Private ruling: Assessable income
Published: February 2014
Ruling period: Year ended 30 June 2013
Date scheme commenced: 1 July 2012

Ruling: Q1: Are the support payments assessable income? | A1: Yes

Relevant facts and circumstances: You are a member of an Australian sporting team. You have received the following payments: · an allowance · scholarship payment · support payments · Commercial sponsorship/endorsement The payments you receive are seasonal and increase significantly around the time the Olympics are held. Outside of the "Olympics window', the commercial sponsorship/endorsement payments is very limited. The opportunity to receive payment from commercial sponsorship/endorsement is not your main objective in playing sport. Your main objective for playing sport is to represent Australia. The training requirements of your sporting team make it difficult for you to hold a position of ordinary employment. You are reliant on the support payments to meet everyday living costs, such as rent.

Relevant legislative provisions: Income Tax Assessment Act 1997 Section 6-5 | Income Tax Assessment Act 1997 Section 995-1

Reasons for decision: Detailed Reasoning - Being in the business of participating in sport: Business is defined by Section 955-1 of the Income Tax Assessment Act 1997 (ITAA 1997) as including any profession, trade, employment, vocation or calling, but does not include occupation as an employee. Taxation Ruling 1999/17 provides the Commissioner's view on when a person may be in the business of participating in a sport. Paragraph 29 of TR 1999/17 provides that a business of participating in sport includes: · the commercial exploitation of skill developed as a pastime or hobby; and · the commercial exploitation of skills developed and used in the pursuit of sporting excellence. Whether an activity constitutes the carrying on of a business can only be determined by considering all the relevant facts and circumstances. A business includes the exploitation of personal skills in a commercial way for the purpose of gaining reward therefore it is necessary to consider all relevant facts surrounding amounts received in relation to your sporting activities. In the case of Commissioner of Taxation v Stone [2005] HCA 21 it was held that a person who was employed as a police officer who competed as an Olympic athlete was in the business of being a sportsperson where they received both government grants and sponsorship payments even where her principle motivation was the pursuit of excellence as opposed to commercially exploiting her skills. Gleeson CJ, Gummow, Hayne and Heydon JJ at 61,71: "Once it is accepted, as the taxpayer did, that the sums paid by sponsors to her, in cash or kind, formed part of her assessable income, the conclusion that she had turned her sporting ability to account for money is inevitable. The sponsorship agreements cannot be put into a separate category marked "business", with other receipts being put into a category marked "sport"…… But the sponsorship arrangements show not only that the taxpayer made those arrangements to assist her pursuit of athletic activities but also that she was able to make them because of her pursuit of those activities. Having this dual aspect, the sponsorship agreements cannot be segregated from other aspects of her athletic activities." The facts in Stone are on point with your circumstances in that you have received a range of payments related to your sporting pursuits. The most prominent of these are payments for sponsorship and endorsement. This strongly suggests a commercial exploitation of your sporting skills that has progressed past a hobby or recreational pursuit. Further in support of the proposition that you are in the business of being a sportsperson is that you are not otherwise employed due to the regimented training requirements. You have contended that your primary reason for playing sport is to represent Australia and not to provide opportunity to receive payment from sponsorship/endorsement. While your intention is relevant it does not change the fact that you have taken opportunities to commercially exploit your sporting ability, opportunities that only became available to you through your pursuit of sporting excellence. Consequently in taking a holistic view of your entire factual circumstances you are in the business of being a sportsperson. | Detailed Reasoning - Ordinary Income: Section 6-5 of the ITAA 1997 provides that assessable income is income according to ordinary concepts. While ordinary concepts of income is not defined within the Act but must be referenced with the common law. In Scott v FCT (1966) 117 CLR 514 it was held that whether or not a particular receipt is ordinary income depends on its character in the hands of the recipient. The support payments are voluntary payments made to athletes to assist in maintaining their training regimes and to allow them to participate at the high level in their chosen sport. Paragraph 13 of TR 1999/17 provides that an 'occasional' voluntary payment or benefit is assessable income when received in relation to a sporting activity of which you are considered to be in the business of. As discussed above in your circumstances you are in the business of participating in sport therefore you cannot separate the support payments from those other payments received such as the sponsorship/endorsement amounts. The payments are proceeds from your business of playing sport therefore they are assessable income under the ordinary concepts under section 6-5 of the ITAA 1997 being the proceeds of your business.