Edited version of your private ruling

Authorisation Number: 1012447644420

Ruling

Subject: Income received from umpiring

Question

Are the payments you receive from umpiring assessable income?

Answer

No.

This ruling applies for the following periods

Year ended 30 June 2012

Year ending 30 June 2013

The scheme commences on

1 July 211

Relevant facts and circumstances

You are employed on a full-time basis in an industry not related to any sport.

You have played social sport for a number of years.

You participate for fitness and enjoyment and want to help others do the same.

You umpire on a voluntary basis on the nights that you play. On occasions you have prior commitments with your full-time employment and you don't attend the competition on those nights.

You are renumerated a nominal amount per game and typically umpire X nights a week.

You have been issued with a PAYG payment summary for the financial year.

You incur expenses for travel and appropriate clothing.

Relevant legislative provisions

Income Tax Assessment Act 1997 Section 6-5

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

Income Tax Assessment Act 1997 Section 6-10

Income Tax Assessment Act 1997 Section 10-5

Income Tax Assessment Act 1997 Section 15-2

Income Tax Assessment Act 1997 Subsection 15-2(1)

Reasons for decision

A payment or other benefit received by a taxpayer is assessable income if it is:

· income in the ordinary sense of the word (ordinary income); or

· Included in assessable income (statutory income).

Ordinary income

Subsection 6-5(1) of the Income Tax Assessment Act 1997 (TIAA 1997) provides that the assessable income of a taxpayer includes income according to ordinary concepts (ordinary income).

The legislation does not provide specific guidance on the meaning of ordinary income. However, a substantial body of case law exists which identifies likely characteristics.

In GP International Pipecoaters Pty Ltd v. Federal Commissioner of Taxation (1990) 170 CLR 124; 90 ATC 4413; (1990) 21 ATR 1, the Full High Court stated:

To determine whether a receipt is of an income or of a capital nature, various factors may be relevant. Sometimes the character of receipts will be revealed most clearly by their periodicity, regularity or recurrence; sometimes, by the character of a right or thing disposed of in exchange for the receipt; sometimes, by the scope of the transaction, venture or business in or by reason of which money is received and by the recipient's purpose in engaging in the transaction, venture or business.

Amounts that are periodical, regular or recurrent, relied upon by the recipient for their regular expenditure and paid to them for that purpose are likely to be ordinary income, as are amounts that are the product in a real sense of any employment of, or services rendered by, the recipient. Amounts paid in substitution for salary or wages foregone or lost may also be ordinary income.

Ultimately, whether or not a particular receipt is ordinary income depends on its character in the hands of the recipient. The whole of the circumstances must be considered and the motive of the payer may be relevant to this consideration.

Where a taxpayer's activities constitute a pastime or hobby rather than an income producing activity, money and other benefits received from the pursuit of that pastime or hobby will not be included in their assessable income as ordinary income, even if the receipts are regular or periodical.

A pastime or hobby can be described as a social or personal pursuit of a non-commercial nature. Amounts received from engaging in a pastime or hobby, are generally not intended to, and often do not, cover expenses.

In your case, you play and umpire in a social competition. The income you earn from umpiring is not for regular expenditure and is not paid to provide financial support or relied upon for that purpose. Umpiring is neither your principal income earning activity nor does it constitute a business activity. As such, it is accepted that the amount you receive is of a non-commercial nature and the activities are a social or personal pursuit which constitutes a pastime or hobby.

Consequently, the payments you receive are not assessable as ordinary income.

Statutory income

Section 6-10 of the ITAA 1997 refers to assessable amounts that are not ordinary income. These amounts are called statutory income. A list of the statutory income provisions can be found in section 10-5 of the ITAA 1997. The most relevant provision to consider for umpires is the potential operation of section 15-2 of the ITAA 1997.

Subsection 15-2(1) of the ITAA 1997 states that:

Your assessable income includes the value to you of all allowances, gratuities, compensation, benefits, bonuses and premiums *provided to you in respect of, or for or in relation directly or indirectly to, any employment of or services rendered by you...

Amounts that are a reward or remuneration for services rendered, or a product, incident or consequence of employment, come within the scope of subsection 15-2(1) of the ITAA 1997.

In your case, you are not considered to be employee. The payments are considered to be incidental to a pastime or hobby and not a product or incident of any employment or a reward for services rendered. As such, the payments are not assessable under section 15-2 of the ITAA 1997.

Therefore, the income you receive for umpiring social games is not considered assessable income, and you are not required to include these amounts in your income tax return.