We often see non-profit community organisations making “gifts” to people who provide volunteer labour to the organisation.
To the extent that these gifts are a reasonable reimbursement for actual costs incurred by the volunteer in providing their services, they are not taxable to the volunteer. However, any excess paid to a volunteer above the reimbursement level will be taxable and must be included in the volunteer’s income tax return.
If you’re making non-taxable reimbursement payments to a volunteer, the organisation should ensure that there is evidence to support the calculation of the amounts paid. Organisations also need to be aware that regular payments to a volunteer above the reimbursement level may constitute an employment relationship, which will have significant implications for the organisation as an employer.
We’re happy to discuss any scenarios with community groups who are unsure of the status of payments made to volunteers.