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Ruling

Subject: Assessable income

Question

Will a weekly payment received for volunteer work be assessable income?

Answer

No.

This ruling applies for the following period:

Year ending 30 June 2012

The scheme commences on:

1 July 2011

Relevant facts and circumstances

You are a volunteer for a non-profit organisation.

You spend an average of 24 hours per week volunteering for the organisation.

You have previously been reimbursed for out of pocket expenses by the organisation.

The organisation has suggested to you that they pay you a regular amount per week in appreciation of the significant amount of volunteer work you perform.

You would not receive any further reimbursement for general expenses you incur as this would be included in the weekly payment.

You are retired and have no other employment income.

Relevant legislative provisions

Income Tax Assessment Act 1997 Section 6-5

Reasons for decision

Summary

The payment that you have been offered from the organisation for which you volunteer is a token amount in comparison to the services that you perform. The payment will not be assessable under section 6-5 of the Income Tax Assessment Act 1997 (ITAA 1997).

Detailed reasoning

Section 6-5(2) of the 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.

Ordinary income has generally been held to include 3 categories, namely, income from rendering personal services, income from property and income from carrying on a business.

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 following characteristics give guidance on what factors may indicate that payments made to a volunteer are not assessable:

§ the payment is to meet incurred or anticipated expenses

§ the payment has no connection to the recipient's income-producing activities or services

§ the payment is not received as remuneration or as a consequence of employment

§ 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 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.

The organisation for which you volunteer has offered to pay you a weekly payment as a token of appreciation for the significant amount of work you perform for them. This amount may be partially used to meet expenses you incur in relation to your volunteer work.

You have volunteered with the organisation for a number of years without receiving this payment, so it would be reasonable to expect that the payment will not be relied upon for your day-to-day living expenses. As you volunteer with the organisation, the payment is not legally required and the organisation is under no obligation to make the payment to you.

It could be argued that the payment will be received as remuneration or as a consequence of the services you provide. However, the weekly payment's per hour rate is minimal. When taking into consideration the fact that you will also incur expenses in relation to your volunteer work, we consider that this is a token amount in comparison to the work you perform.

The payment is not determined by the number of hours that you work. The value of the payment is considered minimal in comparison to the time and energy you expend which diminishes the connection between the payment and the services you perform. It is unlikely that the payment of such a nominal figure is motivated by genuine commercial considerations.

Accordingly it is considered that the amount the organisation proposes to pay you is not assessable under section 6-5 of the ITAA 1997.