Private ruling: Assessable Income
Published: February 2014
Ruling period: Year ended 30 June 2009 | Year ended 30 June 2010
Date scheme commenced: 1 July 2008

Ruling: Q1: Is the income you derived from your activities assessable income? | A1: Yes

Relevant facts and circumstances: You carried out activities. You received payment for these activities. You state these activities were undertaken as a hobby. You began conducting the activities after responding to an advertisement and signed a tax file number (TFN) declaration with the other party. You were required to carry out the activities when rostered. You would carry out these activities on an ad hoc basis. You would train others to carry out these activities on half pay rates. You were not required to provide any equipment or any out of pocket costs in relation to the activities.

Relevant legislative provisions: Income Tax Assessment Act 1997 section 6-5.

Reasons for decision: Summary: Section 6-5 of the Income Tax Assessment Act 1997 (ITAA 1997) states that if you are an Australian resident, your assessable income includes all income derived directly or indirectly from all sources whether in or out of Australia during the income year. Under subsection 6-5(1) of the ITAA an amount is assessable income if it is income according to ordinary concepts (ordinary income). In determining whether an amount is ordinary income, the courts have established the following principles: · what receipts ought to be treated as income must be determined in accordance with the ordinary concepts and usages of mankind, except in so far as a statute dictates otherwise; · whether the payment received is income depends upon a close examination of all relevant circumstances; and · whether the payment received is income is an objective test. Relevant factors in determining whether an amount is ordinary income include: · whether the payment is the product of any employment, services rendered, or any business; · the quality or character of the payment in the hands of the recipient; · the form of the receipt, that is, whether it is received as a lump sum or periodically; and · the motive of the person making the payment. Motive, however, is rarely decisive as in many cases a mixture of motives may exist. No one indicator is decisive. The indicators must be considered in combination and as a whole. Whether income is 'ordinary' depends on the large or general impression gained. You responded to an advertisement seeking applicants. You were required to carry out the activities on a rostered basis and were paid for your services. There were no out of pocket costs associated with the activities. These are all indicators that you were employed by the entity. In addition to the above indicators you completed and signed a TFN declaration. In doing so there is a strong argument that an employer employee relationship was established at this date. Therefore the income derived from the activities is ordinary income and assessable under section 6-5 of the ITAA.