| Disclaimer This edited version has been archived due to the length of time since original publication. It should not be regarded as indicative of the ATO's current views. The law may have changed since original publication, and views in the edited version may also be affected by subsequent precedents and new approaches to the application of the law. You cannot rely on this record in your tax affairs. It is not binding and provides you with no protection (including from any underpaid tax, penalty or interest). In addition, this record is not an authority for the purposes of establishing a reasonably arguable position for you to apply to your own circumstances. For more information on the status of edited versions of private advice and reasons we publish them, see PS LA 2008/4. |
Edited version of your written advice
Authorisation Number: 1012854521030
Date of advice: 5 August 2015
Ruling
Subject: Assessability of part time coaching payments received from a local sporting club
Question 1
Are payments you receive for part time sports coaching considered to be assessable income?
Answer
No
This ruling applies for the following periods:
Year ended 30 June 2015; and
Year ended 30 June 2016
The scheme commenced on:
1 July 2014
Relevant facts and circumstances
You are employed on a full time basis in an unrelated activity.
In your spare time you coach a team from a local sporting club.
Your coaching commitment is generally around 9 months of the year and takes up approximately 25 hours per week. You receive 2 payments during the course of the season in recognition of the time you devote to the role and to cover expenses incurred during the course of the season.
There is no formal contract of employment however a letter is provided by the club confirming the payment arrangements for the season. You do not receive any entitlements for superannuation, public holidays, sick leave, annual leave or long service leave from the sporting club.
Relevant legislative provisions
Income Tax Assessment Act 1997 - Section 6-5
Reasons for decision
Income is assessable under subsection 6-5(1) of the Income Tax Assessment Act 1997 (ITAA 1997) if it is determined to be income according to ordinary concepts.
In determining whether an amount is ordinary income, the courts have established the following principles:
• what receipts ought to be treated as income must be determined in accordance with the ordinary concepts and usages of mankind, except in so far as a statute dictates otherwise
• whether the payment received is income depends upon a close examination of all relevant circumstances, and
• it is an objective test.
Relevant factors in determining whether an amount is ordinary income include:
• whether the payment is the product of any employment, services rendered, or any business
• the quality or character of the payment in the hands of the recipient
• the form of the receipt, that is, whether it is received as a lump sum or periodically
• the motive of the person making the payment. Motive, however, is rarely decisive as in many cases a mixture of motives may exist.
Where a person's involvement in sporting activities constitutes a pastime or hobby rather than an income-producing activity - money and other benefits received from the pursuit of that pastime or hobby is not assessable income, nor are the expenses allowable deductions.
Taxation Ruling TR 1999/17 outlines the Commissioner of Taxation's view on whether benefits received from sporting involvement are considered to be assessable income.
The Ruling states, at paragraph 33:
Participation in activities generating pastime or hobby receipts is a social or personal pursuit of a non-commercial nature. Pastime receipts are not intended to, nor do they usually, cover expenses. Even regular receipts obtained from a pastime or hobby are still characterised as receipts from a pastime or hobby and accordingly are not assessable income. A receipt that is an incident of a pastime or hobby would also not be assessable, even if it arises from the provision of a service. However, the nature of such a receipt or receipts is relevant in determining whether the pastime has become a business. The receipt or receipts could indicate, for example: a commercial activity; an intention to make a profit from the activity; or an increase in either the size and scale of the activity or the degree of repetition or regularity of the activity.
The information you have provided indicates that the coaching activities undertaken by you are a hobby or pastime activity as evidenced by the fact that there is no formal contract of employment. It is not your main employment, nor is it a business activity for you. Rather coaching is an extension of your interest in the sport, and is merely a hobby or pastime which you pursue.
Therefore, the money you receive in respect of the coaching activities undertaken is not assessable income under subsection 6-5(1) of the ITAA 1997.
Where income is not assessable because your activities constitute a pastime or hobby, any expenses associated with the activity are not incurred in the course of gaining assessable income and will therefore not be deductible.