A prominent Australian athlete Joanna Stone disclosed the income of $39 832 that she earned while working as a police officer. It should be noted that she was employed in the Queensland Police Force on a full-time basis. Yet, at the same time, she was a distinguished javelin thrower who represented Australia at various international competitions. This person stated that she had received $136,448 as a result of her athletic activities. In particular, these receipts took the form of prize money, grants, and sponsorship fees. In turn, the Federal Commissioner of Taxation believed that these payments had to be classified as income; therefore, they could not be exempt from taxation. Joanna Stone disagreed with this interpretation and stated that this money had not been derived from business activities. So, these assets should not be taken into account by the state. This case was tried at different levels, and this paper is aimed at examining the decision of the Full Federal Court. One should keep in mind that this verdict was later reversed by the High Court. Overall, it is vital to understand the line of reasoning that the judges followed while examining this dispute.
Joanna Stone believed that these earnings had to be exempt from taxation because they had not been derived from her professional activities, in particular, her employment in the police force. More importantly, she claimed that her athletic activities had to be viewed as a hobby, rather than a business. Overall, Joanna Stone did not perceive herself as a professional athlete. In turn, the Commissioner argued that she had been actually engaged in business activity because she exploited her talent to earn money. Even though she was employed as a police officer, she had sufficient reasons to believe that her participation in athletic tournaments could generate revenues for her. Therefore, she had to include these earnings in the income statement. These are some of the main arguments that were put forward. Thus, the two sides differed considerably in their interpretation of the main question. Furthermore, they could not reach any compromise regarding the legal status of the payments that this athlete received.
There were several important questions that judges had to answer. At first, they had to determine if the payments received by Joanna Stone could be viewed as income. Nevertheless, this task gave rise to a different question. In particular, the court had to decide if the athletic activities of this person could be regarded as a form of business. These issues were critical for understanding what kind of payments had to be included in the income statement. Overall, this decision could have profound implications for many people, especially those individuals who could derive some revenues from semi-professional activities.
The Federal Court stated that the payments that this athlete received could not be regarded as income; therefore, they did not have to be taxable. There were several rationales for this verdict. At first, the judges focused on the common law interpretation of business activities and identified their major characteristics. According to this approach, if a person is engaged in a certain activity with the purpose of making some profit, he/she conducts a business. Thus, the gains derived in this way are not exempt from taxation. Nevertheless, the intentions of a person cannot be a distinctive criterion in this particular situation, because Joanna Stone could take part in such competitions simply out of enthusiasm while financial rewards could be just the consequence of her hard effort and excellence in a particular field. This is one of the issues that should be taken into consideration because it highlights the main complexity of this case.
There are other important issues examined by the court. One of their tasks was to determine the extent to which Joanna Stone was engaged in athletics. In particular, they mentioned that Joanne Stone was engaged in athletic activities only at her spare time, when she did not have to do the duties related to her police work. Therefore, she was not fully committed only to athletics as a means of earning her leaving. Furthermore, the payments that she had received could not be called regular. For instance, for a long time, Joanne Stone could not take part in any tournaments due to her injuries. Moreover, her compensation was not guaranteed in any way, because she did not always take prize-winning places. Apart from that, she did not receive a regular payment from any organization. In this case, it is possible to refer to the activities of professional athletes who can be employed by football or rugby clubs on a full-time basis. Overall, the court came to the conclusion that Joanne Stone was not a professional athlete due to the following reasons; 1) irregularity of payments; 2) absence of clear profit-making intentions; and 3) lack of guaranteed compensation. These are the main details that be distinguished.
Nevertheless, the court also stated that the sponsorship fees had to be regarded as a form of income because Joanna Stone received this payment in exchange for services that she provided to private businesses. In this case, her activities could not be viewed as a form of pure hobby because profit-making intention was clear. This is one of the exceptions that the court had to make.
It should be kept in mind that the decision of the Full Federal Court was reversed by the High Court. In this case, the judges mentioned that income could be derived from the use of a certain asset. In this context, the term asset can incorporate many elements, including the skills which a person could have acquired. Therefore, athletic talent is described as the asset that could be used to generate revenues. Thus, there was a significant difference in opinions, and these distinctions cannot be overlooked by legal professionals.
The discussion of this case indicates that very often, legal professionals are required to apply different criteria in order to classify the actions of a person and reach a certain conclusion. The Full Federal Court attached importance to the nature of Joanna Stone’s career and stated that her activities could not be regarded as a business. Nevertheless, this interpretation was not accepted by the High Court, because they focused primarily on the nature of income and its definition. Additionally, this case should be considered by legal professionals whose work is related to taxation. In particular, these people should clearly understand what kind of activities can be described with the help of the umbrella term business. Furthermore, professionals should identify the payments that have to be included in the income statement. These are some of the main issues that one should take into account.