Class Ruling CR 2015/84
Date of effect: 1 July 2014

What this ruling is about: 1. This Ruling sets out the Commissioner's opinion on the way in which the relevant provisions identified below apply to the defined class of entities, who take part in the scheme to which this Ruling relates. Relevant provision(s) 2. The relevant provisions dealt with in this ruling are: All legislative references in this Ruling are to the ITAA 1997 unless otherwise indicated. Class of entities 3. The class of entities to which this Ruling applies is current and former members of the Australian Football League Players' Association (AFLPA) who receive benefits under an Education and Training Grant program. In this Ruling, persons belonging to this class of entities are referred to as Members. Qualifications 4. The Commissioner makes this Class Ruling based on the precise arrangement identified in the Class Ruling. 5. The class of entities defined in this Ruling may rely on its contents provided the scheme actually carried out is carried out in accordance with the scheme described in paragraphs 8 to 18 of this Ruling. 6. If the scheme actually carried out is materially different from the scheme that is described in this Ruling, then:

Class of entities or scheme: 3. The class of entities to which this Ruling applies is current and former members of the Australian Football League Players' Association (AFLPA) who receive benefits under an Education and Training Grant program. In this Ruling, persons belonging to this class of entities are referred to as Members. | Qualifications: 4. The Commissioner makes this Class Ruling based on the precise arrangement identified in the Class Ruling. 5. The class of entities defined in this Ruling may rely on its contents provided the scheme actually carried out is carried out in accordance with the scheme described in paragraphs 8 to 18 of this Ruling. 6. If the scheme actually carried out is materially different from the scheme that is described in this Ruling, then: 7. This Ruling applies from 1 July 2014 to 30 June 2018. However, this Ruling will not apply to taxpayers to the extent that it conflicts with the terms of a settlement of a dispute agreed to before the date of issue of this Ruling (see paragraphs 75 and 76 of Taxation Ruling TR 2006/10). 8. The following description of the scheme is based on information provided by the applicant. | The AFLPA: 9. The following information is contained within the AFLPA Statement of Purposes and Rules: | Collective Bargaining Agreement (CBA): 10. The AFL (Australian Football League) as the controlling body of the Competition and the AFLPA entered into a CBA operating for the period 1 November 2011 to 31 October 2016. 11. The CBA is an agreement between the AFL and the AFLPA which in accordance with clause 2 applies to: 12. As per the background to the CBA, the AFL has the power to bind the AFL Clubs to the CBA while the AFLPA has the authority to bind the players to the CBA. 13. A player is defined in the CBA to mean: 14. Clause 22 deals with 'Player Education and Training and Welfare' where subclauses 22.2 to 22.4 state: 15. In accordance with paragraph 22.2(a), item 4 of Schedule B provides that the AFL will provide funding to the AFLPA for use in player education and training, health and welfare. | Education and Training Grants: 16. The AFL Players Education and Training Grant form requires applicants to provide the reasons for undertaking a course/training together with the bank account details into which payment is to be made. 17. Under 'Criteria' it states: 18. The following funding guidelines are provided: 19. The amounts received under the AFLPA's Education and Training Grant program are not assessable as ordinary income for the purposes of section 6-5. 20. The amounts received under the AFLPA's Education and Training Grant program are not assessable as statutory income for the purposes of section 6-10. 21. There are no CGT consequences when a Member receives amounts under the AFLPA's Education and Training Grant program. Commissioner of Taxation 4 November 2015 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. Federal Commissioner of Taxation, the Full High Court stated: 26. Amounts that are periodical, regular or recurrent, relied upon by the recipient for their regular expenditure and paid to them for that purpose are likely to be ordinary income, [2] 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 relevant to this consideration. [7] 28. In Scott v. Federal Commissioner of Taxation, [8] 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 Federal Commissioner of Taxation v. Harris, [9] 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 and this was an important element in finding that the payment was not income. 29. There is no employment or business relationship between the player and the AFLPA. A successful applicant is not required to enter into any contractual relationship with either the AFLPA or a sponsor to perform services of any kind in return for the payment of the grant monies. 30. The grant is for payments for course fees, student fees, tuition and essential course materials for courses accredited with registered educational institutions. It does not specifically contribute towards the member's living expenses. The grants are made by, reimbursement to the player or reimbursement to a third party. 31. The timing of a payment varies, depending on the expense claimed. Payments are only made upon receipt of a dated invoice or receipt and evidence of satisfactory completion of the unit/course. The grant period does not extend beyond one year unless further applications are made and approved. 32. The payments made under the grant may take the form of a lump sum as a predetermined expense. [10] The payments are not periodic payments, even if the expense should arise more than once. The payment is not expected or relied upon by the recipient to meet ordinary living expenses. 33. These factors, when considered together, lead to the conclusion that the grants are not ordinary income under subsection 6-5(1). 34. If paid directly to an educational institution on behalf of a recipient of the grant, the payment is not derived as income by the recipient of the grant under subsection 6-5(4), as the payment would not be ordinary income if received personally. | Statutory Income: 35. Section 6-10 provides that a taxpayer's assessable income includes statutory income amounts that are not ordinary income but are included as assessable income by another provision. 36. Section 6-10 includes in assessable income amounts that are not ordinary income; these amounts are statutory income. A list of the statutory income provisions can be found in section 10-5. That list includes a reference to section 15-2. 37. Subsection 15-2(1), provides that assessable income includes: 38. A grant payment will be statutory income under section 15-2 if it is provided to the eligible player in respect of, or for or in relation directly or indirectly to, any employment or services rendered by the eligible player. 39. There is no employment relationship between the grant recipient and the AFLPA. Furthermore, the documents explaining the scheme establish that the recipients are not providing services to the AFLPA. The recipients are required to meet certain conditions in order to qualify for payment of the grant. These do not amount to the rendering of services to the AFLPA. 40. As such the payments are not included in assessable income by section 15-2 because the players are not considered to be employees, nor are they rendering services to the AFLPA. | Fringe Benefits Tax: 41. While Fringe Benefits Tax has been considered, it has been determined that there are no Fringe Benefits Tax consequences in this instance. | Capital gains tax: 42. There are no CGT consequences as a result of an eligible member receiving an amount under the AFLPA's Education and Training Grant program. 43. The following is a detailed contents list for this Ruling: © 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). Not previously issued as a draft

Ruling: 19. The amounts received under the AFLPA's Education and Training Grant program are not assessable as ordinary income for the purposes of section 6-5. 20. The amounts received under the AFLPA's Education and Training Grant program are not assessable as statutory income for the purposes of section 6-10. 21. There are no CGT consequences when a Member receives amounts under the AFLPA's Education and Training Grant program. Commissioner of Taxation 4 November 2015


Appendix: 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. Federal Commissioner of Taxation, the Full High Court stated: 26. Amounts that are periodical, regular or recurrent, relied upon by the recipient for their regular expenditure and paid to them for that purpose are likely to be ordinary income, [2] 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 relevant to this consideration. [7] 28. In Scott v. Federal Commissioner of Taxation, [8] 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 Federal Commissioner of Taxation v. Harris, [9] 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 and this was an important element in finding that the payment was not income. 29. There is no employment or business relationship between the player and the AFLPA. A successful applicant is not required to enter into any contractual relationship with either the AFLPA or a sponsor to perform services of any kind in return for the payment of the grant monies. 30. The grant is for payments for course fees, student fees, tuition and essential course materials for courses accredited with registered educational institutions. It does not specifically contribute towards the member's living expenses. The grants are made by, reimbursement to the player or reimbursement to a third party. 31. The timing of a payment varies, depending on the expense claimed. Payments are only made upon receipt of a dated invoice or receipt and evidence of satisfactory completion of the unit/course. The grant period does not extend beyond one year unless further applications are made and approved. 32. The payments made under the grant may take the form of a lump sum as a predetermined expense. [10] The payments are not periodic payments, even if the expense should arise more than once. The payment is not expected or relied upon by the recipient to meet ordinary living expenses. 33. These factors, when considered together, lead to the conclusion that the grants are not ordinary income under subsection 6-5(1). 34. If paid directly to an educational institution on behalf of a recipient of the grant, the payment is not derived as income by the recipient of the grant under subsection 6-5(4), as the payment would not be ordinary income if received personally. | Statutory Income: 35. Section 6-10 provides that a taxpayer's assessable income includes statutory income amounts that are not ordinary income but are included as assessable income by another provision. 36. Section 6-10 includes in assessable income amounts that are not ordinary income; these amounts are statutory income. A list of the statutory income provisions can be found in section 10-5. That list includes a reference to section 15-2. 37. Subsection 15-2(1), provides that assessable income includes: 38. A grant payment will be statutory income under section 15-2 if it is provided to the eligible player in respect of, or for or in relation directly or indirectly to, any employment or services rendered by the eligible player. 39. There is no employment relationship between the grant recipient and the AFLPA. Furthermore, the documents explaining the scheme establish that the recipients are not providing services to the AFLPA. The recipients are required to meet certain conditions in order to qualify for payment of the grant. These do not amount to the rendering of services to the AFLPA. 40. As such the payments are not included in assessable income by section 15-2 because the players are not considered to be employees, nor are they rendering services to the AFLPA. | Fringe Benefits Tax: 41. While Fringe Benefits Tax has been considered, it has been determined that there are no Fringe Benefits Tax consequences in this instance. | Capital gains tax: 42. There are no CGT consequences as a result of an eligible member receiving an amount under the AFLPA's Education and Training Grant program.


What this Ruling is about | NOT LEGALLY BINDING SECTION: | A public ruling is an expression of the Commissioner's opinion about the way in which a relevant provision applies, or would apply, to entities generally or to a class of entities in relation to a particular scheme or a class of schemes. | If you rely on this ruling, the Commissioner must apply the law to you in the way set out in the ruling (unless the Commissioner is satisfied that the ruling is incorrect and disadvantages you, in which case the law may be applied to you in a way that is more favourable for you - provided the Commissioner is not prevented from doing so by a time limit imposed by the law). You will be protected from having to pay any underpaid tax, penalty or interest in respect of the matters covered by this ruling if it turns out that it does not correctly state how the relevant provision applies to you. | ...a player of Australian Football who is or becomes contracted with an AFL Club or who is or becomes listed with the AFL as a Player with an AFL Club, and specifically excludes players on a Scholarship List or International Scholarship players. | 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. [1] | ... 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 ... | Appendix 2 - Detailed contents list


Related rulings: TR 2006/10 CR 2011/91
Legislative references: ITAA 1997 ITAA 1997 6-5 ITAA 1997 6-5(1) ITAA 1997 6-5(4) ITAA 1997 6-10 ITAA 1997 10-5 ITAA 1997 15-2 ITAA 1997 15-2(1) TAA 1953
Case references: Federal Coke Co Pty Ltd v. Federal Commissioner of Taxation (1977) 34 FLR 375 [1977] FCA 3 77 ATC 4255 (1977) 7 ATR 519