ATO ID 2002/822: Assessability of payments to participants in market research sessions
Date of decision: 5 August 2002
Year of income: 30 June 2002
Business line: Public Groups and International

Issue
Is a payment that was offered to the taxpayer as an incentive to participate in a market research session, assessable income under subsection 6-5(2) of the Income Tax Assessment Act 1997 (ITAA 1997)?

Decision
Yes. A payment that was offered to the taxpayer as an incentive to participate in a market research session is assessable income under subsection 6-5(2) of the ITAA 1997.

Facts
The taxpayer was recruited to participate in a market research session. This essentially involved the taxpayer giving their views and suggestions on various products under development which were shown to the taxpayer during the session. The taxpayer was told at the time they were approached to participate in the market research session that they would be paid for their attendance. The organisation that was conducting the market research intended that the offer of payment act as an incentive for the taxpayer to participate in the market research session. The payment was conditional on the taxpayer attending the session. The taxpayer has attended only one market research session. The taxpayer was subsequently paid for their attendance at the session.

Reasons for decision
Summary: Subsection 6-5(2) of the ITAA 1997 provides that the assessable income of a resident taxpayer includes ordinary income derived directly or indirectly from all sources during the income year. In determining whether an amount is ordinary income, the courts have established the following principles: Relevant factors in determining whether a payment is ordinary income include: Taxation Ruling IT 2639, at paragraph 3, defines 'income from personal services' as 'income that an individual taxpayer earns predominantly as a direct reward for his or her personal efforts by, for example, the provision of services, exercise of skills or the application of labour.' The payment to a taxpayer for services rendered is assessable income, even though the taxpayer does not provide those services as an employee or in carrying on a business ( Brent v. Federal Commissioner of Taxation (1971) 125 CLR 418; 71 ATC 4195; (1971) 2 ATR 563). The courts have held that a voluntary payment or gift is generally ordinary income in the hands of the recipient where the receipt is the product of services rendered by the recipient ( FC of T v. Harris (1979) 37 FLR 325; 79 ATC 4383; (1979) 10 ATR 84). Although the taxpayer might attend only one session and hence receive just the one payment, the absence of regularity of payment in this instance does not indicate that the payment is not ordinary income. The predominant character of the payment is of remuneration for the taxpayer's services. Further, the taxpayer has an expectation that they will be paid for those services. Although not decisive, the fact that the consultant intended the payment as an incentive for the taxpayer to participate in the consultant's market research sessions is indicative that the payment is properly characterised as ordinary income in the hands of the taxpayer. The payment to the taxpayer was made in return for the services that they provided by participating in the market research. The payment falls within the meaning of income from personal services. The income received will therefore be included in the taxpayer's assessable income under subsection 6-5(2) of the ITAA 1997.

Legislative references: Income Tax Assessment Act 1997 subsection 6-5(2)
Case references: Brent v. Federal Commissioner of Taxation (1971) 125 CLR 418 71 ATC 4195 (1971) 2 ATR 563
Related public rulings and determinations: Taxation Ruling IT 2639 | Taxation Ruling TR 92/15
Subject references: Assessable income Producing assessable income Personal services Ordinary income Gifts