Private ruling: Reimbursements to volunteers
Published: November 2014
Ruling period: From 1 July 2014
Date scheme commenced: 1 July 2014

Ruling: Q1: Are payments made by the organisation to volunteer Board Members for the costs associated with running their private vehicles for Board activities considered to be reimbursements? | A1: Yes


Relevant legislative provisions: Taxation Administration Act 1953 Subsection 359-20(2) | Taxation Administration Act 1953 section 357-55 | Taxation Administration Act 1953 section 12-35

Reasons for decision: Summary: While these reasons are not part of the private ruling, we provide them to help you to understand how we reached our decision. A non-profit organisation has requested advice on whether payments made to volunteer Board members for costs associated with use of their private vehicles for the Board's activities are considered to be reimbursements or allowances. | Detailed Reasoning - Detailed reasoning: The Macquarie dictionary defines the word "reimburse" as a repayment for expense or loss incurred, or a refund. Taxation Ruling TR 92/15 (TR 92/15) explains the difference between an allowance and a reimbursement. At paragraph 3, the Commissioner states that a payment is a reimbursement when the recipient is compensated exactly (meaning precisely, as opposed to approximately), whether wholly or partly, for an expense already incurred although not necessarily disbursed. In general, the provider considers the expense to be its own and the recipient incurs the expenditure on behalf of the provider. As a result, a requirement that the recipient vouch or substantiate expenses, lends weight to a presumption that a payment is a reimbursement rather than an allowance. A further indication of a reimbursement is where the recipient is required to refund unexpended amounts to the provider. Your organisation is a non-profit body which has volunteer Board Members who attend monthly Board meetings. You have recently resolved to reimburse board members for their out of pocket expenses incurred in connection with their position on the board, eg: travel in privately owned vehicles to attend monthly board meetings etc. Whether an employer is liable to withhold amounts under the PAYG provisions of the TAA 1953, depends on to whom they make a payment and the nature of the payment itself. Section 12-35 of Schedule 1 of the (TAA 1953) states that an entity must withhold an amount from salary, wages, commission, bonuses or allowances it pays to an individual as an employee - (for exceptions see section 12-1 of the same schedule). Where a payment is made to a volunteer in respect of incidental or out of pocket expenses and those payments are not related to the volunteer's income earning activity, the payments are considered reimbursements rather than allowances, consistent with paragraph 3 of TR 92/15. The ATO publication "Volunteers and Tax" confirms that a payment is a 'reimbursement' for tax purposes where it is a precise compensation, in part or full, for an expense already incurred, even if the expense has not yet been paid. A payment is more likely to be a reimbursement where the recipient is required to substantiate expenses. It adds that in general, the payer considers the expense to be their own and the recipient incurs the expenditure on behalf of the payer. This publication clarifies that if an organisation reimburses a volunteer for using a personal asset or incurring expenses on its behalf, the reimbursement will not be assessable income of the volunteer, provided: • the payment does no more than reimburse the volunteer for expenses actually incurred • the payment is not for a supply made Your organisation, in its application has stated that: • the volunteers on your board do not receive any payment for the work/time they contribute to carry out their duties as members of the board. • You will only reimburse volunteer members for travel expenses, incurred in using their private vehicles for purposes of the board. • You will only pay board members at the set ATO rate, as per the cents per kilometre method. • You will request volunteer members to submit claim forms which provide odometer readings and other details to determine the distance travelled. • You will only make payment after the event. • You will only make payment to the extent incurred by the volunteer. Therefore, provided the distance travelled by the volunteer by private vehicle is not related to their income earning activity, the payment is distinguished from an allowance (as an allowance is paid for services rendered) and is better categorised as a reimbursement. The essential requirement of a reimbursement as required by TR 92/15 is that the payment is based on the precise accounting of actual expenditure. As your payments to the volunteers fulfil the essential requirements of reimbursements, they may be categorised as reimbursements.

Your entity is a non-profit organisation which has a governing board of individuals who act in a voluntary capacity. These members are not employees as they do not receive any remuneration for their services on the board. It was recently resolved to begin reimbursing board members for out-of-pocket expenses incurred in relation to their position on the board which includes travel in their own private vehicles to attend monthly meetings. It is proposed to pay board members only for actual kilometres travelled and at the set ATO rates, as per the cents per kilometre method, and will only be made for predetermined Board activities. The payments will only be made after the event and members will be required to complete a claim form which requests odometer readings and other details of expenditure before any payment is made. | Reasons for decision: These reasons for decision accompany the Notice of private ruling for a Non-profit entity.