When Prize Money Is Ordinary Income — Commissioner of Taxation v Stone
Commissioner of Taxation v Stone [2005] HCA 21; (2005) 222 CLR 289 is the leading Australian authority on when sporting prize money, grants and sponsorship are assessable as ordinary income. Joanna Stone was a Queensland police officer and a champion javelin thrower. The High Court held that by turning her athletic talent to account for money — through prize money, government grants, sponsorship and appearance fees — she was carrying on the business of a professional athlete, and the receipts were ordinary income under s 6-5 of the Income Tax Assessment Act 1997 (Cth).
The principle
Whether a receipt is income is judged by “the ordinary concepts and usages of mankind” — Jordan CJ’s formulation in Scott v Commissioner of Taxation (1935) 35 SR (NSW) 215, quoted with approval by the High Court in Stone. A prize won by a hobbyist is ordinarily a windfall, not income. But where the taxpayer has organised their pursuit so as to turn talent to account for money — sponsorship agreements, appearance fees, structured grant income — the whole of the reward stream takes its character from that business.
In Stone, the fact that the taxpayer pursued the sport in part for personal satisfaction, and held other employment, did not prevent the conclusion that she was in business: the commercial exploitation of her talent characterised the receipts.
What practitioners take from Stone
- Prizes are not automatically income — characterisation turns on whether the taxpayer is relevantly in business or the receipt is a product of income-earning activity.
- Sponsorship is a strong marker: it commercialises the athlete’s pursuit and can colour grants and prize money received in the same period.
- The same characterisation analysis applies beyond sport — to literary prizes, gameshow winnings and one-off receipts generally, where the question is always the relationship of the receipt to an income-producing activity.
Key authorities
- Commissioner of Taxation v Stone [2005] HCA 21
High Court of Australia26 April 2005
Commissioner of Taxation v Stone [2005] HCA 21; (2005) 222 CLR 289 — prize money, grants and sponsorship of a police officer javelin thrower held to be ordinary income of a business of professional athletics.
- Scott v Federal Commissioner of Taxation [1966] HCA 48
High Court of Australia24 August 1966
Scott v Federal Commissioner of Taxation (1966) 117 CLR 514 — Windeyer J held an unsolicited personal gift to a solicitor was not income: the standard contrast case for one-off receipts on the other side of the line from Stone.
Related doctrine guides
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