Edited version of private advice

Authorisation Number: 1051699162585

Date of advice: 8 September 2020

Ruling

Subject: Income - assessable income

Question

Is the income you receive as a result of your contracts assessable income?

Answer

Yes

This ruling applies for the following period

Period ended 30 June 20XX

The scheme commences on

1 July 20XX

Relevant facts and circumstances

You hold formal qualifications for your industry working full time for a local government organisation.

You have received an industry related award; it is was through your industry membership that you were identified and contacted in relation to this work.

You have been contracted as a Subject Matter Expert (SME) in your industry. You are producing items as an expert adviser on technical matters in the following roles as a reviewer, panellist and writer ensuring that all relevant standards are met.

You advised you have received payments for the 20XX-XX financial year.

You do not hold an ABN.

You do not advertise for similar work or related business.

You are conducting this work as an individual

Your contracts are for specific types of work for periods of X to X months. The sample of contracts provided have a variety of effective periods all ceasing on 31 May 20XX.

You receive payment based on work completed, rates of payment are based on per item and type of request as agreed in your SME agreements

You agreed to participate in training for the industry and best practices for item development as detailed in your SME agreements. Currently you have attended a one hour training session on the commencement of work. You have not been required to attend any workshops.

You are required to generate invoices to facilitate receiving remuneration in accordance with the fees and schedule set in the Statement of Work provided as part your SME agreement.

You provided a selection of recipient tax invoices which facilitated payment for your work completed.

You do not maintain any Intellectual property and rights to all items created by you.

Relevant legislative provisions

Income Tax Assessment Act 1997 section 6-10

Income Tax Assessment Act 1997 Part 2-42

Income Tax Assessment Act 1997 section 84-5

Reasons for decision

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.

It is not necessary for all the above indicators to be present for a receipt to be considered ordinary income.

Section 84-5 of the Income Tax Assessment Act 1997 (ITAA 1997) defines your ordinary income or statutory income is your personal services income if the income is mainly a reward for your personal efforts or skills.

The fact that the income is payable under a contract does not stop the income being mainly a reward for your personal efforts or skills (subsection 84-5(4) of the ITAA 1997).

Taxation Ruling TR 2001/7 Income Tax: the meaning of personal services income provides the following guidance:

50. Paragraph 1.27 of the Explanatory Memorandum provides the following examples of personal services income:

·         salary or wages;

·         income of a professional person practising on his or her own account without professional assistance for examples, a medical practitioner in a sole practice

·         income payable under a contract which is wholly or principally for the labour or services of a person;

·         income derived by a professional sports person or entertainer for the exercise of his or her professional skills. This does not include income from endorsement by the person of a sponsor's products; and

·         income derived by consultants, for example, computer consultants or engineers from the exercise of personal expertise.

Example: Income that is personal services income is provided in the following paragraphs:

101. Ralph is in partnership with his spouse to provide accounting services and the partnership only has one client.

102. Ralph's spouse does not participate in the partnership activities other than to answer the phone and do the banking. The spouse does not do any of the partnership's principal work.

103. In this situation, Ralph is doing all of the principal work of the partnership and it is Ralph's personal efforts that are generating the partnership income. Accordingly, all of the partnership income would be the personal services income of Ralph. This example has similarities with the facts in Egan v. FC of T (2001) 47 ATR 1180 where Senior Member Pascoe found the facts to be as follows:

"the technical expertise of Mr Egan was the principal or sole reason which enabled TM to derive fees...I am unable to find that any other service of significance was provided...It appears that TM owns some computer and other office type equipment but the accounts of the company do not show any extensive investment in equipment and all indications are that it was no more than a busy computer consultant would have at his home."

In your case you hold the relevant qualifications for your industry. You have been contracted as a SME in your industry to provide education. You are providing expert advice on technical matters as a reviewer, panellist and writer ensuring that the relevant standards are meet.

You expect to receive payment for the completed works, you sign and submit recipient generated tax invoices which are acknowledged through payment to you.

Based on the information provided, the remuneration you are receiving is a result of your held qualifications paid mainly as a reward for your personal efforts and skills. Therefore, the income received from your contracts is personal services income.