Income tax: assessable income: football umpires: Victorian Amateur Football Association

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.

The relevant provisions dealt with in this Ruling are: • section 6-5 of the Income Tax Assessment Act 1997 (ITAA 1997); • section 8-1 of the ITAA 1997; and • section 15-2 of the ITAA 1997. All legislative references in this Ruling are to the ITAA 1997 unless otherwise indicated.

The class of entities to which this Ruling applies comprises all individuals who receive payments from the Victorian Amateur Football Association (VAFA) to officiate at Australian Rules football matches as umpires.

The entities described in paragraph 3 of this Ruling to whom this Ruling applies are collectively referred to in this Ruling as umpires.

The Commissioner makes this Ruling based on the precise scheme identified in this Ruling.

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 19 of this Ruling.

If the scheme actually carried out is materially different from the scheme that is described in this Ruling, then: • 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because the scheme entered into is not the scheme on which the Commissioner has ruled; and • this Ruling may be withdrawn or modified.

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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).

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

The purpose of the VAFA is to provide all stakeholders of the VAFA with an affordable, enjoyable and competitive game of Australian rules football in a safe environment, whilst making a meaningful contribution to the community and the development of the game.

The VAFA established an annual subscription (affiliation fees) for member clubs and this fee includes a component which is used to pay umpires and their respective coaches and observers who officiate in matches arranged by the VAFA.

Umpires apply to the VAFA to be appointed as either a field, goal or boundary umpire. In some cases where the VAFA has a shortage of available umpires for reserve grade games in lower sections, a competing club may be required to appoint a registered person to officiate. In these circumstances, the club will pay the umpire a designated match payment which is then refunded by the VAFA to the club.

The umpire's appointment board is administered by the VAFA and has ultimate responsibilities for the selection of all umpires in all games. No club has any influence over which umpires are appointed to which games. All appointments are on a merit and development basis. Umpires appointed to games are assessed on their ability.

Umpires receive match payments and when appropriate, an additional amount to attend tribunal hearings. No other allowances are received by umpires for travel or training.

Umpires are paid a match fee for each game they officiate and amounts received in a season depend on the level and number of games at which an umpire officiates. Current match fees are such that the most any umpire could receive in a season is $4,000.

Match fees and the tribunal attendance allowance (where applicable) are paid by the VAFA to the umpires on a monthly basis by electronic funds transfer to the umpire's individual bank account.

Umpires are required to incur expenditure on match uniform, running shoes, whistles, flags, coats, etc. The umpires also meet their own costs of travel to the relevant grounds.

The match fees are not intended to, nor do they usually cover expenses. The purpose of the payment is to encourage members of the community to participate in local sporting activities by subsidising the costs associated with participation.

The match fees paid by the VAFA to umpires officiating at VAFA matches are not assessable income under sections 6-5 or 15-2.

The tribunal allowance paid by the VAFA to umpires officiating at VAFA matches are not assessable income under sections 6-5 or 15-2.

Losses and outgoings incurred by umpires at VAFA matches in connection with their activities as an umpire cannot be claimed as a deduction under section 8-1 or any other provision of the ITAA 1997.

A payment or other benefit received by a taxpayer is assessable income if it is: • income in the ordinary sense of the word (ordinary income); or • an amount or benefit that through the operation of the provisions of the tax law is included in assessable income (statutory income).

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

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.

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.

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]

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]

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.

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.

The Commissioner accepts that the activities of the umpires who receive payments from the VAFA 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.

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.

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.

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...

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]

Umpires covered by this Ruling are not considered to be employees of the VAFA. 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.

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

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.

As explained above, 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.

The following is a detailed contents list for this Ruling: Paragraph What this Ruling is about 1 Relevant provisions 2 Class of entities 3 Qualifications 5 Date of effect 9 Scheme 10 Ruling 20 Appendix 1 - Explanation 23 Ordinary income 24 Statutory income 33 General deductions 38 Pay As You Go (PAYG) withholding 39 Appendix 2 - Detailed contents list 40