Class Ruling CR 2023/45

What this ruling is about: 1. This Ruling sets out tax consequences of payments made by Western Australian Debating League Incorporated (WADL) to League Members. 2. Details of this scheme are set out in paragraphs 9 to 21 of this Ruling. 3. All legislative references in this Ruling are to the Income Tax Assessment Act 1997 (ITAA 1997). Note: By issuing this Ruling, the ATO is not endorsing this service. Potential participants must form their own view about the service. Who this Ruling applies to 4. This Ruling applies to you if you are an individual that receives a payment from WADL: When this Ruling applies 5. This Ruling applies from 1 July 2022 to 30 June 2024. When this Ruling does not apply 6. This Ruling will not apply to you if: 7. If you are an individual that receives a payment from WADL, and this Ruling does not apply to you, you should discuss your circumstances with your taxation adviser or the ATO. 8. Adjudicator, presenter and honoraria payments you receive from WADL are not assessable as ordinary income for the purposes of section 6-5, nor are they statutory income for the purposes of section 6-10. Losses and outgoings incurred by you in respect of receiving these payments from WADL cannot be claimed as a deduction under section 8-1 or any other provision of the ITAA 1997. 9. The following description of the scheme is based on information provided by the applicant. If the scheme is not carried out as described, this Ruling cannot be relied upon. Western Australian Debating League 10. WADL is a charity registered with the Australian Charities and Not-for-profits Commission. 11. The following is contained within the Constitution of Western Australian Debating League Incorporated dated 15 January 1997 which was last amended on 3 October 2022: 12. WADL makes payments [1] to League Members for the following activities: 13. The maximum amount WADL pays to any individual League Member to adjudicate or present at WADL events is $3,400 per annum. 14. The maximum amount WADL pays to any individual in honoraria payments over a year is $5,000 per annum. 15. Payments for WADL activities are paid out on a fortnightly cycle and are made subject to the following: 16. Adjudicators and presenters are free to decline engagements. As a matter of courtesy, WADL ensures League Members who are adjudicators are given 3 debates a week during the debating season. Access to WADL programs is subject to passing written and verbal tests in addition to a practicum. 17. League Members engaged by WADL to participate in adjudicator or presenter activities are expected to act in accordance with WADL's Volunteer Code of Conduct which was last updated on 7 February 2020. 18. WADL provides each League Member with a copy of their Volunteer Agreement which was last updated on 6 February 2020. This document sets out the mutual expectations and responsibilities of WADL and their Volunteers. League Members are asked to sign this Agreement to acknowledge that it has been read and that they have had an opportunity to ask questions prior to their engagement as adjudicators or presenters in WADL events. 19. Adjudicators or presenters are required to incur their own expenditure including travel, pens, paper and other relevant equipment. Adjudicators or presenters are advised not to expect reimbursement or payment for participating in events as payments are at the discretion of the volunteer executive committee. 20. The purpose of the adjudicator and presenter payments is to encourage members of the community to participate in debating activities by subsidising costs associated with involvement. These activities provide an opportunity for League Members with a keen interest in debating to develop their public speaking skills and meet friends on a regular basis. 21. WADL currently engages approximately 40 League Members in adjudicator or presenter activities who are involved in WADL events for an average of 3 years. Commissioner of Taxation 23 August 2023 Payment is not included in assessable income 22. A payment or other benefit received by a taxpayer is included in assessable income if it is: Ordinary income 23. Subsection 6-5(1) provides that an amount is included in your assessable income if it is income according to ordinary concepts. 24. The legislation does not provide specific guidance on the meaning of income according to ordinary concepts. However, a substantial body of case law exists which identifies likely characteristics. 25. In GP International Pipecoaters Pty Ltd v Commissioner of Taxation (Cth) [2] , the Full High Court stated: 26. Amounts that are periodical, regular or recurrent, relied upon by a recipient for their regular expenditure and paid to them for that purpose are likely to be ordinary income, as are amounts that are the product in a real sense of any employment of, or services rendered by, the recipient. [3] Amounts paid in substitution for salary or wages foregone or lost may also be ordinary income. [4] 27. Ultimately, whether or not a particular receipt is ordinary income depends on its character in the hands of the recipient. [5] The whole of the circumstances must be considered [6] and the motive of the payer may be a relevant consideration. [7] 28. In Scott, Windeyer J considered whether a gratuitous payment to the taxpayer's solicitor was income. His Honour held that, to be income, the gratuitous payment had to be, in a relevant sense, a product of the donee's income-producing activities. In The Commissioner of Taxation of the Commonwealth of Australia v Harris, G.O. [8] , a bank made a lump sum payment to supplement a former employee's pension so as to alleviate the negative effects of high inflation. The majority held that the payment was not a product of the former employment relationship and this was an important element in finding that the payment was not income. 29. Where a taxpayer's activities constitute a pastime or hobby rather than an income-producing activity, money and other benefits received from the pursuit of that pastime or hobby will not be included in their assessable income as ordinary income, even if the receipts are regular or periodical. 30. A pastime or hobby can be described as a social or personal pursuit of a non-commercial nature. Amounts received from engaging in a pastime or hobby are generally not intended to, and often do not, cover expenses. 31. The activities of League Members that participate as adjudicators and presenters in WADL events and that assist with WADL's operations are a social or personal pursuit of a non-commercial nature and constitute a pastime or hobby. Consequently, the payments received are not assessable as ordinary income. 32. In forming the opinion that the League Members are engaged in a pastime or hobby, the following factors have been taken into account: 33. These factors when considered together, lead to the conclusion that the amounts received by League Members to adjudicate or present at debating events or as an honoraria payment are not ordinary income under subsection 6-5(1). Statutory income 34. Section 6-10 provides that your assessable income includes statutory income amounts that are not ordinary income but are included as assessable income by another provision. 35. These amounts are called statutory income. A list of the statutory income provisions can be found in section 10-5. The most relevant provision to consider for the League Members is the potential operation of section 15-2. 36. Subsection 15-2(1) states that: 37. Amounts that are a reward or remuneration for services rendered, or a product, incident or consequence of employment, come within the scope of subsection 15-2(1). 38. League Members covered by this Ruling are not considered to be employees of WADL or any affiliated member associations. The payments are considered to be incidental to a pastime or hobby and not a product or incident of any employment or a reward for services rendered by them. As such, the payments are not assessable under section 15-2. 39. As the adjudicator, presenter and honoraria payments are neither ordinary nor statutory income, they are not assessable income of the League Members who receive them. General deductions 40. As the payments received by League Members are not assessable income, all losses and outgoings that are incurred in connection with these activities are not allowable as deductions under section 8-1. Nor will a deduction be allowable under any other provision of the ITAA 1997. © AUSTRALIAN TAXATION OFFICE FOR THE COMMONWEALTH OF AUSTRALIA You are free to copy, adapt, modify, transmit and distribute this material as you wish (but not in any way that suggests the ATO or the Commonwealth endorses you or any of your services or products).

Class of entities or scheme: 9. The following description of the scheme is based on information provided by the applicant. If the scheme is not carried out as described, this Ruling cannot be relied upon. | Western Australian Debating League: 10. WADL is a charity registered with the Australian Charities and Not-for-profits Commission. 11. The following is contained within the Constitution of Western Australian Debating League Incorporated dated 15 January 1997 which was last amended on 3 October 2022: 12. WADL makes payments [1] to League Members for the following activities: 13. The maximum amount WADL pays to any individual League Member to adjudicate or present at WADL events is $3,400 per annum. 14. The maximum amount WADL pays to any individual in honoraria payments over a year is $5,000 per annum. 15. Payments for WADL activities are paid out on a fortnightly cycle and are made subject to the following: 16. Adjudicators and presenters are free to decline engagements. As a matter of courtesy, WADL ensures League Members who are adjudicators are given 3 debates a week during the debating season. Access to WADL programs is subject to passing written and verbal tests in addition to a practicum. 17. League Members engaged by WADL to participate in adjudicator or presenter activities are expected to act in accordance with WADL's Volunteer Code of Conduct which was last updated on 7 February 2020. 18. WADL provides each League Member with a copy of their Volunteer Agreement which was last updated on 6 February 2020. This document sets out the mutual expectations and responsibilities of WADL and their Volunteers. League Members are asked to sign this Agreement to acknowledge that it has been read and that they have had an opportunity to ask questions prior to their engagement as adjudicators or presenters in WADL events. 19. Adjudicators or presenters are required to incur their own expenditure including travel, pens, paper and other relevant equipment. Adjudicators or presenters are advised not to expect reimbursement or payment for participating in events as payments are at the discretion of the volunteer executive committee. 20. The purpose of the adjudicator and presenter payments is to encourage members of the community to participate in debating activities by subsidising costs associated with involvement. These activities provide an opportunity for League Members with a keen interest in debating to develop their public speaking skills and meet friends on a regular basis. 21. WADL currently engages approximately 40 League Members in adjudicator or presenter activities who are involved in WADL events for an average of 3 years. Commissioner of Taxation 23 August 2023

Ruling: 1. This Ruling sets out tax consequences of payments made by Western Australian Debating League Incorporated (WADL) to League Members. 2. Details of this scheme are set out in paragraphs 9 to 21 of this Ruling. 3. All legislative references in this Ruling are to the Income Tax Assessment Act 1997 (ITAA 1997). Note: By issuing this Ruling, the ATO is not endorsing this service. Potential participants must form their own view about the service. | Who this Ruling applies to: 4. This Ruling applies to you if you are an individual that receives a payment from WADL: | When this Ruling applies: 5. This Ruling applies from 1 July 2022 to 30 June 2024. | When this Ruling does not apply: 6. This Ruling will not apply to you if: 7. If you are an individual that receives a payment from WADL, and this Ruling does not apply to you, you should discuss your circumstances with your taxation adviser or the ATO. 8. Adjudicator, presenter and honoraria payments you receive from WADL are not assessable as ordinary income for the purposes of section 6-5, nor are they statutory income for the purposes of section 6-10. Losses and outgoings incurred by you in respect of receiving these payments from WADL cannot be claimed as a deduction under section 8-1 or any other provision of the ITAA 1997. 9. The following description of the scheme is based on information provided by the applicant. If the scheme is not carried out as described, this Ruling cannot be relied upon. | Western Australian Debating League: 10. WADL is a charity registered with the Australian Charities and Not-for-profits Commission. 11. The following is contained within the Constitution of Western Australian Debating League Incorporated dated 15 January 1997 which was last amended on 3 October 2022: 12. WADL makes payments [1] to League Members for the following activities: 13. The maximum amount WADL pays to any individual League Member to adjudicate or present at WADL events is $3,400 per annum. 14. The maximum amount WADL pays to any individual in honoraria payments over a year is $5,000 per annum. 15. Payments for WADL activities are paid out on a fortnightly cycle and are made subject to the following: 16. Adjudicators and presenters are free to decline engagements. As a matter of courtesy, WADL ensures League Members who are adjudicators are given 3 debates a week during the debating season. Access to WADL programs is subject to passing written and verbal tests in addition to a practicum. 17. League Members engaged by WADL to participate in adjudicator or presenter activities are expected to act in accordance with WADL's Volunteer Code of Conduct which was last updated on 7 February 2020. 18. WADL provides each League Member with a copy of their Volunteer Agreement which was last updated on 6 February 2020. This document sets out the mutual expectations and responsibilities of WADL and their Volunteers. League Members are asked to sign this Agreement to acknowledge that it has been read and that they have had an opportunity to ask questions prior to their engagement as adjudicators or presenters in WADL events. 19. Adjudicators or presenters are required to incur their own expenditure including travel, pens, paper and other relevant equipment. Adjudicators or presenters are advised not to expect reimbursement or payment for participating in events as payments are at the discretion of the volunteer executive committee. 20. The purpose of the adjudicator and presenter payments is to encourage members of the community to participate in debating activities by subsidising costs associated with involvement. These activities provide an opportunity for League Members with a keen interest in debating to develop their public speaking skills and meet friends on a regular basis. 21. WADL currently engages approximately 40 League Members in adjudicator or presenter activities who are involved in WADL events for an average of 3 years. Commissioner of Taxation 23 August 2023 | Payment is not included in assessable income: 22. A payment or other benefit received by a taxpayer is included in assessable income if it is: | Ordinary income: 23. Subsection 6-5(1) provides that an amount is included in your assessable income if it is income according to ordinary concepts. 24. The legislation does not provide specific guidance on the meaning of income according to ordinary concepts. However, a substantial body of case law exists which identifies likely characteristics. 25. In GP International Pipecoaters Pty Ltd v Commissioner of Taxation (Cth) [2] , the Full High Court stated: 26. Amounts that are periodical, regular or recurrent, relied upon by a recipient for their regular expenditure and paid to them for that purpose are likely to be ordinary income, as are amounts that are the product in a real sense of any employment of, or services rendered by, the recipient. [3] Amounts paid in substitution for salary or wages foregone or lost may also be ordinary income. [4] 27. Ultimately, whether or not a particular receipt is ordinary income depends on its character in the hands of the recipient. [5] The whole of the circumstances must be considered [6] and the motive of the payer may be a relevant consideration. [7] 28. In Scott, Windeyer J considered whether a gratuitous payment to the taxpayer's solicitor was income. His Honour held that, to be income, the gratuitous payment had to be, in a relevant sense, a product of the donee's income-producing activities. In The Commissioner of Taxation of the Commonwealth of Australia v Harris, G.O. [8] , a bank made a lump sum payment to supplement a former employee's pension so as to alleviate the negative effects of high inflation. The majority held that the payment was not a product of the former employment relationship and this was an important element in finding that the payment was not income. 29. Where a taxpayer's activities constitute a pastime or hobby rather than an income-producing activity, money and other benefits received from the pursuit of that pastime or hobby will not be included in their assessable income as ordinary income, even if the receipts are regular or periodical. 30. A pastime or hobby can be described as a social or personal pursuit of a non-commercial nature. Amounts received from engaging in a pastime or hobby are generally not intended to, and often do not, cover expenses. 31. The activities of League Members that participate as adjudicators and presenters in WADL events and that assist with WADL's operations are a social or personal pursuit of a non-commercial nature and constitute a pastime or hobby. Consequently, the payments received are not assessable as ordinary income. 32. In forming the opinion that the League Members are engaged in a pastime or hobby, the following factors have been taken into account: 33. These factors when considered together, lead to the conclusion that the amounts received by League Members to adjudicate or present at debating events or as an honoraria payment are not ordinary income under subsection 6-5(1). | Statutory income: 34. Section 6-10 provides that your assessable income includes statutory income amounts that are not ordinary income but are included as assessable income by another provision. 35. These amounts are called statutory income. A list of the statutory income provisions can be found in section 10-5. The most relevant provision to consider for the League Members is the potential operation of section 15-2. 36. Subsection 15-2(1) states that: 37. Amounts that are a reward or remuneration for services rendered, or a product, incident or consequence of employment, come within the scope of subsection 15-2(1). 38. League Members covered by this Ruling are not considered to be employees of WADL or any affiliated member associations. The payments are considered to be incidental to a pastime or hobby and not a product or incident of any employment or a reward for services rendered by them. As such, the payments are not assessable under section 15-2. 39. As the adjudicator, presenter and honoraria payments are neither ordinary nor statutory income, they are not assessable income of the League Members who receive them. | General deductions: 40. As the payments received by League Members are not assessable income, all losses and outgoings that are incurred in connection with these activities are not allowable as deductions under section 8-1. Nor will a deduction be allowable under any other provision of the ITAA 1997. © AUSTRALIAN TAXATION OFFICE FOR THE COMMONWEALTH OF AUSTRALIA You are free to copy, adapt, modify, transmit and distribute this material as you wish (but not in any way that suggests the ATO or the Commonwealth endorses you or any of your services or products).


Appendix: Payment is not included in assessable income: 22. A payment or other benefit received by a taxpayer is included in assessable income if it is: | Ordinary income: 23. Subsection 6-5(1) provides that an amount is included in your assessable income if it is income according to ordinary concepts. 24. The legislation does not provide specific guidance on the meaning of income according to ordinary concepts. However, a substantial body of case law exists which identifies likely characteristics. 25. In GP International Pipecoaters Pty Ltd v Commissioner of Taxation (Cth) [2] , the Full High Court stated: 26. Amounts that are periodical, regular or recurrent, relied upon by a recipient for their regular expenditure and paid to them for that purpose are likely to be ordinary income, as are amounts that are the product in a real sense of any employment of, or services rendered by, the recipient. [3] Amounts paid in substitution for salary or wages foregone or lost may also be ordinary income. [4] 27. Ultimately, whether or not a particular receipt is ordinary income depends on its character in the hands of the recipient. [5] The whole of the circumstances must be considered [6] and the motive of the payer may be a relevant consideration. [7] 28. In Scott, Windeyer J considered whether a gratuitous payment to the taxpayer's solicitor was income. His Honour held that, to be income, the gratuitous payment had to be, in a relevant sense, a product of the donee's income-producing activities. In The Commissioner of Taxation of the Commonwealth of Australia v Harris, G.O. [8] , a bank made a lump sum payment to supplement a former employee's pension so as to alleviate the negative effects of high inflation. The majority held that the payment was not a product of the former employment relationship and this was an important element in finding that the payment was not income. 29. Where a taxpayer's activities constitute a pastime or hobby rather than an income-producing activity, money and other benefits received from the pursuit of that pastime or hobby will not be included in their assessable income as ordinary income, even if the receipts are regular or periodical. 30. A pastime or hobby can be described as a social or personal pursuit of a non-commercial nature. Amounts received from engaging in a pastime or hobby are generally not intended to, and often do not, cover expenses. 31. The activities of League Members that participate as adjudicators and presenters in WADL events and that assist with WADL's operations are a social or personal pursuit of a non-commercial nature and constitute a pastime or hobby. Consequently, the payments received are not assessable as ordinary income. 32. In forming the opinion that the League Members are engaged in a pastime or hobby, the following factors have been taken into account: 33. These factors when considered together, lead to the conclusion that the amounts received by League Members to adjudicate or present at debating events or as an honoraria payment are not ordinary income under subsection 6-5(1). | Statutory income: 34. Section 6-10 provides that your assessable income includes statutory income amounts that are not ordinary income but are included as assessable income by another provision. 35. These amounts are called statutory income. A list of the statutory income provisions can be found in section 10-5. The most relevant provision to consider for the League Members is the potential operation of section 15-2. 36. Subsection 15-2(1) states that: 37. Amounts that are a reward or remuneration for services rendered, or a product, incident or consequence of employment, come within the scope of subsection 15-2(1). 38. League Members covered by this Ruling are not considered to be employees of WADL or any affiliated member associations. The payments are considered to be incidental to a pastime or hobby and not a product or incident of any employment or a reward for services rendered by them. As such, the payments are not assessable under section 15-2. 39. As the adjudicator, presenter and honoraria payments are neither ordinary nor statutory income, they are not assessable income of the League Members who receive them. | General deductions: 40. As the payments received by League Members are not assessable income, all losses and outgoings that are incurred in connection with these activities are not allowable as deductions under section 8-1. Nor will a deduction be allowable under any other provision of the ITAA 1997. © AUSTRALIAN TAXATION OFFICE FOR THE COMMONWEALTH OF AUSTRALIA You are free to copy, adapt, modify, transmit and distribute this material as you wish (but not in any way that suggests the ATO or the Commonwealth endorses you or any of your services or products).


What this Ruling is about | If this Ruling applies to you, and you correctly rely on it, we will apply the law to you in the way set out in this Ruling. That is, you will not pay any more tax or penalties or interest in respect of the matters covered by this Ruling. | 10. League Member prerequisites | Membership of the League shall be open to any natural person over the age of 16 or an entity who supports the objects and purposes of the league. No cost or subscription shall be levied onto members or be used to determine eligibility of members. | 16. League membership is required to participate in activities of the League | Agents of the League including but not limited to adjudicators, presenters, Board members, Executive Members or Department Members must be League Members. | …To determine whether a receipt is of an income or of a capital nature, various factors may be relevant. Sometimes the character of receipts will be revealed most clearly by their periodicity, regularity or recurrence; sometimes, by the character of a right or thing disposed of in exchange for the receipt; sometimes, by the scope of the transaction, venture or business in or by reason of which money is received and by the recipient's purpose in engaging in the transaction, venture or business. | Your assessable income includes the value to you of all allowances, gratuities, compensation, benefits, bonuses and premiums provided to you in respect of, or for or in relation directly or indirectly to, any employment of or services rendered by you …


Legislative references: ITAA 1997 6-5 ITAA 1997 6-5(1) ITAA 1997 6-10 ITAA 1997 8-1 ITAA 1997 10-5 ITAA 1997 15-2 ITAA 1997 15-2(1)
Case references: Commissioner of Taxation (Cth) v Dixon [1952] HCA 65 86 CLR 540 [1953] ALR 17 10 ATD 82 26 ALJ 505