Edited version of your written advice

Authorisation Number: 1012879607728

Date of advice: 16 September 2015

Ruling

Subject: Assessable income - hobby

Question

Are the payments you receive assessable income?

Answer

No.

This ruling applies for the following periods:

Year ended 30 June 2011

Year ended 30 June 2012

Year ended 30 June 2013

Year ended 30 June 2014

Year ended 30 June 2015

Year ended 30 June 2016

Year ended 30 June 2017

The scheme commences on:

1 July 2010

Relevant facts and circumstances

You have full time employment.

Since the 2010-11 income year you have been involved in activities in a sport that you have an interest in.

You receive cash payments from these activities.

You are required to incur expenditure relevant to the activities.

You are not obligated to attend and you are often replaced for the night. You have no contract with or are not an employee of the relevant organisations.

You are not compensated for late finishes, public holidays or end of season breaks.

You enjoy the social camaraderie provided by involvement in the activities. You are also involved in other community participation with the relevant bodies for which no payment is received.

Relevant legislative provisions

Income Tax Assessment Act 1997 Section 6-5

Reasons for decision

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 is generally not intended to, and often does not, covers expenses.

In your case, you carry out the relevant activities. The income you earn from these activities is not for regular expenditure and is not paid to provide financial support or relied upon for that purpose. These activities are 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 income.