Private ruling: Award
Date of advice: 27 May 2019
Published: July 2019
Ruling period: Year ending 30 June 2019 | Year ending 30 June 2020
Date scheme commenced: 1 July 2018

Ruling: Q1: Are the payments you receive in relation to an award included in your assessable income? | A1: Yes

Relevant facts and circumstances: You have an Australian Business Number for the work you undertake in your profession. Entity A offers a yearly award to Australians and offers a cash prize and career development support for the winners. You applied and won the award. The application required you to submit information on your proposed project, CV, sample of work, and letters of support or testimonials for the project. Upon winning the award, you entered into an Agreement with Entity A and a career development provider. The Conditions to Letter of Agreement stated that you are an independent contractor of Entity A. The agreement includes provisions on: ● deliverables and completion date ● payment and professional development ● promotion, indemnity, intellectual property rights, recording, dispute resolution You also agreed to participate in other promotional activities of Entity A. The Entity will pay you an amount plus GST conditional on completion of deliverables and/or receipt of your tax invoices.

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

Reasons for decision: Summary: Your assessable income includes income according to ordinary concepts, which is called ordinary income (section 6-5 of the Income Tax Assessment Act 1997 (ITAA 1997)). Ordinary income has generally been held to include three categories, namely income from rendering personal services, income from property and income from carrying on a business. Other characteristics of income that have evolved from case law include receipts that: ● are earned ● are expected ● are relied upon; and ● have an element of periodicity, recurrence or regularity. In your case, you are an independent contractor of Entity A. Under the terms of the Agreement between you and the entity and the careers development provider, you are required to undertake a project work within a 12 month period, to comply with reporting requirements and to participate in promotional activities. The cash prize is paid conditional to meeting specified deliverables and you issuing your invoices. In addition, the award is not an unsolicited prize or gift; rather, to be eligible to receive the award you submitted an application outlining the project work. You also rely upon the prize with your living expenses while you complete the project. Therefore, the payments you receive for the award are ordinary income and are included in your assessable income under section 6-5 of the ITAA 1997.