Private ruling: Taxation of income
Published: June 2015
Ruling period: Year ended 30 June 2015
Date scheme commenced: 1 July 2014

Ruling: Q1: Is the payment that you receive considered to be assessable income under section 6-5 of the Income Tax Assessment Act 1997 ? | A1: Yes.


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

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. Income is generally assessable under section 6-5 of the ITAA 1997. Under section 6-5 of the ITAA 1997 assessable income is made up of ordinary income and statutory income. Under subsection 6-5(1) of the ITAA 1997 ordinary income means income 'according to ordinary concepts'. This phrase is not defined under the legislation, but a large body of case law has developed to identify the factors that indicate if an amount is income according to ordinary concepts. The courts have identified a number of factors that indicate if a payment has the character of income. No one factor is decisive and each fact situation must be examined to determine if the particular payment can be characterised as income according to ordinary concepts. Payments for salary and wages and those made in return for services provided would ordinarily be regarded as income by mankind. As such, they would be assessable as ordinary income under section 6-5 of the ITAA 1997. Paragraph 25 of Taxation Ruling (TR) 1999/17 provide that income received for services provided outside of a formal employment contract can also be considered to be income according to ordinary concepts. Although TR 1999/17 considers the aspect from the point of a sportsperson, the concept outlined can be applied to the situation of any other taxpayer. Paragraph 25 of TR 1999/17 states: The provision or rendering of services consists of the doing of an act for the benefit of another, which is more than the mere making of a contract and which goes beyond the performance of an obligation undertaken in the course of an ordinary commercial contract ( Revesby Credit Union v FC of T 112 CLR 564). Accordingly, a sportsperson will only be providing a service where they are undertaking an activity for the benefit of another party; usually this will be the payer. The provision of services includes, for example, the performing of specific administrative, technical or promotional services of direct benefit for the payers. Such payments are typically 'tied to' and 'based on' activities undertaken, or hours spent performing duties, that produce objective and tangible (often monetary) benefits for the payer. In your case, once a week you go to the premises of an organisation and perform tasks. In return for those duties, you are paid a set amount. Therefore in line with TR 1999/17, you would be regarded as receiving the payment in return for services provided. Given this situation, the payment will constitute ordinary income to you and therefore will be assessable under section 6-5 of the ITAA 1997.

Relevant facts: You work one day a week for an organisation and you perform a range of duties when you are working. You are paid a set amount for each day's work.