Edited version of private ruling

Authorisation Number: 1011667401268

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Ruling

Is the organisation required to withhold an amount from the amount paid to mentors in accordance with Subdivision 12-B of schedule 1 to the Taxation Administration Act 1953 (TAA)?

No.

Relevant facts and circumstances

The organisation established a Mentor Program.

Mentors are expected to:

· participate in a one day training workshop;

· aim to meet their mentees at least twice

· send weekly emails to their mentee group and respond to queries

· attend at least two mentor meetings with the mentor program coordinator, and

· participate in the evaluation process.

The workload varies from one mentor to another. Some tend to put a lot of effort into the role and others put less effort.

To thank the mentors they are given a supermarket voucher by the organisation on completion of the role.

There is no set obligation to consistently perform duties for the mentor and they will be given the vouchers regardless of the result.

Relevant legislative provisions

Taxation Administration Act 1953 Sch1-Schpt2-5-Div12-SDiv12-B

Income Tax Assessment Act 1997 Section 6-5

Income Tax Assessment Act 1997 Section 6-10

Income Tax Assessment Act 1997 Section 15-2.

Reasons for decision

An amount is required to be withheld under Subdivision 12-B of schedule 1 to the TAA for certain listed payments for work and services. Where payments made to volunteers are not assessable income, they will not be regarded as withholding payments under Subdivision 12-B of schedule 1 to the TAA.

The supermarket vouchers given to mentors will be considered assessable income if it is either income in the ordinary sense of the word (ordinary income) or an amount or benefit that through the operation or provisions of the tax law is included in assessable income (statutory income).

Under subsection 6-5(1) of the Income Tax Assessment Act 1997 (ITAA 1997), an amount is assessable income if it is income according to ordinary concepts.

Relevant factors in determining whether the payment is ordinary income include whether the payment is for services rendered, such as personal services, and the character of the payment in the hands of the recipient.

Income Tax Ruling IT 2639 describes income from personal services as:

income that an individual earns predominantly as a direct reward for his or her personal efforts, for example, the provision of services, exercise of skills or the application of labour.

The mentors are volunteers and the payments made to them are not based on any measurement of their activities. The payments do not have a connection to the tasks undertaken by the mentors.

The payment would not be expected by the mentors for day to day living as it is a one off payment.

The amount is quite small compared to the number of hours that mentors would have spent undertaking their tasks.

It is considered, therefore, that the payment received by the mentors does not possess the characteristics of ordinary income. They are not payments for services rendered.

Section 6-10 of the ITAA 1997 includes in assessable income amounts that are not ordinary income. Section 15-2 of the ITAA 1997 is the relevant statutory income provision that may have an application to the circumstances here. This provision provides that assessable income shall include:

… the value to you of all allowances, gratuities, compensation, benefits, bonuses and premiums *provided to you in respect of, or for or in relation directly or indirectly to, any employment of or services rendered by you.

The supermarket vouchers given to mentors are not paid as an allowance or as any other kind of payment in respect of employment or services rendered that are covered by section 15-2 of the ITAA 1997. The payments are not assessable income under section 15-2.

Since the payments made to the mentors are not assessable income, there will be no requirement for the organisation to withhold an amount in accordance with Subdivision 12-B of schedule 1 to the TAA.