Edited version of your written advice

Authorisation Number: 1012908670046

Date of advice: 10 November 2015

Ruling

Subject: Income - instructor payments

Question:

Are the payments you received as an instructor included in your assessable income? 

Answer: No.

This ruling applies for the following period:

Year ending 30 June 2016

The scheme commenced on:

1 July 2015

Relevant facts

You are employed.

You previously had an interest in a sport.

Due to the ongoing cost of maintaining your own equipment and participating in the sport you ceased the activity.

You do not hold any qualifications as an instructor.

You do not have a contract of employment or a contract to provide services as an instructor.

You are notified by a roster when to attend your sport.

You are paid a set rate per day when you attend the sporting activity.

The sport meeting may go for a long period of time.

You attend the sport meeting once a month.

All equipment for the sport is supplied by another entity.

You kept a record of the income you received.

You paid expenses for travelling to and from your home to the sports meeting.

Relevant legislative provisions

Income Tax Assessment Act 1997 Section 8-1.

Income Tax Assessment Act 1997 Section 995-1.

Income Tax Assessment Act 1997 Section 6-5.

Reasons for decision

Under subsection 6-5(1) of the Income Tax Assessment Act 1997 (ITAA 1997) an amount is assessable income if it is 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 income-producing activity money and other benefits received from the pursuit of that pastime or hobby are 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.

TR 1999/17 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.

TR 1999/17 adds that even though a person is engaged in a hobby, a receipt can still constitute income according to ordinary concepts; for example, receipts for the provision of services if not received in respect to the actual hobby activity itself. Whether an activity is an incident of a hobby or is separate from the hobby is a matter of fact that will depend upon the circumstances of each case.

The information you provided indicates that the instructor activity is a hobby or pastime. It is not your main employment, nor is it a business activity for you. Rather, the activity as an instructor is an extension of your interest in the sport, and is merely a hobby which you pursue.

Therefore, the money you receive in respect of your sport as an instructor is not assessable income under subsection 6-5(1) of the ITAA 1997.

Where income is not assessable because your activity constitute a pastime any expenses associated with the activity are not incurred in the course of gaining assessable income and will therefore, not be deductible.