Last December 2019 we posted an article about “paying people legally”. Since then so much has happened to make our lives somewhat chaotic. However some things don’t change. Despite the current season of COVID and all its challenges for our administrations we are still expected to pursue proper compliance requirements.
So we are addressing this issue again and with some more detail. Although we mentioned this in the December article we have been discovering that churches continue to perpetuate payments which raise this as an issue.
This aims to help you deal payments by the church which are difficult to clarify. It is also important for the recipients of such payments to be aware of their own possible tax liabilities.
Let’s recap some information about “the honorarium” and then look at some examples. If you are still unclear about this then please make comments and questions and tell others about your experience in the Church Accounting Facebook Group.
The advent of the JobKeeper subsidy and the use of the PAYGW declarations from BAS and IAS caused churches and organisations to be more clear about who were actually employees and how people were being paid. Suddenly there were 2 groups of people who were excluded for the JobKeeper declarations:
1. some people who had been considered employees we not classified as employees
2. other people who been “casually” paid for their services could not be included.
The first group were the “religious practitioners” in some denominations
It is the second group on which we are focused here.
We have found that people have been paid what is termed “casually or honorarium”. The most common examples include:
- volunteer people from within the local church
- ‘friends of the church’ providing assistance, such as people who rent the facilities and do “extra service” such as cleaning or repairs
- visiting or guest speakers or preachers
It is time to be clear about this.
An honorarium is:
– an ex gratia payment, ie. a payment made, without the giver recognising themselves as having any liability or legal obligation, to a person for his or her services in a volunteer capacity or for services for which fees are not traditionally required,
– a payment given for professional services that are rendered nominally without charge.
So, what is the issue, what’s the problem, what are the implications?
There are 4 parts:
1. is the payment taxable in the hands of the recipient?
2. is the church liable for the usual payroll obligations such as PAYGW, superannuation and workers compensation?
3. is the volunteer person covered for compensation in the case of any accidents, injuries?
4. is the church covered for any losses or problems caused by the person?
The simple answer to these questions is that the church must be sure of the way the payments are handled by the church. The church is primarily responsible if the payments are considered as honorarium.
Test the payment, no matter how it is named (honorarium or other) will be:
- assessable income to the person where it is a reward for services connected to that person’s ordinary income-producing activities, or
- not-assessable income to the person where the payment is unrelated to the person’s ordinary work and is a small or token amount.
This means that the church leadership must:
- consider how payments are made, and
- make clear and documented decisions
- so that all people involved can understand.
We find that many decisions about such payments are made ad hoc and by people, inadvertently, without authority to make such decisions.
The honorarium is only ok in very limited situations
– generally the “old days of honorarium” are over
Here are the relevant links, for your followup as appropriate:
Benkorp’s December 2019 article:
ATO on payment of volunteers: