| Disclaimer This edited version has been archived due to the length of time since original publication.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: 1051522689646
Date of advice: 27 May 2019
Ruling
Subject: Award
Question
Are the payments you receive in relation to an award included in your assessable income?
Answer
Yes
This ruling applies for the following periods:
Year ending 30 June 2019
Year ending 30 June 2020
The scheme commences on:
1 July 2018
Relevant facts and circumstances
You have an Australian Business Number for the work you undertake in your profession.
Entity A offers a yearly award to Australians and offers a cash prize and career development support for the winners.
You applied and won the award. The application required you to submit information on your proposed project, CV, sample of work, and letters of support or testimonials for the project.
Upon winning the award, you entered into an Agreement with Entity A and a career development provider. The Conditions to Letter of Agreement stated that you are an independent contractor of Entity A.
The agreement includes provisions on:
● deliverables and completion date
● payment and professional development
● promotion, indemnity, intellectual property rights, recording, dispute resolution
You also agreed to participate in other promotional activities of Entity A.
The Entity will pay you an amount plus GST conditional on completion of deliverables and/or receipt of your tax invoices.
Relevant legislative provisions
Income Tax Assessment Act 1997 section 6-5
Reasons for decision
Your assessable income includes income according to ordinary concepts, which is called ordinary income (section 6-5 of the Income Tax Assessment Act 1997 (ITAA 1997)).
Ordinary income has generally been held to include 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, you are an independent contractor of Entity A. Under the terms of the Agreement between you and the entity and the careers development provider, you are required to undertake a project work within a 12 month period, to comply with reporting requirements and to participate in promotional activities. The cash prize is paid conditional to meeting specified deliverables and you issuing your invoices.
In addition, the award is not an unsolicited prize or gift; rather, to be eligible to receive the award you submitted an application outlining the project work. You also rely upon the prize with your living expenses while you complete the project.
Therefore, the payments you receive for the award are ordinary income and are included in your assessable income under section 6-5 of the ITAA 1997.