Private ruling: Assessability of commission income
Date of advice: 31 March 2016
Published: May 2016
Ruling period: Year ending 30 June 2016 | Year ending 30 June 2017 | Year ending 30 June 2018 | Year ending 30 June 2019
Date scheme commenced: 1 July 2015

Ruling: Question and answer | Is your assessable income limited to the amount of the commission you deduct from the foreign gross payments received?

Relevant facts and circumstances: You live and work In Australia and are a resident of Australia for tax purposes. You have a relative in country X who runs a sales business which sells products to customers in country Y via telephone. The sales are made via credit card and to facilitate the transactions you established credit card merchant facilities in your name through an Australian bank. The credit card sales proceeds are credited to an Australian bank account in your name and you transfer all these funds, less bank fees and a commission of X% you retain, to country X. You have an Australian Business Number (ABN) and include the commission you receive in your assessable income. You are also entering into an arrangement with a friend in relation to another business along the same lines as the existing business. You will also receive a commission of X% for this arrangement.

Relevant legislative provisions: Income Tax Assessment Act 1936 section 6-5

Reasons for decision: Summary: The assessable income of an Australian resident taxpayer includes the ordinary and statutory income derived from all sources whether in or out of Australia. In your case, credit card sales receipts from a business based in a foreign country are credited to an Australian bank account in your name. After bank fees are charged and you deduct your commission of X%, the remaining funds are transferred to the foreign country. You also intend to enter into a new arrangement with another party along the same lines. From the information provided, the remuneration or financial benefit you derive from the business arrangement is limited to the commission you retain. Therefore, your assessable income is limited to the commission you receive for the existing arrangement and will also be limited to the commission you receive for the new arrangement.