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Edited version of your private ruling
Authorisation Number: 1012432519501
Subject: Capital Gains Tax - Royalty - Ordinary income
Question:
Will the amounts you receive be assessed as royalty payments?
Answer:
Yes.
This ruling applies for the following period:
Year ended 30 June 2013
The scheme commenced on:
1 July 2012
Relevant facts:
You have written songs and composed music which has been recorded and performed live.
You have collaborated with another person on some of these activities.
You wish to join an organisation, which will collect royalties on your behalf, if your songs are played on radio, television or other channels or if they are performed live.
You will assign your rights to this organisation.
The length of the assignment is death plus a number of years.
Under the terms of the assignment, the only amounts to be received by you are the amounts collected by the organisation.
The organisation will enforce your rights if someone infringes your copyright.
Relevant legislative provisions:
Income Tax Assessment Act 1997 Subsection 6-5(1)
Income Tax Assessment Act 1997 Section 6-10.
Income Tax Assessment Act 1997 Section 15-20.
Income Tax Assessment Act 1997 Section 118-20.
Reasons for decision:
Section 15-20 of the Income Tax Assessment Act 1997 (ITAA 1997) includes in assessable income amounts received as or by way of royalty within the ordinary meaning of 'royalty' if the amount is not assessable as ordinary income under section 6-5 of the ITAA 1997.
Your royalties will be included in your assessable income as either;
ordinary income under section 6-5 of the (ITAA 1997), or
statutory income under section 15-20 of the ITAA 1997 where the amount is not ordinary income.
Where the disposal of an asset gives rise to assessable income and a capital gain and the amount received is included in assessable income, the capital gain is reduced by that amount in accordance with subsections 118-20(2) and 118-20(3) of the ITAA 1997.