Private ruling: Deductions
Date of advice: 25 March 2019
Published: May 2019
Ruling period: Year ended 30 June 2017 | Year ended 30 June 2017 | Year ended 30 June 2018 | Year ending 30 June 2019 | Year ending 30 June 2020 | Year ending 30 June 2021 | Year ending 30 June 2022
Date scheme commenced: 1 July 2016

Ruling: Q1: Is the annual payment you receive from the overseas organization assessable income? | A1: No | Q2: Are you entitled to a deduction for travel, accommodation and incidental expenses? | A2: No

Relevant facts and circumstances: You are a resident of Australia for taxation purposes. You are employed as a professional. You hold a number of associated positions. One of your roles is a voluntary position for which you receive an annual stipend of USD $X. You hold a position with an overseas organisation. You travel to attend meetings. As a result you incurred expenses such as airfares, accommodation, meals, transport (including bus, train, tram, taxi fares, and car hire) and other incidental expenses on an ongoing basis. The total amount of these expenses was $X. The overseas organisation is a not for profit organisation and they cannot pay for all of the expenses associated with the role. You are not paid or reimbursed for the expenses incurred by you to attend events. A letter from the organisation confirms that the role is voluntary and no salary is paid. The letter states that the annual amount you receive is to cover office costs. You receive partial support to travel to official organisational congresses, but no support is paid for travel to other events or meetings. You undertake your role for the overseas organisation alongside your work in Australia. You are not a student of any Australian educational institute.

Relevant legislative provisions: Income Tax Assessment Act 1997 Subsection 6-5(2) | Income tax Assessment Act 1997 Section 8-1.

Reasons for decision: Summary: Subsection 6-5(2) of the Income Tax Assessment Act 1997 (ITAA 1997) provides that the assessable income of an Australian resident includes ordinary income derived directly or indirectly from all sources, whether in or out of Australia, during the income year. 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. Based on case law, it can be said that ordinary income generally includes receipts that are earned, expected, relied upon, and have an element of periodicity, recurrence or regularity. The legislation does not provide specific guidance on the meaning of income according to ordinary concepts. However, a substantial body of case law exists which identifies likely characteristics. In GP International Pipecoaters Pty Ltd v Federal Commissioner of Taxation , the Full High Court stated: To determine whether a receipt is of an income or of a capital nature, various factors may be relevant. Sometimes the character of receipts will be revealed most clearly by their periodicity, regularity or recurrence; sometimes, by the character of a right or thing disposed of in exchange for the receipt; sometimes, by the scope of the transaction, venture or business in or by reason of which money is received and by the recipient's purpose in engaging in the transaction, venture or business. Amounts that are periodical, regular or recurrent, relied upon by the recipient for their regular expenditure and paid to them for that purpose are likely to be ordinary income, as are amounts that are the product in a real sense of any employment of, or services rendered by, the recipient. Ultimately, whether or not a particular receipt is ordinary income depends on its character in the hands of the recipient. The whole of the circumstances must be considered and the motive of the payer may be relevant to this consideration. | Detailed Reasoning - Stipend: The Macquarie Online Dictionary defines a stipend in is fixed or regular pay; periodic payment; salary. Merely referring to a payment as a stipend, however, does not mean that the payment is assessable. | Detailed Reasoning - Honorarium: The Macquarie Online Dictionary defines honorarium as a payment given for professional services that are rendered nominally without charge. An honorarium is a payment or gesture made on personal grounds that is either tangible or intangible and can be referred to as an ex gratia payment, bona fide (or true) honorarium or gift. | Detailed Reasoning - What constitutes a 'True Honorarium'?: The following factors indicate a payment is a true honorarium: ● The payment is received for personal reasons. ● The payment has no connection to the recipient's income-producing activities or services rendered. ● The payment is not received as remuneration or as a consequence of employment. ● The payment is not relied upon or expected by the recipient for day to day living. ● The payment is not legally required or expected. ● There is no obligation on the part of the payer to make the payment. ● The payment is a token amount compared to the services provided or expenses incurred by the recipient. ● The form of the receipt, that is, whether it is received as a lump sum or periodically. ● Whether the payments have been earned. For example, honorary rewards for voluntary services are not assessable income. The payer is not required to withhold amount from non-assessable honoraria. True honorariums are not included in assessable income and are not subject to Pay as you go (PAYG) withholding or instalments. For example, where a person’s activities constitute a pastime or hobby rather than an income producing activity, money and other benefits received from a pursuit of that pastime or hobby are not assessable income. | Detailed Reasoning - Application to your situation: You contend that you are able to take the experience and training from your work in Australia and apply it to the international context and vice versa. Your employer recognises this & allows you time to perform your duties with the overseas organisation. Furthermore, you contend that the prestige of your position with the overseas organisation and the contacts made in travel and meetings related to it brings reputational advantage to your roles in Australia and hence gives you capacity to earn the income from them. You contend that there is a reputational advantage to your employers that they recognise and allow time for you to pursue your role in the overseas organisation, however there is insufficient nexus between your role with the overseas organisation and earning your assessable income through your employment as your duties are significantly different with the overseas organisation, when compared to your role as a professional in Australia. In your case, you have been appointed to the overseas organisation which is a voluntary position. In this position you attend various events, meetings and conferences which entails travelling to various locations around the world. The payment you receive from the organisation is paid for the purposes of assisting with the costs associated with that role. It is considered that the payment is made for personal reasons and the payment has no connection with your income producing activities, or services rendered. Additionally, the organisation specifically states that you as member of the organisation Committee will not be paid any salary or fee for your services rendered. Furthermore, the letter you provided from the organisation supports that your role is voluntary and you are not paid for your services. The payment is not relied upon or expected for day to day living. You are employed by another organisation, and the payment from the organisation is not paid for your services, but rather to assist with the costs involved with the position you hold with the organisation. There is no legal requirement or obligation on the organisation to make the payment and the costs associated with meetings of the organisation are covered by the organisation , or another funding source. The payment from the organisation does not cover the majority of your expenses. Based on the figures provided, the payment from the organisation would not cover half of the costs you incurred in travel and incidentals. It is considered that the payment when compared to the expenses incurred is a token amount. Having considered the nature of the payment from the organisation , it is considered that the payment received by you from the organisation is not assessable income. As your expenses were not incurred in producing assessable income from the organisation , they are not considered an allowable deduction under section 8-1 of the ITAA 1997.