Class Ruling CR 2005/44
Date of effect: 1 July 2004


Class of entities or scheme: 3. The class of persons to which this Ruling applies is sporting officials who receive payments for officiating in indoor sporting matches conducted at the Howzat Newcastle Indoor Sporting Centre (Howzat). | Qualifications: 4. The Commissioner makes this Ruling based on the precise arrangement identified in this Ruling. 5. The class of persons defined in this Ruling may rely on its contents provided the arrangement actually carried out is carried out in accordance with the arrangement described in paragraphs 9 to 22. 6. If the arrangement actually carried out is materially different from the arrangement that is described in this Ruling, then: 7. This work is copyright. Apart from any use as permitted under the Copyright Act 1968 , no part may be reproduced by any process without prior written permission from the Commonwealth. Requests and inquiries concerning reproduction and rights should be addressed to: 8. This Ruling applies from 1 July 2004. However, this Ruling does not apply to taxpayers to the extent that it conflicts with the terms of settlement of a dispute agreed to before the date of issue of the Ruling (see paragraphs 21 to 22 of Taxation Ruling TR 92/20). Furthermore, the Ruling only applies to the extent that: 9. The arrangement that is the subject of the Ruling is described below. This description is based on the following documents and telephone records which are attached to the file record maintained by the Tax Office for this ruling. These documents, or relevant parts of them, as the case may be, form part of and are to be read with this description. The relevant documents or part of documents incorporated into this description of the arrangement are: 10. Howzat is an indoor sporting centre providing for sports such as cricket, netball, volleyball and soccer. Additionally there is a gymnasium and a childcare facility. Howzat is a commercial business that charges the general public fees for use of the facilities and the services of its staff. 11. A number of individuals are recruited to officiate at the various sports offered. These individuals are tested to ensure that they have the required knowledge and ability. They are continually monitored to ensure that they perform to the required standard. 12. The officials are placed on a weekly roster stating when and how many matches they will officiate per week. The number of matches that an official will be required for is governed by a minimum and maximum policy at Howzat. On average each official would officiate in 6 matches per week. 13. Howzat determines when the official is to start and finish and when the games will be scheduled. 14. The officials receive an amount per match at a rate determined by Howzat. The officials are paid for the actual number of matches officiated and not for the amount of time that they are there. The earnings achievable by the officials are limited due to Howzat's policy of minimum and maximum matches per week that an official can participate in. 15. At the end of each shift the officials are required to submit a time sheet indicating number of matches officiated, the rate per match and the total owed to them. This sheet is co-signed by a manager. 16. The officials pay for their own uniforms, obtained from Howzat, via a set amount withheld from their match payments. The official provides no other assets or materials. 17. Officials are unable to delegate their duties to third parties. If the official is unable to perform the service, then it is Howzat who determines the replacement. 18. Howzat carries insurance with regard to any risk associated with the matches at which the official officiates. 19. Where there is any dispute as to how a rule of a sporting competition is to be interpreted, Howzat through its managers and senior officers will decide how that rule is to be interpreted and applied. All sporting officials are required to follow the decision that Howzat has made. 20. To ensure the safety of the competitors in a sport, Howzat may direct that the competitors have and use mouthguards, helmets, pads or other safety equipment. Howzat may direct that competitors do not take onto the court jewellery or other items that may be hazardous to their team mates and opponents. Sporting officials are required to enforce all safety requirements as directed by Howzat. 21. Howzat has processes in place where it can investigate complaints about the performance and behaviour of the sporting officials and if necessary take appropriate action. 22. Sporting officials may report inappropriate behaviour by the players, coaches and team managers of the competing teams. Any decision to fine, suspend or ban a player, coach or team manager will be made by Howzat. 23. The match fees paid to officials who officiate at matches for Howzat are assessable income under section 6-5 of the ITAA 1997. 24. A payment or other benefit received by a taxpayer is assessable income if it is: | Ordinary income: 25. Under subsection 6-5(1) of the ITAA 1997 an amount is assessable income if it is income according to ordinary concepts (ordinary income). 26. In determining whether an amount is ordinary income, the courts have established the following principles: 27. Relevant factors in determining whether an amount is ordinary income include: 28. It is appropriate to look at the nature of the relationship between the officials and Howzat when considering the first and last of the factors listed in paragraph 27. 29. It is part of the business of Howzat to run sporting competitions for a fee. To effectively operate a sporting competition, Howzat provides its clients with access to a court suitable for the sport and balls, nets, goals and officials as required. The services of the sporting official are an integral part of the sporting competition that clients of Howzat are purchasing. 30. The relationship between an employer and an employee is a contractual one. It is often referred to as a contract of service. An employee contracts to provide their labour, typically to enable the employer to achieve a result. 31. The officials provide their service of the labour by officiating in matches conducted at Howzat's premises and for the purpose of Howzat's business activities. 32. The classic 'test' for determining the nature of the relationship between a person who engages another to perform work and the person so engaged is the degree of control which the former can exercise over the latter. A common law employee is told not only what work is to be done, but how and where it is to be done. With the increasing usage of skilled labour and consequential reduction in supervisory functions, the importance of control lies not so much in its actual exercise, although clearly that is relevant, as in the right of the employer to exercise it. 33. There are a number of indicators present in the circumstances here that lead to the conclusion that Howzat is exercising a significant degree of control over the services provided by the officials. Those indicators are: 34. The presence of these indicators leads us to conclude that the nature of the relationship between Howzat and the officials is one of employer and employee. The payments being made to the officials by Howzat are a product of that employment relationship and are specifically for the services rendered by the officials under that relationship. 35. In looking at the remaining factors listed in paragraph 27 we can take some guidance from case law. The characteristics of ordinary income that have evolved from case law can be summarised to include receipts that; 36. As discussed in paragraphs 30 to 34 the officials are providing services under an employment relationship and for which they are receiving the match payments. Those payments are earned by the officials. Although the employment may be of a part time or casual nature the payments are expected by the official and have an element of periodicity, recurrence and regularity. 37. As a result of looking at these factors it is concluded that the payments received by the officials are income according to ordinary concepts. They are therefore ordinary income in the hands of the officials and will form part of their assessable income under section 6-5 of the ITAA 1997. | Statutory income: 38. As the payments are considered to be ordinary income, it is not necessary to consider whether the payments could also be statutory income under section 6-10 of the ITAA 1997. | General deductions: 39. Taxpayers are entitled to deduct from their assessable income any loss or outgoing to the extent that it was incurred gaining or producing their assessable income under section 8-1 of the ITAA 1997. | Pay As You Go (PAYG) withholding: 40. As explained above, match payments paid to an official who is employed at Howzat are assessable income and in particular salary or wages. The payments are regarded as withholding payments for the purposes of Division 12 of Schedule 1 to the Taxation Administration Act 1953 . An entity making match payments to officials who are in the class of persons to which this Ruling applies will be required to withhold amounts from these payments and will have other associated PAYG withholding obligations - for example, obtaining Tax File Number declarations, payment summaries, annual reporting. 41. Below is a detailed contents list for this Class Ruling: Commissioner of Taxation 8 June 2005 Not previously issued as a draft

Ruling: 23. The match fees paid to officials who officiate at matches for Howzat are assessable income under section 6-5 of the ITAA 1997. 24. A payment or other benefit received by a taxpayer is assessable income if it is: | Ordinary income: 25. Under subsection 6-5(1) of the ITAA 1997 an amount is assessable income if it is income according to ordinary concepts (ordinary income). 26. In determining whether an amount is ordinary income, the courts have established the following principles: 27. Relevant factors in determining whether an amount is ordinary income include: 28. It is appropriate to look at the nature of the relationship between the officials and Howzat when considering the first and last of the factors listed in paragraph 27. 29. It is part of the business of Howzat to run sporting competitions for a fee. To effectively operate a sporting competition, Howzat provides its clients with access to a court suitable for the sport and balls, nets, goals and officials as required. The services of the sporting official are an integral part of the sporting competition that clients of Howzat are purchasing. 30. The relationship between an employer and an employee is a contractual one. It is often referred to as a contract of service. An employee contracts to provide their labour, typically to enable the employer to achieve a result. 31. The officials provide their service of the labour by officiating in matches conducted at Howzat's premises and for the purpose of Howzat's business activities. 32. The classic 'test' for determining the nature of the relationship between a person who engages another to perform work and the person so engaged is the degree of control which the former can exercise over the latter. A common law employee is told not only what work is to be done, but how and where it is to be done. With the increasing usage of skilled labour and consequential reduction in supervisory functions, the importance of control lies not so much in its actual exercise, although clearly that is relevant, as in the right of the employer to exercise it. 33. There are a number of indicators present in the circumstances here that lead to the conclusion that Howzat is exercising a significant degree of control over the services provided by the officials. Those indicators are: 34. The presence of these indicators leads us to conclude that the nature of the relationship between Howzat and the officials is one of employer and employee. The payments being made to the officials by Howzat are a product of that employment relationship and are specifically for the services rendered by the officials under that relationship. 35. In looking at the remaining factors listed in paragraph 27 we can take some guidance from case law. The characteristics of ordinary income that have evolved from case law can be summarised to include receipts that; 36. As discussed in paragraphs 30 to 34 the officials are providing services under an employment relationship and for which they are receiving the match payments. Those payments are earned by the officials. Although the employment may be of a part time or casual nature the payments are expected by the official and have an element of periodicity, recurrence and regularity. 37. As a result of looking at these factors it is concluded that the payments received by the officials are income according to ordinary concepts. They are therefore ordinary income in the hands of the officials and will form part of their assessable income under section 6-5 of the ITAA 1997. | Statutory income: 38. As the payments are considered to be ordinary income, it is not necessary to consider whether the payments could also be statutory income under section 6-10 of the ITAA 1997. | General deductions: 39. Taxpayers are entitled to deduct from their assessable income any loss or outgoing to the extent that it was incurred gaining or producing their assessable income under section 8-1 of the ITAA 1997. | Pay As You Go (PAYG) withholding: 40. As explained above, match payments paid to an official who is employed at Howzat are assessable income and in particular salary or wages. The payments are regarded as withholding payments for the purposes of Division 12 of Schedule 1 to the Taxation Administration Act 1953 . An entity making match payments to officials who are in the class of persons to which this Ruling applies will be required to withhold amounts from these payments and will have other associated PAYG withholding obligations - for example, obtaining Tax File Number declarations, payment summaries, annual reporting. 41. Below is a detailed contents list for this Class Ruling: Commissioner of Taxation 8 June 2005 Not previously issued as a draft


Appendix: 24. A payment or other benefit received by a taxpayer is assessable income if it is: | Ordinary income: 25. Under subsection 6-5(1) of the ITAA 1997 an amount is assessable income if it is income according to ordinary concepts (ordinary income). 26. In determining whether an amount is ordinary income, the courts have established the following principles: 27. Relevant factors in determining whether an amount is ordinary income include: 28. It is appropriate to look at the nature of the relationship between the officials and Howzat when considering the first and last of the factors listed in paragraph 27. 29. It is part of the business of Howzat to run sporting competitions for a fee. To effectively operate a sporting competition, Howzat provides its clients with access to a court suitable for the sport and balls, nets, goals and officials as required. The services of the sporting official are an integral part of the sporting competition that clients of Howzat are purchasing. 30. The relationship between an employer and an employee is a contractual one. It is often referred to as a contract of service. An employee contracts to provide their labour, typically to enable the employer to achieve a result. 31. The officials provide their service of the labour by officiating in matches conducted at Howzat's premises and for the purpose of Howzat's business activities. 32. The classic 'test' for determining the nature of the relationship between a person who engages another to perform work and the person so engaged is the degree of control which the former can exercise over the latter. A common law employee is told not only what work is to be done, but how and where it is to be done. With the increasing usage of skilled labour and consequential reduction in supervisory functions, the importance of control lies not so much in its actual exercise, although clearly that is relevant, as in the right of the employer to exercise it. 33. There are a number of indicators present in the circumstances here that lead to the conclusion that Howzat is exercising a significant degree of control over the services provided by the officials. Those indicators are: 34. The presence of these indicators leads us to conclude that the nature of the relationship between Howzat and the officials is one of employer and employee. The payments being made to the officials by Howzat are a product of that employment relationship and are specifically for the services rendered by the officials under that relationship. 35. In looking at the remaining factors listed in paragraph 27 we can take some guidance from case law. The characteristics of ordinary income that have evolved from case law can be summarised to include receipts that; 36. As discussed in paragraphs 30 to 34 the officials are providing services under an employment relationship and for which they are receiving the match payments. Those payments are earned by the officials. Although the employment may be of a part time or casual nature the payments are expected by the official and have an element of periodicity, recurrence and regularity. 37. As a result of looking at these factors it is concluded that the payments received by the officials are income according to ordinary concepts. They are therefore ordinary income in the hands of the officials and will form part of their assessable income under section 6-5 of the ITAA 1997. | Statutory income: 38. As the payments are considered to be ordinary income, it is not necessary to consider whether the payments could also be statutory income under section 6-10 of the ITAA 1997. | General deductions: 39. Taxpayers are entitled to deduct from their assessable income any loss or outgoing to the extent that it was incurred gaining or producing their assessable income under section 8-1 of the ITAA 1997. | Pay As You Go (PAYG) withholding: 40. As explained above, match payments paid to an official who is employed at Howzat are assessable income and in particular salary or wages. The payments are regarded as withholding payments for the purposes of Division 12 of Schedule 1 to the Taxation Administration Act 1953 . An entity making match payments to officials who are in the class of persons to which this Ruling applies will be required to withhold amounts from these payments and will have other associated PAYG withholding obligations - for example, obtaining Tax File Number declarations, payment summaries, annual reporting.


What this Class Ruling is about | Preamble: The number, subject heading, What this Class Ruling is about (including Tax law(s), Class of persons and Qualifications sections), Date of effect, Arrangement and Ruling parts of this document are a 'public ruling' in terms of Part IVAAA of the Taxation Administration Act 1953. CR 2001/1 explains Class Rulings and Taxation Rulings TR 92/1 and TR 97/16 together explain when a Ruling is a 'public ruling' and how it is binding on the Commissioner. | What this Class Ruling is about: 1. This Ruling sets out the Commissioner's opinion on the way in which the 'tax law(s)' identified below apply to the defined class of persons, who take part in the arrangement to which this Ruling relates. | Tax law(s): 2. The tax laws dealt with in this Ruling are sections 6-5, 6-10 and 8-1 of the Income Tax Assessment Act 1997 (ITAA 1997).


Related rulings: CR 2001/1 TR 92/1 TR 92/20 TR 97/16 TR1999/17
Legislative references: ITAA 1997 6-5 ITAA 1997 6-5(1) ITAA 1997 6-10 ITAA 1997 8-1 TAA 1953 Pt IVAAA TAA 1953 Sch 1 Div 12 Copyright Act 1968
Subject references: allowances assessable income hobby v. business sport sporting organisations sports people