Private ruling: PAYG Withholding Obligation
Date of advice: 13 July 2017
Published: March 2018
Ruling period: Income years ending 30 June 20XX to 30 June 20XX
Date scheme commenced: 01 July 20XX

Ruling: Q1: Are the payments to the personnel who volunteer their services in undertaking the project subject to PAYG withholding? | A1: Yes.

Relevant facts and circumstances: The taxpayer is a not-for-profit association. The purposes of the taxpayer are to promote, facilitate and extend certain type of sport, to coordinate and conduct events of the sport, and to improve performance of taxpayer’s members in competitions. The taxpayer runs events of the sport regularly; activities are generally conducted by its members who volunteer their services. From time to time, the taxpayer undertakes certain special sponsored projects, where the taxpayer makes payments to the members for their services in these projects.

Relevant legislative provisions: Income Tax Assessment Act 1997 | Taxation Administration Act 1953

Reasons for decision: Summary: There is no legal definition of ‘volunteer’ for tax purpose. The dictionary definition of a volunteer, which is someone who enters into any service of their own free will, or who offers to perform a service or undertaking for no financial gain: The Macquarie Dictionary, [Online], viewed 11 January 2017, www.macquariedictionary.com.au. Subsection 6-5(2) provides that the assessable income of a resident taxpayer includes ordinary income derived directly or indirectly from all sources during the income year. All remuneration and rewards for personal services, whether received in the capacity of employee or otherwise in connection with employment or personal services, are income according to ordinary concepts. These include earnings from irregular work, for example, random weekend or after hours jobs. In this case, the payments to members who render their services in undertaking the taxpayer’s project are considered as assessable income of the members under subsection 6-5(2). Section 12-35 of Schedule 1 to the Taxation Administration Act 1953 (TAA) requires an entity that pays salary, wages, commission, bonuses or allowances to an individual as an employee to withhold an amount from the payment. The individual may be an employee of the payer or of another entity. None of the three general exceptions listed in section 12-1 of Schedule 1 to the TAA is applicable to this case. The term ‘employee’ is not defined in the TAA; therefore it has its ordinary meaning: paragraph 16 of the Taxation Ruling 2005/16 Income tax: Pay As You Go – withholding from payments to employees (TR 2005/16). On the facts of this case, the taxpayer pays a rate, which is considered as a reasonable rate for purpose of rewarding the members for their time and services in the project. In provision of their services in the project, the members of the taxpayer are not running their own business or enterprise, nor do they have independence in the conduct of their services. The members of the taxpayer are provided with majority of the necessary equipment. They are reimbursed for reasonable expenses incurred in the course of their services. In consideration of totality of the relationship and for purpose of section 12-35 of Schedule 1 to the TAA, the members who receive payments are employees of the taxpayer. In making the payments, the taxpayer is required to withhold an amount from each payment under section 12-35 of Schedule 1 to the TAA.

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