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Ruling
Subject: Income- allowances
Question 1:
Is the payment to cover travel expenses of a religious practitioner considered an allowance?
Answer:
Yes.
Question 2:
Are your required to withhold an amount from a bona fide travel allowance you paid to the religious practitioner when they travel overseas?
Answer:
No.
This ruling applies for the following period
Year ended 30 June 2012
The scheme commenced on
1 July 2011
Relevant facts
You are a religious organisation.
You provided a payment to a religious practitioner to cover the cost of travel expenses to travel overseas for work.
The recipient had the discretion to expend the payment.
The religious practitioner spent a number of days overseas.
Relevant legislative provisions
Taxation Administration Act 1953 section 15-10
Taxation Administration Act 1953 section 15-15
Taxation Administration Act 1953 section 12-47
Allowances
Taxation Ruling TR 92/15 discusses the difference between an allowance and a reimbursement.
A payment is an allowance when a person is paid a definite predetermined amount to cover an estimated expense.
A payment is a reimbursement when the recipient is compensated exactly, for an expense already incurred although not necessarily disbursed.
In your case, you paid a predetermined amount to cover the estimated expenses in relation to a religious practitioner to cover the partial cost of travel expenses to travel overseas. The payment is not considered to be a reimbursement, but an allowance.
Pay as you go
An entity must withhold tax from religious practitioners under Section 12-47 of Schedule 1 of the Tax Administration Act 1953 (TAA).
Section 15-10 of Schedule 1 to the TAA provides that the amount which an entity is required to withhold under section 12-47 of the TAA is to be determined in accordance with the regulations or the withholding schedules made by the Commissioner.
Section 15-15 of Schedule 1 to the TAA provides that the Commissioner may vary the amount which an entity is required to withhold under section 12-47 of the TAA.
A number of situations exist where the amount required to be withheld from payments made to a religious practitioner is varied to nil. Where a religious practitioner is paid a domestic/overseas travel allowance, the amount can be varied to nil providing all of the following conditions are satisfied:
· the religious practitioner is expected to incur an amount of deductible expenses at least equal to the amount of the allowance.
· the amount and nature of the allowance is shown separately in the accounting records of the payer.
· the allowance is for travel that requires the religious practitioner to be absent overnight from their ordinary place of residence.
· the allowance amount is up to the reasonable amount published in the annual Australian Tax Office Taxation Determination.
For a domestic/overseas travel allowance where the above conditions are satisfied:
· If the allowance amount is less than or equal to the reasonable amount, the payer is not required to withhold tax from the allowance or to show the allowance on the payee's payment summary.
· If the allowance amount is more than the reasonable amount, the payer is required to withhold tax from the amount of the allowance that is over the reasonable amount and to show the total amount of the allowance on the payee's payment summary.
In your case, where the allowance is shown in your accounting records as an expense item and it meets all the conditions noted above and the allowance paid is a bona fide travel allowance, you are not required to withhold tax from the allowance or to show the allowance on the religious practitioner's payment summary.
However if you are aware that the allowance will not be spent on the items it is intended to cover, the allowance is not considered to be a bona fide travel allowance and you would the be required to withhold from the allowance and record the amount on the employee payment summary as part of the gross earning.
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