Private ruling: Assessable income – Gratuity payment – Volunteer agreement
Date of advice: 26 February 2018
Published: June 2018
Ruling period: Period Ending 30 June 2018 | Period Ending 30 June 2019
Date scheme commenced: 01 July 2017

Ruling: Q1: Will the payments received in relation to your role as sports division co-ordinator for a club form part of your assessable income? | A1: Yes

Relevant facts and circumstances: You are a sports division Co-Ordinator. You are required to report to the club Co-Ordinator. At all times you must be a member of a club and must hold a valid and current Working with Children Card to fulfil the role. You must comply with the sports division Co-ordinator volunteer agreement and the Job Description for the sports division Co-Ordinator. You are required to perform this role on a flexible basis, and are required to attend; ● Holiday Clinics ● Games, and ● C ommittee meetings and Age Co-ordinator meetings. Your approximate hours per season are an average of 325 hours, as per your job description. You receive a payment of gratuity payments in instalments from the club. The gratuity is in recognition of the time and commitment to your role as the sports division Co-Ordinator. Fees received by the club fund the payment of the Gratuity/Honorarium. The initial payment has not been received due to the absence of club officers. You have provided the Club officer with you bank details to facilitate receipt of the payments. Your attendance is not recorded through any formal method including time sheets. Your non-attendance at any activity due to your hospitalisation or illness would see the requirement for a substitute to be identified; they would be sourced via either the Co-Ordinator or the Club Officers. Should others fill in the role or your job description key results are not being met your payments may be made on a pro-rata basis at the discretion of the Co-ordinator. If you wish to apply for any other type of role in the sporting industry you must seek prior written approval of the Club Co-Ordinator and must notify the club before you accept a role. You have the right to cease acting in the position of the sports division Co-Ordinator, or the club to cease your appointment in the role as the sports division Co-Ordinator by providing a written notice seven days prior to ceasing. Where serious misconduct at common law is identified the club may choose to end the agreement immediately. The title to any Intellectual Property Rights in all material created as a result of your appointment and Role vest in the club. All knowledge and/or information written or otherwise related to the activities of the club obtained by you as a consequence and in the course of your engagement remain the property of the club. You identified expenses related to meeting the requirements of this role to be minimal to moderate in the range. The identified expenses incurred are visiting customers, accessing resources from the club storage facility, attending meetings as required by the club, use of your personal phone to contact respective representatives and co-ordinate logistics. You have purchased a laptop of which 80% of the usage is for the role as the sports division Co-Ordinator with 20% of usage for your other employment. The expenses incurred related to printing costs will be invoiced directly to the club. You and the club through the agreement, agree you are responsible for effecting any relevant taxation in relation to any gratuity that is received under the terms of the agreement.

Relevant legislative provisions: Income Tax Assessment Act 1997 Section 6-5 | Income Tax Assessment Act 1997 Section 15-2

Reasons for decision: Summary: In your case, you have a formalised volunteer agreement detailing attendance, performance, remuneration, engagement and termination. As your payments are received in respect of the services provided; therefore they are regarded as assessable income. | Detailed Reasoning - Detailed reasoning: 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. Section 15-2 of the ITAA 1997 states that the assessable income includes the value of all allowances, gratuities, compensations, benefits, bonuses and premiums provided in respect of, or for or in relation directly or indirectly to, any employment of or services rendered by you. A voluntary payment incidental to services rendered qualifies as ordinary assessable income. That is, tips and gratuities and other payments for services are regarded as assessable income. Gratuity is not defined in the ITAA 1997 and therefore takes its ordinary meaning. The Macquarie dictionary defines gratuity to be 1. a gift, usually of money, over and above payment due for service; tip. 2. that which is given without claim or demand. 3. a bounty given to soldiers 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. It is highlighted in paragraph 26 of TR 1999/17 Income tax: sportspeople - receipts and other benefits obtained from involvement in sport, amounts received for, in respect of, or in connection with services rendered by a sportsperson are assessable income even if no employer/employee relationship exists with the payer, or there is no carrying on of 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. Whether a payment received is assessable income depends upon a close examination of all relevant circumstances A payment to a volunteer is not generally assessable income if it has many of the following characteristics: ● The payment is to meet incurred or anticipated expenses. ● The payment has no connection to the volunteer’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 volunteer for day-to-day living. ● The payment is not legally required or expected. ● There is no obligation on the part of your organisation to make the payment. ● The payment is a token amount compared to the services provided or expenses incurred by the volunteer. Whether the payment is token depends on the full facts surrounding the payment and volunteer's circumstances. In your case, you have a formalised agreement detailing attendance, performance, remuneration, engagement and termination. The club pay you by the way of instalments covering the period of your engagement. You calculated your expenses to be in the range of minimal to moderate for the period. The club agreement for the sports division Co-Ordinator refers to the payment of the gratuity being adjusted on a pro-rata basis if others fill the role or the job description key results are not being met. Therefore it is considered that your payments are connected with your services rendered and not paid for personal reasons. Although the payments may not be relied upon or expected for your day-to-day living expenses, the payments are made regularly on a bi-monthly basis. The payments have an element of periodicity and are in consequences of services rendered to the club. There are no set amounts or limits as to what constitutes a ‘token amount’. Consideration must be given to all of the circumstances surrounding both the payment and the recipient. The total annual payments and allowances are for an expected attendance of approximately 325 hours per season. Although you do not see this amount as substantial in relation to your other employment, it is more than a token amount. The gratuity meets more than just your associated expenses. After considering the full circumstances of your payments as a sports division Co-Ordinator it is considered that the payments are paid to you in connection to the services you are providing to the club. Therefore the payments are assessable under section 6-5 of the ITAA 1997. Please note that where such payments are not assessable under section 6-5 of the ITAA 1997, section 15-2 of the ITAA 1997 would apply. It is acknowledge you are not regarded as an employee of the club and although your volunteer position is not related to your other duties, it is still considered that the payments are for your services as the sports division Co-Ordinator and therefore assessable.