Class Ruling CR 2003/71
Date of effect: 1 July 2003


Class of entities or scheme: 3. The class of persons to which this Ruling applies is winners of The Australian Council of Deans of Science (ACDS) University Science Teaching Prize. | 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 below at paragraphs 9 to 20 in this Ruling. 6. If the arrangement actually carried out is materially different from the arrangement that is described in this Ruling: 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 2003. However, the 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 and 22 of Taxation Ruling TR 92/20). Furthermore, the Ruling only applies to the extent that: 9. The arrangement that is the subject of this Ruling is described below. This description is based on the documents listed below. 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 parts of documents incorporated into this description of the arrangement are: 10. The ACDS is a national body which represents Deans of Faculty, Heads or Deans of School, Heads of Department and others who hold senior positions of responsibility for science in Australian universities. Its purpose is to promote the development of science through study and research in those universities. 11. The ACDS, with funding support provided by the Department of Education Science and Training, is to offer a prize to be known as 'The Australian Council of Deans of Science University Science Teaching Prize'(the Prize). The Prize will recognise a Scientist who has made an outstanding contribution to science education in Australia. The $30,000 Prize will be awarded annually. 12. The Prize will be awarded to a Scientist who has made an outstanding contribution in science education in any of the following areas: 13. Eligibility for the Prize is limited to Australian citizens or those who hold permanent resident status in Australia. Candidates must have a demonstrable link to Australia and should be active in science education at Tertiary level at the time of their nomination. 14. Nominations for the Prize will be adjudicated by the ACDS University Science Teaching Prize Committee (the Committee) which will make recommendations on the recipient of the Prize. 15. The Committee will be managed by the ACDS and will comprise three members of the Executive of the ACDS, a representative from the Department of Education Science and Training, a nominee of the Australian Academy of Science, and a nominee of the Australian Academy of Technological Sciences and Engineering. 16. Nominations will be sought from individuals who must be personally knowledgeable of the professional work of the nominee and they must submit an opinion on the worth of the achievement of the nominee by addressing the following selection criteria: 17. Nominations for the Prize will be sought by advertising in a national newspaper and Tertiary Institutions will be contacted at the level of Vice Chancellor and Dean. 18. The winner is expected to attend the presentation ceremony in Canberra at the expense of the ACDS. The winner is also expected to assist the ACDS, through publicity, to boost interest in University science teaching. 19. It is anticipated that the Prize will be awarded for the first time in 2003. If there is more than one winner is any one year, the prize money would be divided equally between the winners. 20. The Committee reserves the right not to recommend an award in any year. 21. The ACDS University Science Teaching Prize is not assessable income under either section 6-5 or section 6-10 of the ITAA 1997. 22. A payment or other benefit is assessable income if it is: | Ordinary income: 23. Subsection 6-5(1) of the ITAA 1997 provides that an amount is included as assessable income if it is income according to ordinary concepts (ordinary income). 24. In determining whether a prize or gift is ordinary income, the courts have established that consideration of the whole of the circumstances is necessary and that the following factors need to be taken into account: 25. The ACDS University Science Teaching Prize is of an exceptional kind, awarded to the recipient for excellence in University science teaching. 26. Having regard to the nature of the Prize, the character of the payments in the hands of the recipient is such that it is not received by virtue of employment or as a recompense for services rendered, even though the Prize is made in relation to an achievement or contribution that is related to the vocation of the individual recipient. The nature of the award is that of a personal windfall or gain not having the qualities of income. [F1] 27. The Prize is not a common incident of the income earning activities of the Scientist to whom this Ruling applies. While not a determinative factor, the fact that Scientists eligible to receive the Prize cannot self nominate is an indicator that receipt of the Prize is not an incident of employment in science education at Tertiary level. A further indicator that receipt of the Prize is not in respect of the Scientist's employment is that the members of the ACDS University Science Teaching Prize Committee are independent of the employer of a nominated Scientist. | Statutory income: 28. Section 6-10 of the ITAA 1997 provides that a taxpayer's assessable income includes statutory income amounts that are not ordinary income but are included in assessable income by another provision. Section 10-5 of the ITAA 1997 lists those provisions. Included in this list and of relevance to this matter is paragraph 26(e) of the ITAA 1936. 29. Paragraph 26(e) of the ITAA 1936 provides that the value to the taxpayer of all gratuities and benefits given or granted to them in respect of, or for or in relation directly or indirectly to, any employment will be included in their assessable income. An issue in this arrangement is whether the Prize was granted 'in relation directly to or indirectly to, employment ...'. In particular, whether the Prize was granted 'indirectly' in relation to the employment of the recipient of the Prize. 30. The leading cases in connection with this arrangement are Dixon's Case and Scott's Case. In both cases, it was decided that the phrase 'an indirect consequence of employment' was not an open ended concept. Rather, there must still be a connection between the payment and the employment such that the receipt 'is in a relevant sense a product' of the employment. 31. The Prize cannot be regarded in a real sense as a product of the employment of any recipient. Nor is it a benefit provided for services rendered. The value of the Prize is therefore not assessable under paragraph 26(e) of the ITAA 1936. | Conclusion: 32. As the Prize received by the Scientists to whom this ruling applies does not constitute either ordinary or statutory income, it is not assessable income under either section 6-5 or section 6-10 of the ITAA 1997. 33. Below is a detailed contents list for this Class Ruling: Commissioner of Taxation 27 August 2003 Not previously issued in draft form.

Ruling: 21. The ACDS University Science Teaching Prize is not assessable income under either section 6-5 or section 6-10 of the ITAA 1997. 22. A payment or other benefit is assessable income if it is: | Ordinary income: 23. Subsection 6-5(1) of the ITAA 1997 provides that an amount is included as assessable income if it is income according to ordinary concepts (ordinary income). 24. In determining whether a prize or gift is ordinary income, the courts have established that consideration of the whole of the circumstances is necessary and that the following factors need to be taken into account: 25. The ACDS University Science Teaching Prize is of an exceptional kind, awarded to the recipient for excellence in University science teaching. 26. Having regard to the nature of the Prize, the character of the payments in the hands of the recipient is such that it is not received by virtue of employment or as a recompense for services rendered, even though the Prize is made in relation to an achievement or contribution that is related to the vocation of the individual recipient. The nature of the award is that of a personal windfall or gain not having the qualities of income. [F1] 27. The Prize is not a common incident of the income earning activities of the Scientist to whom this Ruling applies. While not a determinative factor, the fact that Scientists eligible to receive the Prize cannot self nominate is an indicator that receipt of the Prize is not an incident of employment in science education at Tertiary level. A further indicator that receipt of the Prize is not in respect of the Scientist's employment is that the members of the ACDS University Science Teaching Prize Committee are independent of the employer of a nominated Scientist. | Statutory income: 28. Section 6-10 of the ITAA 1997 provides that a taxpayer's assessable income includes statutory income amounts that are not ordinary income but are included in assessable income by another provision. Section 10-5 of the ITAA 1997 lists those provisions. Included in this list and of relevance to this matter is paragraph 26(e) of the ITAA 1936. 29. Paragraph 26(e) of the ITAA 1936 provides that the value to the taxpayer of all gratuities and benefits given or granted to them in respect of, or for or in relation directly or indirectly to, any employment will be included in their assessable income. An issue in this arrangement is whether the Prize was granted 'in relation directly to or indirectly to, employment ...'. In particular, whether the Prize was granted 'indirectly' in relation to the employment of the recipient of the Prize. 30. The leading cases in connection with this arrangement are Dixon's Case and Scott's Case. In both cases, it was decided that the phrase 'an indirect consequence of employment' was not an open ended concept. Rather, there must still be a connection between the payment and the employment such that the receipt 'is in a relevant sense a product' of the employment. 31. The Prize cannot be regarded in a real sense as a product of the employment of any recipient. Nor is it a benefit provided for services rendered. The value of the Prize is therefore not assessable under paragraph 26(e) of the ITAA 1936. | Conclusion: 32. As the Prize received by the Scientists to whom this ruling applies does not constitute either ordinary or statutory income, it is not assessable income under either section 6-5 or section 6-10 of the ITAA 1997. 33. Below is a detailed contents list for this Class Ruling: Commissioner of Taxation 27 August 2003 Not previously issued in draft form.


Appendix: 22. A payment or other benefit is assessable income if it is: | Ordinary income: 23. Subsection 6-5(1) of the ITAA 1997 provides that an amount is included as assessable income if it is income according to ordinary concepts (ordinary income). 24. In determining whether a prize or gift is ordinary income, the courts have established that consideration of the whole of the circumstances is necessary and that the following factors need to be taken into account: 25. The ACDS University Science Teaching Prize is of an exceptional kind, awarded to the recipient for excellence in University science teaching. 26. Having regard to the nature of the Prize, the character of the payments in the hands of the recipient is such that it is not received by virtue of employment or as a recompense for services rendered, even though the Prize is made in relation to an achievement or contribution that is related to the vocation of the individual recipient. The nature of the award is that of a personal windfall or gain not having the qualities of income. [F1] 27. The Prize is not a common incident of the income earning activities of the Scientist to whom this Ruling applies. While not a determinative factor, the fact that Scientists eligible to receive the Prize cannot self nominate is an indicator that receipt of the Prize is not an incident of employment in science education at Tertiary level. A further indicator that receipt of the Prize is not in respect of the Scientist's employment is that the members of the ACDS University Science Teaching Prize Committee are independent of the employer of a nominated Scientist. | Statutory income: 28. Section 6-10 of the ITAA 1997 provides that a taxpayer's assessable income includes statutory income amounts that are not ordinary income but are included in assessable income by another provision. Section 10-5 of the ITAA 1997 lists those provisions. Included in this list and of relevance to this matter is paragraph 26(e) of the ITAA 1936. 29. Paragraph 26(e) of the ITAA 1936 provides that the value to the taxpayer of all gratuities and benefits given or granted to them in respect of, or for or in relation directly or indirectly to, any employment will be included in their assessable income. An issue in this arrangement is whether the Prize was granted 'in relation directly to or indirectly to, employment ...'. In particular, whether the Prize was granted 'indirectly' in relation to the employment of the recipient of the Prize. 30. The leading cases in connection with this arrangement are Dixon's Case and Scott's Case. In both cases, it was decided that the phrase 'an indirect consequence of employment' was not an open ended concept. Rather, there must still be a connection between the payment and the employment such that the receipt 'is in a relevant sense a product' of the employment. 31. The Prize cannot be regarded in a real sense as a product of the employment of any recipient. Nor is it a benefit provided for services rendered. The value of the Prize is therefore not assessable under paragraph 26(e) of the ITAA 1936. | Conclusion: 32. As the Prize received by the Scientists to whom this ruling applies does not constitute either ordinary or statutory income, it is not assessable income under either section 6-5 or section 6-10 of the ITAA 1997.


What this Class Ruling is about | The number, subject heading, and the 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 laws' 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 10-5 of the Income Tax Assessment Act 1997 ('ITAA 1997') and paragraph 26(e) of the Income Tax Assessment Act 1936 ('ITAA 1936').


Related rulings: CR 2001/1 TR 92/1 TR 92/20 TR 97/16 IT 2145
Legislative references: ITAA 1936 26(e) ITAA 1997 6-5 ITAA 1997 6-5(1) ITAA 1997 6-10 ITAA 1997 10-5 TAA 1953 Part IVAAA Copyright Act 1968
Case references: Squatting Investment Co Ltd v. FC of T (1953) 86 CLR 570 (1953) 5 AITR 496 (1953) 10 ATD 126
Subject references: exempt income prizes and awards windfall gains