Class Ruling CR 2014/21
Date of effect: 1 July 2013

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 provisions 2. The relevant provisions dealt with in this Ruling are: All subsequent references in this Ruling are to the ITAA 1997, unless stated otherwise. Class of entities 3. The class of entities to which this Ruling applies is: who hold current ACA membership. Qualifications 4. The Commissioner makes this Ruling based on the precise scheme identified in this 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 27 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: who hold current ACA membership. | Qualifications: 4. The Commissioner makes this Ruling based on the precise scheme identified in this 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 27 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 2013. 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 following documents, or relevant parts of them form part of and are to be read with the description: 9. The ACA is an independent, representative, sporting body established to represent the interests of individuals, who formerly and currently play cricket at the national, state or rookie levels. 10. Its membership base extends to both male and female cricketers, being past or present players. 11. As stated in its Constitution, the objects of the ACA are: 12. There are three classes of membership of the ACA: 13. Members are not employees of the ACA. The only relationship between the ACA and the individual player is that of association and member. 14. In fulfilment of the ACA's functions and goals, the ACA have established and funded the Education and Training Grant Program (the Program) to encourage players to begin planning and preparing for life after cricket. 15. To be eligible, an individual must be an ACA member and not retired or delisted from one of the playing categories for a period of greater than 12 months. 16. Grants can be used to fund any further study, provided the course is accredited with a registered training or education institution. The course undertaken must be related to the applicant's career after cricket. 17. Grants are available for course fees, student fees, tuition and essential course materials. Grants do not cover items such as stationery, text books, calculators or general equipment or living expenses. 18. The total funding available under the Program is $350,000 per annum. 19. Applicants are required to complete and submit an application form. Applicants must provide a brief explanation as to the reason for undertaking further education and training including how this will assist their career after cricket. 20. Applicants who successfully obtain a grant are able to access up to a maximum of $4,000 per annum unless the ACA Training and Education Sub-Committee exercises its discretion to increase the maximum amount threshold. 21. Applications are accepted over two rounds each year and only those submitted by the due date will be considered. 22. Grants are determined at the absolute discretion of the Education and Training Sub-Committee. The value of grants provided will be determined by the number of players requesting assistance, the type of course being completed and the player's commitment to study. 23. Surplus funds not allocated for grants for that year remain in the ACA's Professional Development Program Budget. 24. There are three options for payment of grants: 25. Payments will be made upon receiving a dated invoice or receipt for the claimed amount of legitimate educational expenses from an accredited education institution. 26. If payment is to be made to a third party, the applicant must provide written documentation to the Education and Training Sub-Committee. Accordingly an applicant must have incurred the cost prior to reimbursement. That is, the member would have generally enrolled in the course before seeking reimbursement. 27. Applicants will be required to return grant monies to ACA in the following circumstances: | Ordinary income: 28. Amounts received under the Program are not assessable as ordinary income under section 6-5. | Statutory income - section 15-2: 29. Amounts received under the Program are not assessable as statutory income under section 15-2. | Capital gains tax: 30. There are no CGT consequences when an eligible member receives amounts under the Program. Commissioner of Taxation 12 February 2014 31. A payment or other benefit received by a taxpayer is included in assessable income if it is: | Ordinary income: 32. Subsection 6-5(1) states that the assessable income of a taxpayer includes income according to ordinary concepts (ordinary income). 33. 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. 34. In GP International Pipecoaters Pty Ltd v. Federal Commissioner of Taxation , the Full High Court stated: 35. 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] 36. 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] 37. 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. [9] In Federal Commissioner of Taxation v. Harris , [10] 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. 38. There is no employment or business relationship between the member and the ACA. A successful applicant is not required to enter into any contractual relationship with either the ACA or a sponsor to perform services of any kind in return for the payment of the grant monies. 39. 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 direct payment to the educational institution, reimbursement to the player or reimbursement to a third party. 40. The timing of a payment varies, depending on the expense claimed. Payments are only made upon receipt of a dated invoice or receipt and the grant period does not extend beyond one year unless further applications are made and approved. 41. he 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. 42. These factors, when considered together, lead to the conclusion that the grants are not ordinary income under subsection 6-5(1). 43. 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 - section 15-2: 44. 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. 45. Section 10-5 lists provisions about statutory income and included in this list is section 15-2. 46. Section 15-2 provides that the value of all allowances, gratuities, compensation, benefits, bonuses and premiums allowed, given or granted, directly or indirectly in respect of employment or services rendered is included in assessable income. 47. A grant payment will be statutory income under section 15-2 if it is provided to the eligible player in respect of, for, or in relation directly or indirectly to, any employment or services rendered by the eligible player. 48. There is no employment relationship between the grant recipient and the ACA. Furthermore, the documents explaining the scheme establish that the recipients are not providing services to the ACA. 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 ACA. 49. As such the payments are not assessable under section 15-2 because the players are not considered to be employees, nor are they rendering services to the ACA. | Capital gains tax: 50. There are no CGT consequences as a result of an eligible member receiving an amount under the Program. 51. 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: Ordinary income: 28. Amounts received under the Program are not assessable as ordinary income under section 6-5. | Statutory income - section 15-2: 29. Amounts received under the Program are not assessable as statutory income under section 15-2. | Capital gains tax: 30. There are no CGT consequences when an eligible member receives amounts under the Program. Commissioner of Taxation 12 February 2014


Appendix: 31. A payment or other benefit received by a taxpayer is included in assessable income if it is: | Ordinary income: 32. Subsection 6-5(1) states that the assessable income of a taxpayer includes income according to ordinary concepts (ordinary income). 33. 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. 34. In GP International Pipecoaters Pty Ltd v. Federal Commissioner of Taxation , the Full High Court stated: 35. 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] 36. 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] 37. 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. [9] In Federal Commissioner of Taxation v. Harris , [10] 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. 38. There is no employment or business relationship between the member and the ACA. A successful applicant is not required to enter into any contractual relationship with either the ACA or a sponsor to perform services of any kind in return for the payment of the grant monies. 39. 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 direct payment to the educational institution, reimbursement to the player or reimbursement to a third party. 40. The timing of a payment varies, depending on the expense claimed. Payments are only made upon receipt of a dated invoice or receipt and the grant period does not extend beyond one year unless further applications are made and approved. 41. he 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. 42. These factors, when considered together, lead to the conclusion that the grants are not ordinary income under subsection 6-5(1). 43. 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 - section 15-2: 44. 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. 45. Section 10-5 lists provisions about statutory income and included in this list is section 15-2. 46. Section 15-2 provides that the value of all allowances, gratuities, compensation, benefits, bonuses and premiums allowed, given or granted, directly or indirectly in respect of employment or services rendered is included in assessable income. 47. A grant payment will be statutory income under section 15-2 if it is provided to the eligible player in respect of, for, or in relation directly or indirectly to, any employment or services rendered by the eligible player. 48. There is no employment relationship between the grant recipient and the ACA. Furthermore, the documents explaining the scheme establish that the recipients are not providing services to the ACA. 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 ACA. 49. As such the payments are not assessable under section 15-2 because the players are not considered to be employees, nor are they rendering services to the ACA. | Capital gains tax: 50. There are no CGT consequences as a result of an eligible member receiving an amount under the 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. | 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] | Education and Training Grants | Appendix 2 - Detailed contents list


Related rulings: TR 2006/10
Legislative references: ITAA 1936 26(e) 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 TAA 1953 Copyright Act 1968
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
Subject references: capital gains tax education payments employment relationship ordinary income statutory income voluntary payments to sportspersons