Edited version of your written advice

Authorisation Number: 1051203016358

Date of Advice 21 March 2017

Ruling

Subject: PAYG Withholding - Volunteers

Question

Does the organisation have an obligation to withhold tax from payments made to volunteers under section 12-35 of Schedule 1 to the Taxation Administration Act 1953 (TAA 1953)?

Answer

No.

This ruling applies for the following periods

Year ending 30 June 2017

Year ending 30 June 2018

Year ending 30 June 2019

The scheme commences on

1 July 2016

Relevant facts and circumstances

The organisation is a Not For Profit registered charity with the Australian Charities and Not-for-profits Commission (ACNC) and seeks to obtain volunteers to assist with providing transportation for seniors and disabled persons.

The volunteers will not be employees but will use their own motor vehicles to pick up clients from their homes and deliver them to medical appointments or to health providers and return them home.

The organisation seeks to contribute to volunteers so that they do not incur excessive costs in volunteering their services.

The organisation would like to use the ATO deemed deductible rate for motor vehicle usage of $0.66 per kilometre as a guideline to make a fair contribution to the volunteers expected expenditure in volunteering and using their motor vehicle.

Employee characteristics:

Volunteers are not paid an hourly rate or award rate for their time worked.

Volunteers do not receive leave and no leave loaded rates are paid.

The volunteer provides all materials or equipment required for their work.

Volunteers agree to perform the services as a volunteer not as an employee and agree to provide their time for free.

Volunteers are not covered under any award and no award payments are made.

The volunteers are recognised as part of the organisation for providing free services.

The payment is given to ensure that costs of running and maintaining the vehicle are covered.

Independent Contractor characteristics

Volunteers are not paid for results. They are not paid per service.

Volunteers provide their own vehicle which is the necessary equipment required to perform the work.

Volunteers are not able to delegate their trips issued to them to another party.

Volunteers are provided with training to ensure that the service is provided in a correct manor to comply with government regulations when providing services to vulnerable persons, and meet the time constraints to ensure that the client reaches their medical appointment on time and with safety.

Volunteers cannot provide these services to the general public or any other business

Volunteers are free to accept or refuse work on any day they wish.

Volunteers are made aware that while there may be out of pocket expenditure incurred, it is not deductible from any income they derive from other sources.

Volunteer Characteristics

Volunteers choose what times and days they are available to volunteer with trips scheduled to meet the volunteer's availability and the volunteer receives no pay for the services provided.

Volunteers are responsible for providing their own vehicle, insurance, petrol, repairs and maintenance to ensure that the vehicle complies with the relevant motor vehicle legislation. Volunteers are also required to be registered for a blue card.

The organisation is not required to make payments to the volunteer.

Relevant legislative provisions

Tax Administration Act 1953 section 12-35 of Schedule 1

Tax Administration Act 1953 section 12-1(1A)

Income Tax Assessment Act 1997 section 6-5

Reasons for decision

Question 1

Subdivision 12-B (which comprises sections 12-35 to 12-60) of the Tax Administration Act 1953 (TAA 1953) deals with PAYG withholding from payments for work and services which includes payments to employees. Section 12-35 of Schedule 1 to the TAA 1953 provides that an entity must withhold an amount from salary, wages, commission, bonuses or allowances it pays to an individual as an employee (whether of that or another entity).

Subsection 12-1(1A) of Schedule 1 to the TAA 1953, however, provides an entity need not withhold an amount under section 12-35 or section 12-45 from a payment if the whole of the payment is not assessable income and is not exempt income of the entity receiving the payment.

Therefore, to work out whether an amount needs to be withheld from a payment it is necessary to determine whether the payment is assessable and not exempt income of the payee.

Are payments to 'volunteers' assessable income?

Volunteers can be paid in cash, given non-cash benefits or given a combination of both cash and non-cash benefits. These payments can be given various descriptions, including honorariums, reimbursements and allowances.

How an amount is described does not determine its treatment for tax purposes. Whether a payment is assessable income in the hands of a volunteer depends on the nature of the payment and the recipient's circumstances.

Section 6-5 of the ITAA 1997 includes income according to ordinary concepts, which is called ordinary income is assessable income.

Generally, receipts which are earned, expected, relied upon and have an element of periodicity, recurrence or regularity are treated as ordinary income.

However, where a person's activities are a pastime or hobby rather than income producing, money and other benefits received from those activities are not assessable income.

To determine if an amount is assessable, the full facts surrounding both the payment and the recipient must be considered. A payment that is not assessable to a volunteer will have many of the following characteristics:

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. Whether the payment is 'token' depends on the full facts surrounding the payment and recipient's circumstances.

Taxation Determination TD 2004/75 Income tax: are payments to a volunteer respite carer to cover expenses of providing respite care for a disabled person assessable income, provides guidance about where a carer receives a reimbursement for the costs of caring for a disabled person. Where the payment is intended to cover expenses incurred in providing the care including food and drink, laundry, recreation activities and transport the payment is considered to be in the nature of a reimbursement of expenses and therefore is not assessable income.

Based on the facts provided we accept that the volunteers will be receiving monies from the organisation with the intention that these monies will be used to cover the costs incurred in providing transport for the disabled person. Such payments are not considered to be ordinary income or statutory income.

Therefore, as the payments would not be assessable income to the volunteers, the organisation is not required to withhold in accordance with section 12-35 of Schedule 1 to the TAA 1953.