Private ruling: Assessability of consultancy income
Date of advice: 8 December 2015
Published: February 2016
Ruling period: Year ending 30 June 2016
Date scheme commenced: 1 July 2015

Ruling: Question and answer | Does the consultancy income form part of your assessable income? | No.

Relevant facts and circumstances: You are a salaried employee of an Australian organisation. You also have a consultancy business which has an ABN but is not registered for GST. You individually contracted to undertake a consultancy project with an international organisation. You are undertaking the consultancy on behalf of your Australian employer and on work time. Due to the requirements of the international organisation, it was not possible for the consultancy to be undertaken directly by your employer. Your employer approved the consultancy arrangement in your name individually on the basis that the international organisation only contracts with individuals for funding amounts of under a certain amount. Your employer is hopeful that your consultancy may lead to tender opportunities for your employer to contract with the international organisation directly for larger funding amounts in the future. Your employer's approval of the consultancy arrangement requires you to pay any amount you receive from the international organisation to your employer. To facilitate payment, you will advise your employer of the actual amount received and your employer will invoice you personally for that amount.

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) provides that the assessable income of a resident taxpayer includes income according to ordinary concepts (ordinary income) derived from all sources, whether in or out of Australia, during the income year. In your case, you are a salaried employee of an Australian organisation who contracted individually with an international organisation to undertake an overseas consultancy project. The remuneration derived from the consultancy is payable to you personally; however, you are undertaking the consultancy on behalf of your employer and on work time. To enable you to accept the consultancy, your employer had to give you approval and part of that approval is that you have to pay the remuneration you receive from the consultancy to your employer. Based on the documentation provided, it is evident that the income derived from the consultancy will be passed on to your Australian employer and is not yours to use for your own benefit. Therefore, the income derived from the consultancy is not required to be included in your assessable income.