Chris Riches:
Hi everyone, welcome to our first ACNC webinar for 2019. Happy New Year to everyone, we hope you had a great festive season and a bit of time to relax and rest up for the year ahead. Today we’re going to focus on the topic of gifts and honorariums. It’s an issue which calls for some care and some diligence from charities and their responsible persons. My name’s Chris Richards, I’m from the ACNC’s Education team. With me is my colleague Heath Eldridge. Hi Heath.

Heath Eldridge:

Hi Chris.

Chris:

Before we launch into the webinar proper, as usual some quick preliminaries. If you’ve got any trouble with the audio for the webinar you can try listening through your phone. You can call the number listed in the email you will have received upon sign up and put in an access code and listen to the webinar that way. You can also ask a question at any time throughout the webinar by using the tools in the “Go To” webinar panel on your screen. We’ve got a couple of our colleagues, Matt and Michael, ready and waiting to respond to any questions as they come through. We will try to answer as many questions as possible but depending on how many we get we may not be able to get to them all. If your question isn’t answered, do feel free to send us an email at education@acnc.gov.au and we will respond afterwards. We do allow a little bit of time at the end of for a Q&A session where we can, so if you wanted to watch the presentation and save your questions until the end, that’s fine as well. We’re recording this webinar as we always do, and the recording will be published on the ACNC website in the coming days. And also any website references that we mention in this webinar are either on the screen or in our chat as we go along. They will be included in a follow-up email and that will be sent out to everyone who has registered in the next day or two. Last thing, we always value your feedback so if you’ve got any idea or any ways that we can improve our webinars, especially with our schedule for 2019, well it’s developed, it’s getting there and we’ll be listing a few more webinars up on our webinar’s page in the coming day or two. But if you have any feedback, let us know via the short survey at the end of today’s session, or send us an email with your comments.

So onwards. Gifts and honorariums. Here’s what we’ll cover today. We’re going to start with a general outline of what gifts and honorariums are as well as look at why some charities provide them. Important is the ACNC’s expectations for the provision of gifts and honorariums as well as the legal implications and some of the considerations that accompany them. We’ll also look at some of the questions charities should actually ask themselves, things they should consider if they’re thinking about providing a gift or an honorarium. And throughout this webinar we’ll most likely refer to the ACNC’s recently published guidance on the issue. That guidance can be found on our website at www.acnc.gov.au/gifts. Some of the information you’ll hear today comes from this guidance, so it’s well worth having a look at.

Heath Eldridge:

And just before we start, an explanation and some clarification. Some charities might refer to gifts and honorariums by other names. They might call them allowances or ex gratia payments. Whatever they might be called, the same considerations that we’re going to talk about today still apply.


What are gifts and honorariums? When it comes down to it, they’re pretty similar. The ACNC draws a slight distinction between the two in that we say an honorarium is a payment made to someone in recognition of their service to the organisation. That might be service over a long period of time or it might be service that has gone above and beyond the norm. But the key phrase here is service. That’s how many organisations, including charities, distinguish between a gift and an honorarium. A gift, as spelled out on the slide, is something given to a person without an obligation. It might be given for a variety of reasons, whereas an honorarium is more likely to have that service component, and it can be in the form of goods, money or other property. Both gifts and honorariums are made without obligation. They may be made out of appreciation or in recognition, but they’re made voluntarily and without obligation.

Chris:

Heath’s just touched on some of the reasons why a charity might provide a gift or an honorarium. We’ve provided a couple of examples on this slide here. A gift is usually a bit smaller. It might be offered as, say, a token of appreciation, maybe to a volunteer or to a supporter who has helped during a fundraiser or during another activity of some sort. An honorarium might be given in recognition of service, that’s often sort of the distinguishing feature there. Might be as service as a Board Member or a committee member, or for some time spent in a specific role on the Board or the committee, you know maybe as a Treasurer, or something like that. Again, there’s no problems with charities offering these gifts or honorariums as long as they are legal and as long as they meet ACNC expectations.

Heath:

And what are those expectations? Well the chief one is that any gift or honorarium should be of a token nature. They shouldn’t provide anyone with a sizeable or significant personal benefit. This sort of thing really does put at risk a charity’s not-for-profit standing and can see a charity at risk of breaching the ACNC guidelines. Not only that, and we’re going to touch on this in a bit more detail later, payments like these should not be seen as regular ones. They should be closer to one-offs or rare. Or else they can easily be seen as payments, wages or remuneration.

Chris:

That is a key consideration. We will, as Heath said, touch on that later on. But the regularity, or the non-regularity, of payments is an important consideration when looking at this issue. Key thing when it comes to gifts and honorariums is that your responsible persons, a charity’s responsible persons, have a massive role to play. As we set out in our guidance, and here on this slide as well, responsible persons are the ones who must figure out what an acceptable value of a gift or an honorarium might be. Responsible persons need to think about their charity’s financial position when looking at this idea of acceptable value. Simply put, don’t consider providing a gift or an honorarium if your charity can’t afford to do so. Now that sounds like common-sense, it is common-sense. It might be nice to provide a thank you gift, or something similar, to a volunteer or to a Board Member, but if you’re a small charity running on the smell of an oily rag, doing so might not be the most responsible or the most thoughtful behaviour. And it might not be prudent financial management.

Heath:

From a legal perspective any decision to provide a gift or honorarium must not be at odds to the requirement to remain registered as a charity with the ACNC. Among those obligations are for the charity to remain as a not-for-profit and comply with its purposes, and to be accountable to its members. It’s important to emphasise the role that responsible persons have in this. They must comply with their duties to act in good faith in the charity’s best interests and to further its purposes, to disclose perceived or actual conflicts of interest, and to properly manage the charity’s financial affairs. So if providing a gift or honorarium means these things do not occur, that is it puts the charity’s standing and finances at risk, or it could constitute a perceived or actual conflict of interest, then that becomes an issue and it needs more careful consideration.

Chris:
We mentioned here too just the idea of conflicts of interest and the concept of related party and related party transaction. That’s another one that I know that we get a lot of queries here at the ACNC about, those related party transactions, isn’t it?

Heath:

Yeah it is. And it’s important to remember that conflict of interest do come up and it’s the most important piece of advice give a charity is that it should have policies in place to manage those. So for example, if there’s a potential for a payment between people that are related, the person should exclude, or could potentially exclude themself from that conversation, things like that. There’s not a single rule but it’s important for them to have a process to ensure that a potential conflict of interest is managed appropriately.

Chris:

Yeah. Alright. Here we go. Hold on, there we go. There’s some points to think about here when it comes to what you should be, I guess, considering when you sit down as a Board or a committee and consider providing a gift or an honorarium. The first is private benefit. And you should ask, would providing a gift or honorarium create a situation where there’s a private benefit for an individual in your charity? The next point is is transparency and accountability. How transparent are the processes on making this sort of decision? How are you going to properly record the decision? How is the discussion leading up to the making of that decision going to be noted and recorded? Doing all these things right, going through all these processes, dotting I’s, crossing some T’s, that ensures transparency. It ensures accountability and ensures that the decision making processes that you go through, and the discussions that you go through, are open and transparent and are done in the right way in that respect.

Again, is providing a gift or an honorarium in the charity’s best interests? It can’t be in its best interest if it puts the charity’s existence at risk, or if it places it in breach of ACNC obligations or legal requirements. Now this issue also sort of touches on another point listed on the slide here which is poor financial management. Providing a gift or an honorarium when you can’t afford it, or when you have more pressing financial needs, does not constitute responsible management of a charity’s financial affairs. Again, as we mentioned before with the conflicts of interest in making a decision as a Board or a committee member, you shouldn’t be giving the thumbs up to a gift or an honorarium if you are, for example, a relation or, you know, you’re in business with the person who might be receiving that gift or honorarium.

The last point here we look at is employment and taxation law. That’s one that can be easily overlooked and really the question should be here, how will the provision of such gifts be reported, and are there tax implications? Now there is information about this on the ATO site about providing honorariums and whether in providing honorariums is, whether the recipient has to declare it as assessable income, for example. So that’s something that both the potential recipient but also the charity needs to be aware of.

Now here’s a slide here. We’ve got about five or six questions that you should perhaps ask. As we state here the first thing you should do is ask yourselves whether the provision of a gift or an honorarium is a one-off, or whether it is more, I guess, more accurately described as a wage or a pay packet, or remuneration or reimbursement. Now there’s a few other questions here as well, I’ll let Heath run through them.

Heath:

Obviously the first couple are important. Is your charity allowed by its governing documents to provide a gift or honorarium as part of its operations? If it’s not, that’s going to be a problem. So we would certainly expect you’d be following your governing documents. How does your charity determine the value of any gift or honorarium it provides? This is something the responsible persons have a key role in. It may be through a discussion among the responsible persons or at the management level, and it maybe by consulting with other similar charities. But there’s a couple of other questions you should consider, both of which relate to your charities people. What will the charity supporters, donors and members think if your charity decides to start providing gifts or honorariums? Even members of the public who may be engaged with your charity. Do you risk putting them offside or losing their support? And how are you going to inform them or consult with them on this decision? Do you need to? This can be very tricky. For example, if you don’t do this right you risk hurting the charity’s reputation and its donations, especially if the gift or honorarium is of significant value.

Chris:

But just also the last point here, I know I mentioned it just quickly at the top of this slide, the idea that a gift or honorarium is labelled as such when really it isn’t, really it might be, as it says here, remuneration or reimbursement or a pay packet. Look, it’s vital for your charity to be very clear on this, you shouldn’t be offering or labelling something as a gift or an honorarium where in fact it is remuneration for expenses, it is reimbursement for expenses, it’s a wage or a pay packet. Do not get these things mixed up. Do not get these things confused. Honorariums and gifts, they’re one-offs. Often they’re of a token nature. These things like wages, like reimbursements and all that sort of stuff, they’re very different and they can’t really be crossed like that. Keep them separate. Keep them separate.

Heath:

This sort of issue can be covered, or it should be covered in a policy your charity develops on gifts or honorariums, especially of course if it’s looking to pay gifts and honorariums. Now the slide here says formal policy and that can sound a little bit fancy. Really, when we say formal policy, we’re not necessarily asking you to get all over the top, just send out some solid practical workable guidelines your organisation can establish and follow. Obviously that does look different for different sizes [indistinct – over speaking 0:15:14.8].

Chris:

Absolutely right, yeah.

Heath:

A bigger one, you know, for example might have that policy on its website or something like that. Whereas for a smaller group it might be just something the Board or the responsible persons have agreed on.

Chris:

And that’s where having it documented in some way is a vital part. It’s great to have a policy, if it’s not documented anywhere then who’s going to know about it. You have to have it documented somewhere. And if you’ve gone to the trouble of getting a policy together, then why not document it? That’s just common-sense.

As for what the policy can include or should include, there should be clear statements on when a gift or an honorarium can be provided, as well as the circumstances that might see its provision, you know, when will your charity even consider providing one? It should look at who the decision makers are when it comes to providing a gift or an honorarium, and how those decisions are made, the processes that you will go through, how your charity will ensure that their provision is appropriate, what steps will your charity put in place, who will discuss the issue, how the decision is reached, all of that sort of stuff. And how you’ll inform people about any such provision, and maybe how you might have them involved in any such decision, if appropriate, or whether you do need to or wish to inform people about any decision like this.

Importantly, when you set up a policy, it should be a help and not a hindrance. It shouldn’t be a burden to follow.

Heath:

One thing we haven’t touched on is how gifts and honorariums can impact on the charity’s financial reporting. Gifts or honorariums to certain people, for example related parties, which might include the responsible persons, have to be disclosed. These disclosures occur under Australian Accounting Standards and as part of the medium and large charities, that is charities with revenue over $250,000, part of their reporting to the ACNC. There’s more about related parties on the ACNC website that can be found at www.acnc.gov.au/relatedparty. But generally speaking related parties include key management personnel of a charity. For example, a responsible person or a close member of a responsible person’s family.

Chris:

So some key points to remember. First couple are that the emphasis for gifts and honorariums should be that they are of a token nature and that they should not provide anyone with a significant personal benefit. It’s OK for these things to be small but people shouldn’t be getting wealthy off of gifts or honorariums. Linked to that is the need for charities to ensure that the size of any gift or honorarium they provide is appropriate and doesn’t threaten or charity in any way. And again, we emphasise again responsible persons are the key people there.

Heath:

Gifts or honorariums offered must not breach the charity’s legal obligations or its obligations to the ACNC. It is important that charities have issues like conflicts of interest, related party transactions and private benefit in mind when considering gifts and honorariums. Responsible persons need to ensure these things are in order and ensure accountability to members and determine whether providing a gift or honorarium is in the charity’s best interests.

Chris:

As well as considering if a gift or honorarium is in the charity’s best interests, a charity should be clear on any potential or actual effects this might have on grants or funding arrangements. Point six, right there in front of you, it’s a very important one as well. Ensure you’re not considering gifts or honorariums when instead you should actually be looking at reimbursement of expenses or even just paying someone as a contractor or as an employee.

Heath:

That’s about the end of our formal presentation today. We’ll open things to questions. We’ll now open it up to questions and we’ve already had quite a few come in.

Chris:

We have had. We’ve got one here that’s come through. The charity has asked, they’ve got an individual that is provided significant work on a pro-bono basis. Is it reasonable to thank them by way of a gift?

Heath:

Look, I’d say that it may well be. I think when you look at those definitions we talked about earlier, that would be more what we call an honorarium, wouldn’t it?

Chris:

Yeah. Yeah.

Heath:

But …

Chris:

Particularly given the word significant here. Yeah, that might be honorarium. But yeah…

Heath:

Not that it really makes that much of a difference. And the answer is that it may well be appropriate but they’d need to consider all the things that we’ve talked about here today.

Chris:

Yeah. There’s also… and we mentioned earlier on, there’s some information, some handy information too on the ATO website, our colleagues over at the ATO have some information on honorariums. If you go onto the ATO’s site and you search “honorariums”, you’ll find it. It looks more from almost the other side of things, from a volunteer’s perspective, and particularly looks at whether the provision of an honorarium from, say, a charity to a volunteer becomes part of that volunteer’s, becomes part of their income that they have to go through tax, declare, and all of that sort of stuff. There’s an interesting section on there and there’s a couple of, I guess, useful examples that are handy for a charity to know, but also handy for, say, someone who might be receiving an honorarium to know. And I’ve actually got them here, so I’m going to read them out.

Now the first example here is an honorarium that is not assessable income, that doesn’t have to be assessed, doesn’t have to be put on tax. And the example given by the ATO here is a gentleman by the name of Michael, works as a computer programmer at the local city council and volunteers as a referee for the local footy league. This year he organised an accreditation course for new referees. He applied for a grant, he arranged advertising, he assembled course materials and booked venues. Michael, for his efforts, is awarded an honorarium of $100. Now the ATO guide here says that that example is not assessable income.

The example that is assessable income is this one. And that’s someone by the name of Judy, has a graphic design business and volunteers at a local art gallery. Judy prepares the gallery’s annual report using her business’s software and equipment. At the gallery’s Annual General Meeting Judy is awarded an honorarium of $800 in appreciation of her services. Now the ATO lists this example as having the income as being assessable because it is a reward for services connected to her income producing activities.

Now that’s, I guess, a significant distinction between the two. If something is a bit removed from your normal job as, you know, so people have jobs, they volunteer in other ways too. If something’s a little bit removed from that, the ATO guidance or the ATO advice here is that it might not be assessable income. If on the other hand the work is done as a volunteer and it’s directly related to the income producing activities of that person, then it may well be assessable income. Again, go and talk to the ATO if you need further guidance on that as a volunteer. And again, feel free as a charity or an organisation like that to either come to us or come to the ATO if you wish to talk about these matters further.

Heath:

Yeah. It’s one of those things where you’d probably seek advice from a tax planner or from the ATO.

Chris:

Yes, absolutely.

Heath:

It does, depending on the facts of the case.

Chris:

Yeah, and each case is different, each charity is different as we always say. Now that’s about it I think. We’ve whipped through this in relatively quick time, which is good, because it’s lunchtime and you should go and have lunch if you’re on this side of the country. If you’re not and you’re on the other side of the country it’s probably coffee time, so either way that’s fine and we won’t hold you up for very much longer.

We have some associated resources here. Again our gifts and honorariums guidance at /gifts, that’s very handy, recommend you have a really good read over of that one, that’s good stuff. Our governance standards advice. And that’s the link for the ATO guidance and information that we just drew on. Again, bookmark that one if you want to, it’s well worth a look, it’s well worth just keeping that sort of stuff in mind as you go along. We ask you to stay in touch as well. All our bits and pieces are back for the New Year, so we have our Commissioner’s column, all of our email updates, our web guidance on our snazzy new website, all video content, podcasts are up and moving again as well. Go and have a look at our webinars, there’s a link for our webinars. There’s the link for our lovely advice team. What are our advice hours again, Heath, just so we know?

Heath:

Our advice team’s available by phone from 9 o’clock to 5 o’clock Monday to Friday Australian Eastern Daylight Savings Time at the moment. Daylight savings of course ends fairly soon. But you can email us any time. We also, now on the new website, have got an online enquiry form, which is probably the preferred way of sending us a written request.

Chris:

That’s on the “Contact Us” page, isn’t it?

Heath:

Yeah.

Chris:

Yeah, so yeah that’s another way of getting in touch with us. It’s a very easy form to fill out.

Heath:

For the time being certainly that advice email address is still there as well.

Chris:

Yeah definitely. And there’s our other addressed through Facebook, through Twitter and through YouTube. And of course YouTube has our previous webinars and previous videos and all those bits and pieces. So that’s about all the stuff that we’re going to do today. We thank you for coming along. Thank you for taking the time join us for our first webinar for the year. We will hang around a little bit longer just to answer some questions. Matt and Michael are typing away madly in the other room. And look, if you wish to give us any feedback, if you’ve got any questions, comments, that sort of thing, feel free to drop us a line via our Education email address, education@acnc.gov.au. Thank you very much again for attending. Thank you to Matt and to Michael for typing away and answering questions. We bid farewell and just before we do our upcoming webinars will start being fed through to our webinars page… you can see the address there… in the coming days. We have one, two, three, four of them I think planned out or scheduled tentatively. So feel free to keep checking that page and if there’s any that you’re interested in registering for, hit the button and do so and we’ll look forward to having your company then I suppose. But beyond that, thanks again. Thank you Heath.

Heath:

Thank you.

Chris:

And we’ll bid you farewell. See you later. Bye.

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