Private ruling: PAYG Withholding
Date of advice: 29 February 2024
Published: 22 April 2024
Ruling period: Income year ended 30 June 202X | Income year ended 30 June 202X | Income year ended 30 June 202X | Income year ended 30 June 202X | Income year ended 30 June 202X
Date scheme commenced: 1 July 202X

Ruling: Q1: Is there an obligation on you to withhold from payments made to players under Division 12 of Schedule 1 to the Taxation Administration Act 1953 (TAA)? | A1: No, where the players have provided a written statement that they are undertaking a hobby.

Relevant facts and circumstances: You are a sporting club. You make participation payments to your players. The amount of the payment varies and depends on the outcome of each match. All players either participate in another form of paid employment or study. All players play for social reasons and do not rely on the payments to pay their living expenses.

Relevant legislative provisions: Taxation Administration Act 1953 section 12-35 of Schedule 1 | Taxation Administration Act 1953 section 12-190 of Schedule 1

Reasons for decision: Summary: Division 12 in Schedule 1 of the Taxation Administration Act 1953 (TAA) outlines the situations where a paying entity is obliged to withhold part of an amount paid to another entity. The withheld amount is referred to as PAYG Withholding. PAYG withholding must be withheld where a payment of salary, wages, commission, bonus or allowance is made to an individual as an employee or office holder. An entity is not required to withhold from a payment where the whole of the payment is not included as part of the recipient's assessable income. Taxation Ruling TR 1999/17 discusses the Commissioner's views on whether receipts and other benefits paid to sportspeople are assessable income. The ruling states that a payment or other benefit received by a sportsperson is assessable income if it is: • income in the ordinary sense of the word, or • an amount or benefit that through the operation of the provisions of the tax law is included in assessable income. This includes non-cash benefits that may not be ordinary income. However, where a person's sporting activities constitute a pastime or hobby rather than an income-producing activity, money and other benefits received from the pursuit of that hobby are not assessable income, nor are the expenses allowable deductions. Participation in activities generating pastime or hobby receipts is a social or personal pursuit of a non-commercial nature. Pastime receipts are not intended to, nor do they usually, cover expenses. Even regular receipts obtained from a pastime or hobby are still characterised as receipts from a pastime or hobby and accordingly are not assessable income. Example 7 of TR 1999/17 describes a situation where regular payments for participating in a sporting activity do not form part of their assessable income: Tony is an accountant by profession. Tony plays football on the weekends. The club he plays for gives him $100 for every game he plays. Tony does not play football to earn income for his regular expenditures. Nor are his receipts paid to provide financial support for Tony or relied on by Tony for that purpose. His motivation in playing football is personal; he does not do it as, nor does he intend it to become, an income producing activity. In a year Tony receives $3000 for playing football. Tony's expenses exceed $3000. Tony lodges an 'Application for a Private Ruling' at his local branch of the Australian Taxation Office (ATO) requesting a determination of whether his receipts from football should be included as assessable income. The ATO advises Tony that based on the facts supplied by him, his receipts are not assessable income. In your situation you make payments to players based on the outcome of matches they have participated in. The players study or work in other professions during the working week, are pursuing an interest in the game and do not rely on the payments to cover their regular living expenses. Therefore, the match payments the player receives will be considered receipts relating to a pastime or hobby and the payments to the player will not form part of their assessable income. Payers are not required to withhold an amount from a payment where no ABN has been provided by a supplier if the supplier is an individual and has given the payer a written statement declaring that they are either involved in the activity as a hobby or recreational pursuit or that their involvement in the activity is purely private in nature and the payer has no reasonable grounds to believe that the statement is false or misleading in a material particular. Consequently, where the players provide a written statement stating they are providing their services as part of the pursuit of a private reaction or hobby there is no obligation on the club to withhold from payments made to players. | Detailed Reasoning - Further issues for you to consider: If a player is unsure if the payments received are in relation to a hobby or pastime they may apply for a private ruling on this topic.