Private ruling: PAYG Withholding for volunteers
Date of advice: 2 June 2017
Published: March 2018
Ruling period: Year ending 30 June 2017 | Year ending 30 June 2018 | Year ending 30 June 2019
Date scheme commenced: 1 July 2016

Ruling: Q1: Does the entity have an obligation to withhold tax from payments made to volunteers for the a program under section 12-35 of Schedule 1 to the Taxation Administration Act 1953 (TAA 1953)? | A1: No

Relevant facts and circumstances: The entity holds an international licence to deliver a program. The program as part of its delivery trains a local team in each school it operates. The team consists of 6-8 individuals representing parents, schools and community. It is a value of the program that parent and other volunteer member are remunerated for their involvement. Traditionally the team have volunteered their time and you provided an honorarium in lieu of hours. Involvement in the program requires individuals to volunteer 60-80 hours of their time. You are funded to pay an amount of approximately $1,500 per person. Volunteer hours are tracked and recorded and paid through your finance department. You have required each person to complete a “Statement by a Supplier” form. The volunteers have ticked the box on the form “not required to have an ABN as not carrying on an enterprise in Australia”. You envisage that in the coming year, at least 25 individuals will come under the arrangement. The team members deliver the program on premises and are covered by insurance from a separate organisation. The team members have no other association with your business apart from involvement with the program. The hours of involvement are spread out over a 3-4 month period, as part of program delivery requirements. The entity has a volunteer policy which assists in the management of all volunteers.

Relevant legislative provisions: Tax Administration Act 1953 section 12-35 of Schedule 1 | Tax Administration Act 1953 section 12-1(1A) | Income Tax Assessment Act 1997 section 6-5

Reasons for decision: Summary: Subdivision 12-B (which comprises sections 12-35 to 12-60) of the Tax Administration Act 1953 (TAA 1953) deals with PAYG withholding from payments for work and services which includes payments to employees. Section 12-35 of Schedule 1 to the TAA 1953 provides that an entity must withhold an amount from salary, wages, commission, bonuses or allowances it pays to an individual as an employee (whether of that or another entity). Subsection 12-1(1A) of Schedule 1 to the TAA 1953, however, provides an entity need not withhold an amount under section 12-35 or section 12-45 from a payment if the whole of the payment is not assessable income and is not exempt income of the entity receiving the payment. Therefore, to work out whether an amount needs to be withheld from a payment it is necessary to determine whether the payment is assessable and not exempt income of the payee. Are payments to 'volunteers' assessable income? 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. Section 6-5 of the ITAA 1997 includes income according to ordinary concepts, which is called ordinary income is assessable income. Generally, receipts which are earned, expected, relied upon and have an element of periodicity, recurrence or regularity are treated as ordinary income. However, where a person's activities are a pastime or hobby rather than income producing, money and other benefits received from those activities are 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. In this case, the volunteers are engaged to assist with the implementation of your program. They are not engaged as employees by your organisation. The payments have no connection to the recipient’s income producing activities, and they are not relied upon or expected by the recipient for day to day living. There is no obligation on the part of your organisation to make the payment. The payment is made to remunerate volunteers. Statement by a supplier You do not need to withhold an amount from a payment if the supplier is an individual and has given you a written statement that states the supply either: ● Relates to a private recreational pursuit or hobby; or ● Is wholly of a private or domestic nature for that supplier However, you should withhold if you have reasonable grounds to believe that the statement supplied is false or misleading. In your case, you have requested each volunteer to complete a “Statement by a Supplier” and tick the box not required to have an ABN as not carrying on an enterprise in Australia. Conclusion Therefore, as the payments would not be assessable income to the volunteers, the Workskills Incorporated is not required to withhold in accordance with section 12-35 of Schedule 1 to the TAA 1953.