Class Ruling

CR 2012/35

Income tax: assessable income: football umpires: AFL Riverina Incorporated

• Please note that the PDF version is the authorised version of this ruling.

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:

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Section 6-5 of the Income Tax Assessment Act 1997 (ITAA 1997);

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Section 6-10 of the ITAA 1997; and

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Section 8-1 of the ITAA 1997.

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 comprises Australian Rules football umpires who are members of the Riverina Umpires Association Inc. (RUA) and who receive payments from AFL Riverina Incorporated (AFL Riverina) for umpiring matches in any of the following New South Wales Football Leagues:

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The Riverina Football League;

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The Farrer Football League;

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The Wagga and District Junior Australian Football Association; and

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Other Wagga Wagga/Riverina Australian Football competitions.

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 10 to 21 of this Ruling.

6. If the scheme actually carried out is materially different from the scheme that is described in this Ruling, then:

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this Ruling has no binding effect on the Commissioner because the scheme entered into is not the scheme on which the Commissioner has ruled; and

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this Ruling may be withdrawn or modified.

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:

Commonwealth Copyright Administration

Copyright and Classification Policy Branch

Attorney-General's Department

3-5 National Circuit

Barton ACT 2600

or posted at: http://www.ag.gov.au/cca

Date of effect

8. This Ruling applies from 1 July 2011. 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).

Previous Rulings

9. This Class Ruling replaces CR 2004/39 which is withdrawn on and from 30 May 2012 due to a change in the Scheme. CR 2004/39 will continue to apply to umpires who entered into the arrangement on or before 1 July 2011.

Scheme

The following description of the scheme is based on information provided by the applicant.

10. Members of the RUA provide their services to the following NSW Australian Football Associations:

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The Riverina Football League;

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the Farrer Football League;

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The Wagga and District Junior Australian Football Association; and

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Other Wagga Wagga/Riverina Australian Football competitions.

11. The completion of a RUA registration form is the only condition precedent to individual membership of the RUA. The registration form records the member's name and address etc.

12. Individual umpire performance is evaluated on a regular basis by the Senior Coach, the Boundary and Goal Umpire Coaches and several umpire observers. Appointment of umpires to specific football matches is the responsibility of the appointment Board, of which the Senior Coach, the Umpire Coach Manager and other coaching staff are members. The RUA and representatives from the NSW-AFL and leagues/association for which the RUA provide umpires, are responsible for the selection of the Senior Coach and Umpire Coach Manager. The Senior Coach then appoints the other coaching staff and the Umpire Coach Manager appoints the observer panel. The Umpire Coach Manager acts as the Chairman of the Appointments Board.

13. Umpiring appointments are made solely on the basis of merit, such that the best available umpires are appointed to the most important games.

14. There is a verbal agreement with the football leagues/associations that they will use RUA to provide umpires at their matches. The football leagues/associations pay an agreed amount to AFL Riverina for the provision of RUA umpires for their matches.

15. RUA members are paid a match fee for each match they umpire. The amounts paid vary from league to league, is dependent on what grade is umpired and whether the umpire is a field, goal or boundary umpire. The maximum an umpire would receive for a standard rostered match is currently not greater than $155. Current match fees are such that umpires are unlikely to receive more than $3,000 in a season.

16. A travel allowance may be paid to the designated driver of one 'official car' per game when members officiated at those matches outside of the umpire's home town. This is currently paid at the rate of $0.63 per kilometre. Individual members have the choice of travelling via the nominated vehicle or finding their own transport. Only the driver of the nominated vehicle is paid the travel allowance. In the majority of cases, only the nominated vehicle is used.

17. Members do not receive any allowances and benefits other than their match fee and the travel allowance.

18. Match payments are not intended to, nor do they usually cover expenses. The purpose of payments is to encourage members of the community to participate in local sporting activities by subsidising their participation.

19. Members of the RUA are required to incur expenditure on their umpiring uniform, umpiring shoes, whistles, wrist bands, training gear and other related umpiring equipment. Members who are in their first year of umpiring of Australian Rules Football are provided one set of umpiring uniform only at no expense to the member. This is a cost to the RUA to encourage new people to umpiring.

20. If an umpire advises, at short notice, that they are unavailable, the Umpire Coach Manager liaises with the relevant coach with a view to find a suitable replacement.

Ruling

21. The match fees received by members of the RUA are not assessable income under either section 6-5 or section 6-10.

22. The travel allowance received by members of the RUA is not assessable income under either section 6-5 or section 6-10.

23. Losses and outgoings, incurred in deriving the match payments and call allowance, cannot be claimed as a deduction under section 8-1 or any other provision of the ITAA 1997.

Commissioner of Taxation
30 May 2012

Appendix 1 - Explanation

24. A payment or other benefit received by a taxpayer is assessable income if it is:

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income in the ordinary sense of the word (ordinary income); or

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an amount or benefit that through the operation of the provisions of the tax law is included in assessable income (statutory income).

Ordinary income

25. Subsection 6-5(1) provides that the assessable income of a taxpayer includes income according to ordinary concepts (ordinary income).

26. The legislation does not provide specific guidance on the meaning of ordinary income. However, a substantial body of case law exists which identifies likely characteristics.

27. In GP International Pipecoaters Pty Ltd v. Federal Commissioner of Taxation,^[1] the Full High Court stated:

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.

28. 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, as are amounts that are the product in a real sense of any employment of, or services rendered by, the recipient.^[2] Amounts paid in substitution for salary or wages foregone or lost may also be ordinary income.^[3]

29. Ultimately, whether or not a particular receipt is ordinary income depends on its character in the hands of the recipient.^[4] The whole of the circumstances must be considered^[5] and the motive of the payer may be relevant to this consideration.^[6]

30. 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.

31. 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.

32. The Commissioner accepts that the activities of the umpires who receive payments from AFL Riverina are a social or personal pursuit of a non-commercial nature and constitute a pastime or hobby, with the payments received being from the pursuit of that pastime or hobby. Consequently, the payments received are not assessable as ordinary income.

33. In forming the opinion that the umpires are engaged in a pastime or hobby, the Commissioner has taken into account the number of matches at which they are likely to officiate in a season, the amount and the purpose of the payments they can receive, the factors that can motivate their participation, and the level or division of the sporting competition.

Statutory income

34. Section 6-10 refers to assessable amounts that are not ordinary income. 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 football umpires is the potential operation of section 15-2.

35. Subsection 15-2(1) states that:

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...

36. 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).^[7]

37. Umpires covered by this Ruling are not considered to be employees of AFL Riverina. 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.

38. As the payments are neither ordinary nor statutory income, they are not assessable income of the umpires who receive them.

General deductions

39. As the payments received by the umpires are not assessable income, all losses and outgoings that are incurred in connection with these activities are not allowable as a deduction under section 8-1. Nor will a deduction be allowable under any other provision of the ITAA 1997.

Pay As You Go (PAYG) withholding

40. As explained, payments made to an umpire engaged in a hobby or pastime activity are not assessable income. The payments are not regarded as withholding payments under Division 12 of Schedule 1 to the Taxation Administration Act 1953. An entity making payments to umpires who are in the class of entities to which this Ruling applies will not be required to withhold amounts from these payments, nor do they have any other associated PAYG withholding obligations - for example, obtaining Tax File Number declarations, providing payment summaries, or annual reporting.

Appendix 2 - Detailed contents list

41. The following is a detailed contents list for this Ruling:

Not previously issued as a draft

References

ATO references:
NO 1-3SPDSLS

Related Rulings/Determinations:

TR 2006/10

Subject References:
hobby v. business
income
sport
sporting organisations
sports officials
sportspersons
voluntary payments to sportspersons

Legislative References:
ITAA 1997
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)
TAA 1953
TAA 1953 Sch 1 Div 12
Copyright Act 1968

Case References:
Commissioner of Taxation v. Rowe
(1995) 60 FCR 99
95 ATC 4691
(1995) 31 ATR 392

Federal Coke Co Pty Ltd v. Federal Commissioner of Taxation
77 ATC 4255
(1977) 7 ATR 519
Federal Commissioner of Taxation v. Dixon
(1952) 86 CLR 540
(1952) 10 ATD 82
(1952) 5 AITR 443
GP International Pipecoaters Pty Ltd v. Federal Commissioner of Taxation
(1990) 170 CLR 124
90 ATC 4413
(1990) 21 ATR 1
Hayes v. Federal Commissioner of Taxation
(1956) 96 CLR 47
(1956) 11 ATD 68
(1956) 6 AITR 248
Scott v. Federal Commissioner of Taxation
(1966) 117 CLR 514
(1966) 14 ATD 286
(1966) 10 AITR 367
Smith v. Federal Commissioner of Taxation
(1987) 164 CLR 513
87 ATC 4883
(1987) 19 ATR 274
Squatting Investment Company Limited v. Federal Commissioner of Taxation
(1953) 86 CLR 570