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Edited version of private advice
Authorisation Number: 1012622085012
Ruling
Subject: Income - assessable
Question
Is income you receive for displaying an item considered assessable income?
Answer
No.
This ruling applies for the following periods:
• Year ending 30 June 2012
• Year ending 30 June 2013
The scheme commences on:
1 July 2011
Relevant facts and circumstances
You are employed full-time in an industry unrelated to the production of an item.
You joined some professionals who were developing an item.
Over several years you have been developing the item as a hobby in your spare time. You have spent numerous hours on the project.
You have been showing the award winning item at exhibitions approximately once per year for a number of years.
Each time the exhibition host pays for return airfare travel for you and your team, all accommodation, shipping costs, some incidental expenses and a small rental amount per team member.
Prize money you have won with the item has been used to simplify and improve the assembling and dismantling process of the item, and also to build another item which you expect to be completed in the near future. You intend on displaying the second item at exhibitions in the future.
You believe your item building activity is a hobby, and therefore believe the prize money won at the competition is not assessable and is a windfall gain.
Relevant legislative provisions
Income Tax Assessment Act 1997 Section 6-5
Income Tax Assessment Act 1997 Section 6-10
Reasons for decision
Section 6-5 of the Income Tax Assessment Act 1997 (ITAA 1997) provides that the assessable income of a resident taxpayer shall include the ordinary income derived directly or indirectly from all sources, whether in or out of Australia, during the taxation year.
Ordinary income has generally been held to include income from 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.
In your case, the income received from displaying your item is not income from property or from rendering personal services. Further it is not considered that you are carrying on a business of item building.
Although the payment may be said to be expected, and perhaps relied upon with an element of recurrence, the payments are small amounts and are paid predominantly to cover expenses you may incur when accompanying your item overseas. Further they are not considered to be received periodically or regularly as they are received only once per year.
Therefore the income you have received from accompanying your item overseas is not considered to be ordinary income.
Statutory income
Statutory income is not ordinary income, but is included in assessable income by specific provisions of the income tax law (section 6-10 of the ITAA 1997).
There is no specific provision in the income tax law that would include the payments you received from the overseas hosts as assessable income in Australia.
Conclusion
As the payments are not ordinary or statutory income, they are not considered to be assessable.