Edited version of private advice

Authorisation Number: 1051869052014

Date of advice: 22 July 2021

Ruling

Subject: Assessable income - honorariums

Question

Is the payment you received in your position as Director of the Club assessable under section 8-1 of the Income Tax Assessment Act 1997?

Answer

No. Having considered your circumstances and the relevant factors, it is accepted that the payment you received was an honorary reward for voluntary services. Further information about honorariums can be found by searching 'QC 46354' on ato.gov.au.

This ruling applies for the following period periods:

Year ended 30 June 2021

The scheme commences on:

1 July 2020

Relevant facts and circumstances

You are a registered tax agent and accountant.

Your full time job involves income tax return preparation and general accounting/taxation advice to a broad range of salary and wage earners, small business entities and their associated entities such as family trusts and self-managed superannuation funds.

Two years ago you accepted appointment as a director at a sporting club (The Club). You accepted the position because the sport is a passion of yours, and you have been a sporting member of The Club for over 30 years during which time the club has provided you with great support and you felt that you wanted to give something back.

The position of treasurer has been held by someone else for X years.

You were not appointed to the position of director because you are a registered tax agent and accountant.

You are not asked to provide your skills as an accountant to the role of director.

The Club has a CEO, an Operations Manager, an Accountant, and other back office staff (all of whom are full time employees) duty managers, shift supervisors and general bar/café staff.

The staffing structure of administration management at The Club is such that it is not necessary for directors to be involved in any facet of the day to day running of the club.

Directors are specifically advised that they have no authority when it comes to day to day operational matters of the club.

As part of your directorship you attend a general board meeting twice per month each of which is of around two hours duration. These meetings are attended by the all directors and the CEO and are always held outside of normal business hours. The function of these meetings is to update directors on all matters which pertain to a general stewardship duty that a director has with the club. A typical meeting agenda would include:

•        Reading of minutes of the previous meeting;

•        Confirmation of those minutes;

•        Review/update on any business arising from those minutes;

•        Review of correspondence both inward and outward;

•        Review of applications for acceptance as new members;

•        Review of reports from the CEO (on operations), green keeper, sporting coordinator, and various other sub committees.

•        Review of reports such as Austrac reports submitted by the CEO or their staff members;

•        Planning for upcoming events; and

•        General business

In addition to this you sit on two sub committees, being the finance committee and the judicial committee.

The finance committee meets once per month (usually during business hours) to review management financial statements of the previous month as presented by the inhouse accountant. This committee would also typically consider, discuss, and vote upon applications for grants or donations from various local bodies such as charitable organisations, schools and sporting clubs. The committee would also do likewise for any capital expenditure proposed by management of the club.

The judicial committee gathers on an ad hoc frequency, whenever a member has breached behavioral rules of the club significantly enough to warrant temporary exclusion from the club or membership cancellation.

When the judicial committee meet it involves reviewing CCTV footage, meeting with the member to discuss their behavior, listening to the member put forward their case as to why they should not be excluded from the club, and ultimately deciding on an appropriate outcome for ratification at the next general board meeting.

Each year the club receives many invitations from local schools and sporting clubs to attend their presentations in gratitude for the financial support provided to them from the club. Attendance at these functions is shared around all board members. There are occasions when board members would be called upon to make visits to other clubs to investigate projects before any funding is committed to capital expenditure projects.

All board members are required to attend the members Annual General Meeting (AGM) where the operating results of the previous year are released to members, and members have an opportunity to ask the board members about any matters concerning the club.

It is at this meeting where a proposal is put to members to vote on the provision of an honorarium to individuals who have voluntarily served the club during the previous year. The proposal is listed on the Notice of Annual General Meeting as 'Consideration of Out of Pocket Expenses'. These funds are only provided to directors if the resolution is passed by the members.

At the last AGM, the proposal was passed and you, being a director in a non-executive position, received a payment of $X.

The payment is not commensurate with the income you earn when engaging in your income earning activities.

Relevant legislative provisions

Income Tax Assessment Act 1997 section 8-1