Edited version of private advice

Authorisation Number: 1051998349431

Date of advice: 24 June 2022

Ruling

Subject: PAYG withholding

Question 1

Are payments to volunteers who use their own motor vehicle assessable income?

Answer

No

Question 2

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

Answer

No

The scheme commences on:

1 July 20XX

Relevant facts and circumstances

NFP is a Not‐for‐profit registered charity with the Australian Charities and Not‐for‐profits Commission (ACNC) and relies on Volunteers to assist with the provision of transportation for seniors and disabled persons, commonly referred to as "Volunteer Owner Drivers", as they use their own vehicle.

NFP currently pays X cents per kilometre to their volunteers as a token amount to cover or subsidise the volunteer's expenditure related to running their own motor vehicle to transport aged and disabled persons to and from:

•                     medical appointments

•                     social events, visits to family and friends

•                     everyday tasks such as shopping, banking, post office

•                     gym, swimming, hairdressing, or any other appointment.

X cents per kilometre rate is the required vehicle allowance rate for employees under the Social, Community, Home Care and Disability Services Industry Award, which covers NFP paid employees.

NFP requires all volunteers to only use motor vehicles that are less than 8 years old, minimum 4‐door, comprehensive insurance and be generally well maintained inside and out.

NFP has classified these payments as taxable allowances for the purposes of Single Touch Payroll with no amounts withheld from the payments.

NFP had X Volunteer Owner Drivers in FY20XX. From review of the payments made during that financial year X% of the volunteers received less than $X in payment.

The average payment per volunteer was $X with the highest payment being $X.

NFP reimburses volunteers out of pocket expenses, upon receipt of a reimbursement mileage form, so they do not incur excessive costs when volunteering their vehicle.

Volunteers are not paid any amount for their time or to reward them for any personal services they provide. They are volunteering their time without any expectation of monetary reward, only that motor vehicle costs are reimbursed.

The volunteers:

•                     are not employees

•                     choose what time and days they are available to volunteer, with trips scheduled to meet the volunteer's availability

•                     are not carrying on a business of driving or being paid any amount to compensate for the loss of other income

•                     use their own motor vehicles to pick up clients from their homes and deliver them to their appointments and return them home

•                     are provided with a uniform at no cost (e.g., polo shirts, jacket) and are responsible for laundry of their uniform

•                     are also required to be registered for a National Disability Insurance Scheme (NDIS) Workers Screening Yellow Card and National Police Check

•                     receive no pay for their time or to reward them for any personal services they provide, that is:

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

o        the payment is made to meet incurred expenses for the use of the Volunteer's motor vehicle

o        are responsible for providing their own vehicle, insurance, petrol, repairs, and maintenance to ensure that the vehicle complies with the relevant motor vehicle legislation

o        do not rely upon or expect payment to assist with day‐to‐day living costs.

Relevant legislative provisions

Taxation 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

Summary

Payments to volunteers who use their own motor vehicle by NFP is not assessable income.

Detailed reasoning

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 Income Tax and Assessment Act 1997 (ITAA1997) includes income according to ordinary concepts, which is called ordinary income and 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 the 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 seniors and disabled people. Such payments are not considered to be ordinary income or statutory income. Therefore, the payments would not be assessable income to the volunteers.

Question 2

Summary

NFP does not have an obligation to withhold tax from payment made to volunteers under 12-35 of Schedule 1 to the Taxation Administration Act 1953 (TAA 1953).

Detailed reasoning

Based on the facts provided in Question 1, we accept that the payments made to volunteers would not be assessable income. Therefore, NFP does not have an obligation to withhold from payments it makes to volunteers in accordance with section 12-35 of Schedule 1 to the TAA 1953.