxation Ruling IT 2674 provides the Commissioner's view regarding the assessability of gifts to missionaries, ministers of religion and other church workers. The principles are no different from those which apply in determining whether gifts received in other callings or occupations are assessable income. IT 2674 provides that whether a gift is assessable income depends on the quality of the character of the gift in the hands of the recipient and whether the gift constitutes ordinary income.

Paragraph 12 of IT 2674 states that a voluntary payment or gift paid to a church worker is assessable income if it is possible to:

· relate the receipt of the gift by the church worker to any income-producing activity on his or her part; or

· point to any employment, personal exertion or other income-earning activity by the church worker of which the receipt of the gift is in a relevant sense a product or incident.

IT 2674 goes on to explain that a gift received in these circumstances is assessable income even if:

· the donor is not legally obliged to make the gift; or

· gift is made by a family member, friend or fellow worker; or

· if the church worker is an employee, the gift comes not from the employer but from somebody else; or

· the gift is made so that the church worker can acquire a capital asset; or

· the gift is received in kind rather than in money; or

· the church worker is not in any way motivated by the prospect of receiving the gift but is motivated only by a genuine commitment to religious beliefs.

Where a gift is made both as an expression of goodwill towards the church worker and also as a reward for some income-producing activity or in recognition of the worker's calling or occupation, the gift is assessable income where the occupation or income-producing activity is a substantial reason for the payment of the donation.  

Conversely, where the income-producing activity is merely an insubstantial factor in the making of the gift, and the gift is made on personal grounds, the gift is not assessable income. For example, a donation is not assessable income if it is solely referable to the worker's personal qualities or attributes without any connection with any income-producing activity or work done by the taxpayer.

In determining whether the payments are income, we therefore need to consider the nature of the payments in the hands of the recipient.

You and your spouse receive payments from Organisation X which are sourced from donors who, in some instances, have specifically requested the donations be paid to you and your spouse. The payments are used to assist you financially with your daily living expenses and activities you carry out from your association with Organisation X.

The work you do in association with Organisation X is a substantial reason for you receiving the financial contributions. The payments are received in your capacities within the organisation.

Although the payments are voluntary and not solicited, the payments can still be considered to be income in your hands as:

· a substantial reason for the payments is in the recognition of the work carried out by you, and

· the payments are intended to supplement your income.

Thus the gifts are related to your personal exertion.

This applies also to the payments which relate to donations by your relatives to Organisation X. The donations were made to Organisation X due to your activities with them.

As the payments are received due to your association with Organisation X they are considered to have been received in recognition of the work carried out by you.

Therefore, all of the payments received from Organisation X form part of your assessable income.