Tax issues when dealing with volunteers

Brad Dickfos • May 17, 2024

From bushfire relief groups, sporting clubs, environmental groups, charity associations and many more, volunteers are an indispensable workforce and support network for many organisations. For most, if not all, having volunteers ready to lend a hand is pivotal in them being able to function or survive.


Given that there are many hundreds of volunteers propping up all sorts of good works throughout the nation, and in the spirit of thorough tax planning, an important practical consideration for many may be if payments to volunteers constitute assessable income and whether their expenses are tax deductible.


What’s a volunteer?

There is no common law definition of “volunteer” for tax purposes, although it typically means someone who enters into any service of their own free will, or who offers to perform a service or undertaking. A genuine volunteer does not work under a contractual obligation for remuneration, and would not be an employee or an independent contractor.


Volunteers can be paid in cash, given non-cash benefits or a combination of both – payments include honorariums, reimbursements and allowances. Generally, receipts which are earned, expected, relied upon and have an element of periodicity, recurrence or regularity are treated as assessable income.

Conversely, where a person’s activities are a pastime or hobby – rather than income producing – money and other benefits received from those activities are generally not perceived as assessable income.


The examples below shed light on whether typical payments such as honorariums, reimbursements and allowances constitute assessable income.


Is an honorarium assessable income?

An honorarium is either an honorary reward for voluntary services, or a fee for professional services voluntarily rendered, and can be paid in money or property.


Example 1

Q. Alex works as a computer programmer at the local city council and volunteers as a referee for the local rugby union. This year he organised an accreditation course for new referees. He applied for a grant, arranged advertising, assembled course materials, and booked venues. Michael is awarded an honorarium of $100 for his efforts.

A. No, the honorarium is not assessable income as honorary rewards for voluntary services are not assessable as income and related expenses are not deductible.


Example 2

Q. Mindy has an accounting practice and volunteers at the local art gallery. Mindy prepares the gallery’s annual report using her business’s software and equipment. At the gallery’s annual general meeting, Mindy is awarded an honorarium of $800 in appreciation of her services.

A. Yes, this honorarium constitutes assessable income because it is a reward for services connected to her income-producing activities.


Is a reimbursement assessable income?

A reimbursement is 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 and/or refund unspent amounts.


Example 3

Q. Matthew is an electrical contractor. He volunteers to mow the yard of a local not-for-profit childcare centre. Matthew purchases a $15 spare part for the centre’s mower. The childcare centre reimburses Matthew for the cost of the spare part.

A. No, the $15 reimbursement is not assessable income because Matthew has not made the payment in the course of his enterprise as an electrician.


Example 4

Q. Rose has a gardening business. She volunteers to prune the shrubs of a local nursing home and uses materials from her business’s trading stock.

A. Yes, any reimbursement she receives for the cost of the materials is assessable income because the supplies were made in the course of her enterprise.


Is an allowance assessable income?

An allowance is a definite predetermined amount to cover an estimated expense. It is paid even if the recipient does not spend the full amount.


Example 5

Q. Andy volunteers as a telephone counsellor for a crisis centre. He is rostered on night shifts during the week and is occasionally called in on weekends. When Andy works weekends, the centre pays him an allowance of $150. The allowance is paid to acknowledge Andy’s extra efforts and to compensate him for additional costs incurred.

A: Yes, these payments to Andy are considered assessable income because he received the allowance with no regard to actual expenses and there is no requirement to repay unspent money.


Expenses incurred by volunteers

On the tax deductibility of volunteer expenses, a volunteer may be entitled to claim expenses incurred in gaining or producing assessable income – except where the expenses are of a capital, private or domestic nature.

For instance, expenditure on items such as travel, uniforms or safety equipment could be deductible, but expenses incurred for private and income-producing purposes must be apportioned – with only the income-producing portion of the expense being tax deductible.


Example 6

Q. Robert operates a commercial fishing trawler and uses navigational charts in his business. He also volunteers as an unpaid training officer at the volunteer coastguard. Robert purchases two identical sets of navigational charts – one for his business, the other as a training aid in coastguard courses.

A. Yes, Robert can claim the part incurred in gaining or producing assessable income – in this case, half the total cost.


What about donations? Are these deductible?

It is also common for volunteers to donate money, goods and time to not-for-profit organisations. To be tax deductible, a gift must comply with relevant gift conditions, and:

  • be made voluntarily
  • be made to a deductible gift recipient, and
  • be in the form of money ($2 or more) or certain types of property.

Donors can claim deductions for most, but not all, gifts they make to registered deductible gift recipients. For instance, a gift of a service, including a volunteer’s time, is not deductible as no money or property is transferred to the deductible gift recipient. However, individuals may be entitled to a tax deduction for contributions made at fundraising events, including dinners and charity auctions.


Example 7

Mila buys a clock at a charity auction for $200. This is not a gift even if Mila has paid a lot more than the value of the clock. Payments that are not gifts include those to school building funds as an alternative to an increase in school fees and purchases of raffle or art union tickets, chocolates and pens.

Example 8

Clive receives a lapel badge for his donation to a deductible gift recipient. As the lapel badge is not a material benefit or an advantage, the donation is a gift.


Consult this office for more information on which volunteer payments are considered assessable income and which expenses are typically tax deductible.

Can the cost of clothing be tax deductible?

By Brad Dickfos • December 9, 2025
Sometimes it can be, but only in limited circumstances. The tax deductibility of expenditure on clothing is subject to strict ATO guidelines. These cover occupation-specific clothing, compulsory or registered non-compulsory uniforms and protective items. Conventional clothing What you can’t claim is the cost of conventional clothing, even where your employer expects you to observe a particular dress style. You might work in an office environment, and your employer expects you to wear a business suit to work, even though you wouldn’t have even bought the suit but for your employer’s dress requirements. While the cost of the suit might seem like a work related expense, it is not deductible as it is conventional clothing that could also be worn outside of work. This makes it a private expense, even though it relates directly to your employment. Conventional clothing includes business attire, non-monogrammed black trousers and white shirts worn by wait staff, non-protective jeans and drill shirts worn by tradies and athletic clothes and shoes worn by PE teachers. Occupation-specific clothing On the other hand, occupation-specific clothing falls on the deductible side of the line, for example a chef’s distinctive chequered pants or a health worker’s blue uniform, including nurses’ stockings and non-slip shoes. Compulsory uniforms The cost of clothing that forms part of a compulsory uniform is generally deductible. A compulsory uniform is a set of clothing that identifies you as an employee of a particular organisation. Your employer must make it compulsory to wear the uniform and have a strictly enforced workplace policy in place. You can only claim a deduction for shoes, socks and stockings if: They are an essential part of a distinctive compulsory uniform, and The characteristics (the colour, style and type) are an integral and distinctive part of your uniform that your employer specifies in the uniform policy, for example, airline cabin crew members. You can claim for a single item of clothing such as a jumper if it's distinctive and compulsory for you to wear it at work. An item of clothing is unique and distinctive if it: Has been designed and made only for the employer, and Has the employer's logo permanently attached and is not available to the public. Just wearing a jumper of a particular colour is not part of a compulsory uniform, even if your employer requires you to wear it, or you pin a badge to it. Non-compulsory uniforms You can only claim for non-compulsory work uniforms if your employer has registered the design with AusIndustry. This means the uniform has to be on the Register of Approved Occupational Clothing. Your employer will be able to clarify whether your uniform is registered. Protective clothing The cost of protective clothing is deductible, and covers such items as: Fire-resistant clothing Sun protection clothing with a UPF sun protection rating Hi-viz vests Non-slip nurse’s shoes Protective boots, such as steel-capped boots or rubber boots for concreters Gloves and heavy-duty shirts and trousers Occupational heavy duty wet-weather gear Boiler suits, overalls, smocks or aprons you wear to avoid damaging or soiling your ordinary clothes during your work activities. Laundry and dry-cleaning costs and repairs You are entitled to a deduction for the cost of cleaning your deductible clothing. If you launder them at home, the Tax Office will allow you a deduction of $1 per load where the load contains only deductible clothing, or 50 cents per load where deductible clothing is mixed with other items. You are entitled to claim the cost of dry-cleaning deductible clothing, as well as the cost of mending and repairs. Record keeping You should keep receipts or other documentary evidence of your expenditure on buying, laundering or repairing deductible work clothing. Proof of laundering clothing at home can be in the form of diary entries. Allowances If your employer pays you a clothing allowance, this needs to be included in your assessable income, and you can only claim what you have actually spent. Feel free to come and see us for advice as to whether your expenditure on work clothing is deductible.

Division 296 Tax Revisited

By Brad Dickfos • December 1, 2025
Big news for anyone with a large super balance – the government has gone back to the drawing board on the controversial Division 296 tax , and the changes are a big step toward fairness and common sense. A quick recap When the Division 296 tax was first announced in 2023, it caused an uproar. The main problem? It would have taxed unrealised gains, that is, paper profits you haven’t actually made yet and set a $3 million threshold that wasn’t indexed meaning it wouldn’t rise with inflation. After a wave of feedback from the industry, the government has listened. The Treasurer’s new announcement, made in October 2025, fixes some of the biggest issues. The revamped version is designed to be fairer, simpler, and more in line with how tax usually works. The plan is to start the new system from 1 July 2026, with the first tax bills expected in 2027–28. What’s changing Here’s what’s new under the revised Division 296 tax: · Only real earnings will be taxed. No more tax on unrealised gains as you’ll only pay on earnings you’ve actually made. · Super funds will work out members’ real earnings and report this to the ATO. · The $3 million threshold will be indexed to inflation in $150,000 increments, keeping pace with rising costs. · A new $10 million threshold will be introduced. Earnings above that will be taxed at a higher rate of 40%, and that threshold will also rise with inflation. · The start date is pushed back to 1 July 2026, giving everyone more time to prepare. · Defined benefit pensions are included, so all types of super funds are treated the same. So what does this mean in practice? Think of it as a tiered tax system: · Up to $3 million – normal super tax of 15%. · Between $3 million and $10 million – taxed at 30%. · Over $10 million – taxed at 40%. Basically, the more you have in super, the higher the tax rate on your earnings above those thresholds. How it will work Super funds will continue reporting members’ balances to the ATO, which will figure out who’s over the $3 million mark. If you are, your fund will tell the ATO your actual earnings (not paper gains). The ATO will then calculate how much extra tax you owe. We don’t yet have the fine print on what exactly counts as “realised earnings,” but it’s likely to mean profits you’ve actually made, similar to how taxable income is treated now. What’s still up in the air While these updates make the system much fairer, there are still a few unanswered questions: · What exactly counts as “earnings”? Will it only include profits made after 1 July 2026, or could older gains that are sold later be included too? · What happens with capital gains? Super funds usually get a one-third discount on capital gains for assets held over a year, but it’s unclear whether that will still apply. · How will pension-phase income be handled? Some super income is tax-free when you’re in the pension phase, and we don’t yet know how that will interact with the new rules. · Can people with over $10 million move money out? If your earnings above $10 million are taxed at 40%, you might want to shift funds elsewhere but the government hasn’t said if that’ll be allowed. What it means for you If your super balance is over $10 million, the proposed rules mean that a portion of your superannuation earnings could attract a higher tax rate of up to 40%. For people with between $3 million and $10 million, the new system could also change how much tax applies to their super earnings, depending on how the final legislation defines “realised gains.”  But don’t rush. These rules aren’t law yet, and if you take your super out, it’s hard to put it back because of contribution limits. It’s best to wait for the final legislation and get professional advice before making any decision to withdraw benefits from super.

Christmas and Tax

By Brad Dickfos • November 18, 2025
( ) Knowing the rules around Fringe Benefits Tax (FBT), GST credits and what is or isn’t tax deductible can help keep tax costs to a minimum. Holiday celebrations generally take the form of Christmas parties and/or gift giving. (<->)