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Edited version of your written advice
Authorisation Number: 1012731483428
Ruling
Subject: Assessable income - honorarium
Question
Are the two payments you received for voluntary services assessable income?
Answer
This ruling applies for the following period:
Year ending 30 June 2014
The scheme commenced on:
1 July 2013
Relevant facts and circumstances
You are employed full time.
You have provided voluntary services to an organisation who has paid you two separate lump sum payments.
Relevant legislative provisions
Income Tax Assessment Act 1997 Subsection 6-5(2)
Reasons for decision
Subsection 6-5(2) of the Income Tax Assessment Act 1997 (ITAA 1997) provides that the assessable income of a resident taxpayer includes ordinary income derived directly or indirectly from all sources during the income year.
The courts have identified a number of factors which indicate whether an amount is regarded as ordinary income. Characteristics of ordinary income that have evolved from case law include receipts that:
• are earned
• are expected
• are relied upon, and
• have an element of periodicity, recurrence or regularity.
The assessability of a voluntary payment was considered in Case Z16 (92 ATC 183). The Administrative Appeals Tribunal determined that a payment that does not bear any relationship to the time and energy that the recipient expends on voluntary work or to the quantum of their expenses and that is not motivated by genuine commercial considerations will not be assessable.
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. Merely referring to a payment as an honorarium however, does not mean that the payment is not assessable.
The courts have determined a number of factors that indicate a 'true honorarium':
• the payment is received for personal reasons
• the payment has no connection to the recipient's income-producing activities or services rendered
• the payment is not received as remuneration or as a consequence of employment, services rendered, or any business
• the payment is not relied upon or expected by the recipient for day-to-day living
• the payment is not legally required or expected
• there is no obligation on the part of the payer to make the payment
• the payment is a token amount compared to the services provided or expenses incurred by the recipient
• the form of the receipt, that is, whether it is received as a lump sum or periodically
• whether the payments have been earned.
There are no set amounts or limits as to what constitutes an honorarium. Consideration must be given to all of the circumstances surrounding both the payment and the recipient.
Application to your circumstances
In your case you have received two lump-sum payments for voluntary services you provided. The services you provided have no connection to your employment and you are not carrying on a business. We consider that the amounts you were paid were token amounts in comparison to the services provided. Accordingly, the payments will not be assessable income.
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