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Ruling

Subject: Honorarium

Question and answer

Do the honorarium payments to faculty members of a non resident entity have Pay As You Go withholding (PAYGW) implications?

No

This ruling applies for the following period

Year ended 30 June 2010

Year ended 30 June 2011

Year ended 30 June 2012

Year ended 30 June 2013

The scheme commenced on

1 July 2009

Relevant facts

The entity's activities include providing seminars in Australia. It is a registered business entity in Australia providing seminars at various Australian schools and universities.

The entity does not have a permanent establishment in Australia, the courses are organised from Country X.

Faculty members of the entity are Australian residents and non residents. Generally faculty members are practitioners who volunteer their services for the purpose of professional growth in educational institutions.

Faculty members participate in an annual institute for educational fundraising.

Faculty members are not paid an engagement fee, but receive an honorarium as a token of appreciation.

Relevant legislative provisions

Income Tax Assessment Act 1997 Section 6-5

Income Tax Assessment Act 1936 Paragraph 26(e)

Reasons for decision

The treatment of an honorarium for tax purposes depends on the nature of the payment, that is, whether it has the character of income in the hands of the recipient or not.

An honorarium is defined in the Oxford dictionary as "as voluntary payment for professional services rendered without the normal fee…"

An honorarium is not generally regarded as assessable income because it normally represents a nominal payment for services and in most instances would not cover the incidental costs incurred in providing the service.

True honorariums are not included in assessable income. Taxation Ruling TR 2002/21 states, at paragraph 29, that a ture honorarium paid to an office holder would not be salary, wages, commission, bonuses or allowances that would be subject to withholding under section 12-45 in Schedule 1 to the Taxation Administration Act 1953 (TAA).

An honorarium is generally described as:

1. A one off payment to a service provider who had no expectation of receiving such a payment;

2. The payment is a token amount compared to the value of the services provided and/or the expenses incurred by the recipient;

3. There is no obligation on the part of the payer to make the payment; and

4. The duties performed by the recipient are purely benevolent.

From the information provided by you, the payments to the faculty who run the educational courses fall in the categories above. This is because:

· A one-off payment is paid to each faculty member

· The payment is considered a token amount in appreciation of services provided

· The duties performed by the faculty members volunteer their services and therefore the duties performed by them are benevolent.

Therefore, the payments are not assessable income and are not subject to income tax under either section 6-5 of the Income Tax Assessment Act 1997 (ITAA 1997) or section 26(e) of the Income Tax Assessment Act 1936 (ITAA 1936). As the payments are not regarded as withholding payments under Division 12 in Schedule 1 to the TAA.

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