Private ruling: Assessable income
Date of advice: 9 June 2017
Published: October 2017
Ruling period: Year ended 30 June 2016
Date scheme commenced: 1 July 2015

Ruling: Q1: Is the allowance for volunteers that you received from an Australian government agency assessable income? | A1: Yes

Relevant facts and circumstances: You worked as a volunteer for an Australian government agency. You performed all the volunteer work in Australia. You were paid with a daily rate of a certain level. You had to apply for the allowance on a regular basis. Time records were maintained and were enclosed with every application for the allowance. The government agency issued a PAYG payment summary for the year ended 30 June 2016.

Relevant legislative provisions: Income Tax Assessment Act 1997 Section 6-5

Reasons for decision: Summary: 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. Subsection 6-5(2) of the Income Tax Assessment Act 1997 (ITAA 1997) provides that the assessable income of an Australian resident includes ordinary income derived directly or indirectly from all sources, whether in or out of Australia, during the income year. Ordinary income has generally been held to include three categories, namely, income from rendering personal services, income from property and income from carrying on a business. Based on case law, it can be said that ordinary income generally includes receipts that are earned, expected, relied upon, and have an element of periodicity, recurrence or regularity. However, where a person’s activities are a pastime or hobby rather than income producing, money and other benefits received from those activities is 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 recipient’s circumstances. While not a conclusive factor, the amount of the payment and how it is calculated will ascertain some of these characteristics. The allowance is a payment for the services provided by the volunteers; the rate of payment is determined by a certain level and is paid for a combination of time and to cover expenses. Furthermore, the government agency has an obligation to make the payment to volunteers. Therefore, the allowance is assessable income to volunteers.