Edited version of private advice

Authorisation Number: 1052366177608

Date of advice: 14 March 2025

Ruling

Subject: FBT - volunteers

Question 1

Is the Corporation required to withhold PAYGunder section 12-35 of Schedule 1 to the Taxation Administration Act 1953 (TAA) in respect of the house provided to the caretaker to reside in rent free under the arrangement?

Answer

No.

Question 2

Is the caretaker an employee of the Corporation as defined in subsection 136(1) of the Fringe Benefits Tax Assessment Act 1986 (FBTAA)?

Answer

No.

Question 3

Is the provision of the house to the caretaker to reside in rent free a fringe benefit as defined in subsection 136(1) of FBTAA?

Answer

No.

This ruling applies for the following periods:

FBT year ending 30 March 20XX

FBT year ending 30 March 20XX

FBT year ending 30 March 20XX

FBT year ending 30 March 20XX

Income tax year ending 30 June 20XX

Income tax year ending 30 June 20XX

Income tax year ending 30 June 20XX

Income tax year ending 30 June 20XX

The scheme commenced on:

1 April 20XX

Relevant facts and circumstances

The caretaker is provided rent free accommodation at a property (the Property) owned by The Corporation.

The area the Property is located is listed as a remote area and is eligible for FBT concessions for accommodation.

The caretaker role is not advertised. The Council provides the house to a member of the Council to reside in rent free, so they can undertake the role of property caretaker.

The main reason for having a caretaker is for security.

The Council believes renting it commercially isn't feasible. The decision was made to have a caretaker who would live rent free in exchange for undertaking the various caretaker duties as outlined below. This position was offered to a member of the Council.

The caretaker role includes the following activities;

•                     Organising and arranging repairs

•                     Organising access

•                     Carrying out additional watering and yard maintenance work

The hours spent on the caretaker duties are ad-hoc.

If the caretaker duties are not undertaken, it may be raised at the Council but there would be no further implications - for example, the caretaker would not be evicted from the house.

There is no written agreement between the Corporation and the caretaker on the duties the caretaker undertakes.

There is no rental agreement or lease in place for the house.

The caretaker pays the electricity for the property.

The caretaker has installed two air conditioners in the property at own cost.

Financial records are maintained in the office.

No monetary renumeration is paid to the caretaker for the role.

The caretaker is the treasurer of the Council (voluntary position).

The caretaker has full time paid employment in another role.

The property is the principal place of residence of the caretaker.

Relevant legislative provisions

Taxation Administration Act 1953 Section 12-35 of Schedule 1

Taxation Administration Act 1953 Schedule 1 - Divisions 12 to 14

Fringe Benefits Tax Assessment Act 1986 Subsection 136(1)

Fringe Benefits Tax Assessment Act 1986 Section 137

Reasons for decision

Question 1

Is (the Corporation) required to withhold PAYGunder section 12-35 of Schedule 1 to the Taxation Administration Act 1953 (TAA) in respect of the house provided to the caretaker to reside in rent free under the arrangement?

Summary

The Corporation is not required to withhold PAYG under section 12-35 of Schedule 1 of the Taxation Administration Act 1953 (TAA) in respect of the house provided to the caretaker to reside in rent free under the arrangement.

Detailed reasoning

Payments and other transactions that are subject to PAYG withholding are covered by the provisions in Divisions 12 to 14 of Schedule 1 to the TAA, which include section 12-35.

For PAYG withholding to be required by section 12-35 of Schedule 1 to the TAA, the payee must be an individual and the payment must be made to the individual as an employee. The term 'employee' is not defined in the TAA. For the purposes of withholding under section 12-35 of Schedule 1 to the TAA the word 'employee' has its ordinary meaning.

Intention to create a legal relationship

The employment relationship with which the common law is concerned must be a legal relationship.[1] The relationship between an employee and an employer is a contractual one, often referred to as a contract of service.

Paragraph 7 of Taxation Ruling TR 2023/4 Income tax and superannuation guarantee: who is an employee? states:

7. Whether a person (that is, a worker) is an employee of an entity (referred to in this Ruling as the 'engaging entity') under the term's ordinary meaning is a question of fact to be determined by reference to an objective assessment of the totality of the relationship between the parties, having regard only to the legal rights and obligations which constitute that relationship.

Whilst there is no legal definition of 'volunteer' for tax purposes, a volunteer does not work under a contractual obligation for remuneration and would not be an employee or independent contractor. Volunteers can be paid in cash and/or be given non-cash benefits. These payments can be given various descriptions, including 'honorariums' or 'gratuities.' An 'honorarium' is either an honorary reward for voluntary services, or a fee for professional services voluntarily performed. A 'gratuity' is not defined in the Income Tax Assessment Acts and thus takes its ordinary meaning.

Application

1.     In this case, the caretaker:

a.            Is primarily living in the house for security purposes

b.          Is not paid for the duties they undertake.

c.          Has no written contract with the Entity, and there are no consequences (such as eviction) should the caretaker's duties not be performed.

d.          Does have duties which are required to be undertaken.

e.          Spends ad-hoc hours performing caretaker duties and also has paid employment in another role.

Based on the facts provided, the caretaker is considered to be a volunteer and not an employee of the Corporation. As a volunteer the caretaker is not an employee of the Corporation. The Corporation would not be required under section 12-35 of the TAA to withhold PAYG in respect of the house provided to the caretaker to reside in rent free under the arrangement.

Question 2

Is the caretaker an employee of the Corporation as defined in subsection 136(1) of the Fringe Benefits Tax Assessment Act 1986 (FBTAA)?

Summary

The caretaker is not an employee of the Corporation as defined in subsection 136(1) of the Fringe Benefits Tax Assessment Act 1986 (FBTAA).

Detailed reasoning

For a fringe benefit to arise, a benefit must be provided in respect of an employee's employment.

An employee is defined in subsection 136(1) of the FBTAA to be:

a)            A current employee

b)            A future employee; or

c)            A former employee

Subsection 136(1) of the FBTAA also sets out that a current employee is someone who receives, or is entitled to receive, salary or wages.

'Salary or wages', as defined in subsection 136(1) of the FBTAA, means payments from which an amount must be withheld under section 12-35 of Schedule 1 to the TAA.

The caretaker does not meet the definition of an 'employee' for fringe benefits tax purposes as they do not receive salary or wages from the Corporation from which an amount must be withheld.

Section 137 of the FBTAA further expands this to include persons who receive non-cash remuneration in circumstances where the person would have been treated as an employee if the non-cash remuneration had been received by way of a cash payment.

Subsection 137(1) states:

For the purpose only of ascertaining whether a person is an employee or an employer within the meaning of this Act, where:

(a)            a benefit is provided by a person (in this subsection referred to as the first person) to, or to an associate of, another person (in this subsection referred to as the second person);

(b)            but for this subsection, the benefit would not be regarded as having been provided in respect of the employment of the second person; and

(c)            either of the following conditions is satisfied:

(i)          if the benefit were provided by the first person by way of a cash payment to the second person, the payment would constitute salary or wages paid by the first person to the second person;

(ii)          all of the following conditions are satisfied:

(A)        subparagraph (i) does not apply in relation to the benefit;

(B)        the first person is an associate of a third person or the benefit is provided under an arrangement between the first person and a third person;

(C)        if the benefit were provided by the third person by way of a cash payment to the second person, the payment would constitute salary or wages paid by the third person to the second person;

a definition in subsection 136(1) applies as if the benefit were salary or wages paid to the second person by:

(d)            in a case to which subparagraph (c)(i) applies - the first person; or

(e)            in a case to which subparagraph (c)(ii) applies - the third person.

The Corporation has allowed the caretaker to reside in the Property rent free in order to undertake the role of property caretaker. This is a 'benefit' as defined in subsection 136(1) of the FBTAA, however the benefit is not provided 'in respect of employment' as the caretaker is a volunteer and not an employee. Accordingly, section 137 of the FBTAA does not apply.

The phrase 'in respect of' in relation to the employment of an employee is defined in subsection 136(1) of the FBTAA to include 'by reason of, by virtue of, for or in relation directly or indirectly to, that employment'.

The meaning of 'in respect of employment' was considered by the Federal Court in J & G Knowles v Federal Commissioner of Taxation [2000] 96 FCR 402; 2000 ATC 4151; 44 ATR 22 (Knowles). In Knowles, the Full Federal Court concluded that there needs to be a sufficient or material, rather than a causal connection or relationship between the benefit and the employment.

From the facts provided, there is not a material connection between the provision of accommodation and the caretaker's duties as the caretaker is considered to be a volunteer and not an employee.

Question 3

Is the provision of the house to the caretaker to reside in rent free a fringe benefit as defined in subsection 136(1) of FBTAA?

Summary

The provision of the house to the caretaker to reside in rent free is not a fringe benefit as defined in subsection 136(1) of FBTAA.

Detailed reasoning

As discussed under Question 1, the caretaker is considered to be a volunteer and does not meet the definition of an 'employee' for the purposes of the PAYG withholding under section 12-35 of Schedule 1 to the TAA.

Consequently, as discussed in Question 2 the caretaker is considered to be a volunteer and does not meet the definition of an 'employee' in subsection 136(1) of the FBTAA.

Accordingly, a fringe benefit as defined in subsection 136(1) of FBTAA is not being provided by the Corporation to the caretaker in respect of the house provided to the caretaker to reside in rent free under the arrangement.

[1] CFMMEU v. Personnel Contracting [2022] HCA 1 at [44].