While volunteers do not receive a salary or wage for their contribution they can still receive cash (or gifts) as payments or benefits. Volunteers may also be reimbursed for their out-of-pocket expenses or receive an allowance to cover any expenses, e.g. meals or petrol.
Payments of gifts, honoraria, reimbursements or allowances show that your organisation appreciates the work of its volunteers and treats their contributions seriously.
This article discusses some of the types of financial payments, benefits and rewards that volunteer-based organisations may provide for their volunteers and some of the tax implications for these.
Gifts and honoraria
Many organisations choose to give gifts or cash as a reward, incentive or to simply thank volunteers for their contribution. And, why not? Volunteers are an invaluable part of many community organisations.
These sorts of payments are typically ad hoc and not something that a volunteer expects or demands. Given this, payments to volunteers are not treated as taxable income, i.e. a volunteer does not need to pay tax on the money or benefits that they receive.
According to the Australian Tax Office, a payments to volunteers that are not assessable income will have some of the following characteristics:
- It meets incurred or anticipated expenses
- It is not related to the volunteer's income-producing services or activities
- It is not received as remuneration or as a consequence of employment
- The volunteer does not rely on the payment for day-to-day living
- The payment is not legally required or expected
- The organisation paying the volunteer is not obliged to make the payment
- The payment is token in comparison to the volunteer services provided
The amount of money given to a volunteer or how much a gift is worth does not in itself affect whether they payment is assessable income. The amount of the payment needs to be seen in the context of the volunteer's overall services and contribution.
Some volunteer organisations have a very clear reimbursement policy for repaying volunteers in full or in part for certain out-of-pocket expenses that they incur while undertaking their volunteering duties. These reimbursements typically cover things like petrol, meals, telephone charges or parking. Reimbursing volunteers for their out-of-pocket expenses is yet one further way to show an organisation's appreciation for their volunteers' efforts and contribution.
If an organisation reimburses a volunteer for out-of-pocket expenses the reimbursement is not considered to be part of the volunteer's assessable income as long as the payment:
- is only a reimbursement for expenses actually incurred and,
- is not for the supply of products or services that are part of the volunteer's enterprise e.g. for electrical services if the volunteer is an electrician.
Tax deductions for volunteers
According to the Australian Tax Office, because volunteer work is by its nature unpaid and payments to volunteers are not seen as part of their assessable income, then any expenses incurred by volunteers in the course of volunteering are not tax deductible.
But if some of a volunteers expenses are incurred as a result of them providing a service that is part of their usual enterprise, e.g. for photocopy repairs when the volunteer is a photocopy repairperson, then this portion of their expenses is tax deductible.
If a volunteer donates money to their volunteer organisation (and that organisation is a deductible gift recipient) then this is tax deductible. However, if the volunteer donates in-kind services instead of money then this is generally not tax deductible.