EXPLANATORY STATEMENT
STATUTORY RULES 1982 NO. 267
ISSUED BY THE AUTHORITY OF THE TREASURER
These regulations prescribe the rates at which PAYE tax instalments are to be deducted from salaries and wages paid on or after 1 November 1982.
The regulations, as amended, will provide for tax instalment deductions from salary or wages paid on or after 1 November 1982 to reflect several decisions announced in the 1982-83 Budget. These include the increase in the top of the zero rate and standard rate steps in the income tax rate scale from $4,195 to $4,595 and $17,894 to $19,500 respectively, the reduction in the standard rate of tax from 32 per cent to 30 per cent, the removal of the zero rate step from non-residents and increases in certain dependant rebates and the sole parent rebate. Notes on each of the amending regulations are set out below:
Regulation 1 provides for the amending regulations to come into operation on 1 November 1982.
Regulation 2 is a formal provision under which an Income Tax Instalment Declaration, made in accordance with the regulations prior to these amendments and still in force is (other than in circumstances where regulation 54DAM as amended by regulation 13 of these regulations applies), to have effect for the purposes of the new PAYE arrangements provided for in these regulations. This will make it clear that there is no need for employees to lodge fresh declarations with their employers for the purposes of having their concessional rebates for dependants, a housekeeper and as a sole parent taken into account for PAYE purposes from 1 November 1982, unless they wish to claim a different level of rebate or their circumstances have changed.
Regulation 3 amends regulation 54A of the Income Tax Regulations. That regulation defines certain terms used in the Subdivision of the Income Tax Regulations which governs the deduction of PAYE tax instalments from the salary or wages of employees.
Paragraph (a) of regulation 3 omits the definition of “dependant rebate value” and substitutes a new definition to provide for the increased dependant rebate of $1,030 available in respect of a spouse or daughter-housekeeper (sub-paragraph (a)(ii) of the definition) or housekeeper (sub-paragraph (b)(ii) of the definition) where there is a dependent child under 16 or student child under 25.
Paragraph (b) of regulation 3 inserts a definition of “prescribed non-resident” into the regulations. This definition is necessary to give effect to the decision to remove the zero rate step in the income tax rate scale from a non-resident. For the purposes of the regulations, the term “prescribed non-resident” has the same meaning as that proposed for the purposes of the income tax rates legislation, that is, a person who was not a resident of Australia at any time during the year of income, other than a person who received, at any time during the year, an Australian social security or repatriation pension, allowance or benefit subject to tax in Australia. Under transitional provisions for the 1982-83 income year only, a person who came to Australia on a short working visit, or who made firm arrangements for such a visit, on or before Budget day, 17 August 1982, will not be treated as a prescribed non-resident.
Regulation 4 amends regulation 54B which prescribes the rates at which tax instalment deductions are to be made from the salary or wages (other than lump sum retirement amounts to which
regulation 54DAAA applies) of an employee who claims, for PAYE purposes, the benefit of the zero rate of tax that applies to the first slice of a person’s income (referred to in the regulations and in these notes as the “general exemption”), but who does not claim for those purposes a rebate for a dependant. The effect of the amendment is that regulation 54B will not apply to allow the benefit of the general exemption where an employee lodges a declaration to the effect that he is a prescribed non-resident - such a person will not, after 31 October 1982, be entitled to the benefit of the zero rate.
Regulation 5 amends regulation 54D, which specifies the rate at which tax instalments are to be deducted by an employer from the salary or wages (other than lump sum retirement amounts to which regulation 54DAAA applies) of an employee who has not lodged a declaration claiming the general exemption or a rebate in respect of a dependant for PAYE purposes. This regulation applies where an employee who has lodged a declaration with his employer takes a second job, in which case he is not entitled to lodge a declaration with his second employer. The instalments under this regulation are higher, being calculated on the basis that the employee has other earnings.
The purpose of the amendment is to exclude from the operation of regulation 54D the salary or wages of a prescribed non-resident who has lodged a declaration to that effect. The instalments to be deducted from such salary or wages, which are specified in new regulation 54DA, inserted by regulation 6, do not include any allowance for the zero rate step but neither do they include any loading on account of earnings from a second job.
Regulation 6 inserts new regulation 54DA which specifies the rates at which tax instalments are to be deducted by an employer from the salary or wages (other than lump sum
retirement amounts to which regulation 54DAAA applies) of an employee who has furnished to his employer a declaration to the effect that he is a prescribed non-resident.
Paragraph (a) of regulation 54DA specifies that, if the salary or wages are less than $210 per week the rates of tax instalment deduction shall be the amount specified in column 2 of Table A or B of the Third Schedule - that is, a rate of 30 per cent, being the standard rate of tax to apply from 1 November 1982, with no general exemption.
Paragraph (b) provides that the deduction to be made from salary or wages of $210 per week or more but less than $375 per week (the weekly equivalent of the top of the standard rate step) is $62.70 (the amount specified in column 2 of Table B for salary or wages of $209) plus 30 per cent of the excess over $209. This results in a 30 per cent rate of deduction applying to salary or wages up to $374 per week.
Paragraph (c) specifies the rate of deductions to be made from weekly salary or wages of $375 or more but less than $688 (the weekly equivalent of the top of the 46 per cent rate step in the rates scale) to be $112.20 (the deduction applicable to $374) plus 46 per cent of the excess over $374, the resultant amount being rounded to the nearest 5 cents.
In terms of paragraph (d), the rate of deductions to be made from weekly salary or wages of $688 or more is $256.15 (the amount applicable to $687 under paragraph (c)) plus 60 per cent of the excess over $687.
Regulation 7 amends regulation 54DAB - which provides that no tax instalments are to be deducted from salary or wages paid by an employer otherwise than in connection with a trade, business, profession or undertaking carried on by the employer,
in respect of a week or part of a week which do not exceed $20 - by excluding a prescribed non-resident from its scope. Under new regulation 54DA, instalments are to be deducted from the salary or wages of a prescribed non-resident, regardless of the level of those salary or wages.
Regulation 8 amends regulation 54DAC of the Income Tax Regulations which sets out the circumstances in which an employee may furnish a declaration for tax instalment purposes.
Paragraphs (a) and (b) are drafting measures to provide for the insertion of new paragraph (1)(e) in regulation 54DAC. Paragraph (c) inserts the new paragraph (1)(e) to provide that an employee (being a prescribed non-resident) who wishes to have the rates of tax instalment deductions prescribed in new regulation 54DA made from his salary or wages may furnish a declaration to his employer for this purpose.
Paragraph (d) inserts new sub-regulations 54DAC(3) and (4). Sub-regulation (3) makes it clear that a prescribed non-resident may not furnish a declaration claiming the general exemption. Sub-regulation (4) precludes an employee who is a non-resident but is not a prescribed non-resident from furnishing a declaration claiming a rebate in respect of a dependant. This is necessary since a person who is a non-resident may be treated, in effect, as a resident that is, as not being a prescribed non-resident, for the purposes of the PAYE regulations (for example, a person residing outside Australia who receives a taxable Australian social security pension). Such a person is not to obtain the benefit in tax instalment deductions of dependant rebates to which, as a non-resident, he will not be entitled in his end of year income tax assessment.
Regulation 9 amends existing regulation 54DAD - which prescribes the form in which a declaration is to be made - to include the requirement that an employee state in his or her declaration whether or not he or she is a prescribed non-resident.
Regulation 10 amends regulation 54DAE which sets out the circumstances in which a person is to be taken as being a dependant of an employee for PAYE purposes.
Paragraph (a) amends paragraph 54DAE(1)(c) to include the new dependant rebate value of $1,030 (see notes on paragraph (a) of regulation 3) and to provide that the estimated separate net income of the person involved must be less than $4,402 if the person is to be treated as a dependant for PAYE purposes.
Paragraph (b) similarly amends sub-regulation 54DAE(3) to include the new dependant rebate value of $1,030 and to provide for the calculation of the number of weeks the employee should claim for the person involved where that person has a separate net income.
Regulation 11 amends regulation 54DAJ. That regulation governs the issuing of a tax instalment certificate by the Commissioner of Taxation to an employee in circumstances where the employee has furnished a declaration to the Commissioner rather than to his or her employer. The amendment provides that such a certificate may specify that a prescribed non-resident employee desires to have regulation 54DA (see notes on regulation 6) taken into account in determining the instalment deductions to be made from his or her salary or wages.
Regulation 12 amends regulation 54DAK to take into account that an employee who desires to have new regulation 54DA (inserted by regulation 6) taken into account in calculating his
tax instalment deductions may lodge a declaration for that purpose under regulation 54DAC as amended by regulation 8. Regulation 54DAK provides that a certificate issued by the Commissioner under regulation 54DAJ and lodged by the employee with his employer has the same effect as a declaration furnished to the employer under regulation 54DAC.
Regulation 13 amends regulation 54DAM which applies where an employee, because of changed circumstances, is no longer entitled to some or all of the rebates claimed in a declaration previously furnished. In such a case, the employee is required to effectively withdraw that declaration.
The amendment inserts new sub-regulation 54DAM(2) to provide that an employee who ceases to be entitled to the general exemption because he or she is (on 1 November 1982) or has later become, a prescribed non-resident, must withdraw any declaration furnished to his or her employer (or furnish a new declaration to the effect that he or she is a prescribed non-resident), or, where appropriate, return to the Commissioner any certificate issued under regulation 54DAJ.
Regulation 14 repeals the Third Schedule to the Income Tax Regulations - which is the schedule that specifies the rates of deductions to be made from salary or wages less than $751 per week - and inserts a new Third Schedule in those regulations to apply on and from 1 November 1982.
Table A of the new Schedule prescribes the weekly rates of tax instalment deductions to be made from the salary or wages of an employee who has not furnished to his or her employer a declaration claiming the general exemption or has furnished a declaration to the effect that he or she is a prescribed non-resident. The Table covers salary or wages, less than $73, paid in respect of a week or part of a week.
Table B prescribes rates of instalment deductions applicable where an employee’s salary or wages in respect of a week or part of a week are not less than $73 but are less than $751.
The Table prescribes the instalments to be deducted in a range of circumstances. Column 2 applies where the employee concerned has not furnished a declaration claiming the general exemption. As indicated in the notes on regulation 6, it also applies up to weekly salary or wages of $209, where an employee furnishes a declaration to the effect that he or she is a prescribed non-resident.
Sub-column (i) of Column 3 of the Table applies where the employee has claimed only the general exemption. In such a case, no tax instalment deductions are required where the salary or wages in respect of a week or part of a week are less than $85.
Sub-columns (ii), (iii) and (iv) of Column 3 of Table B prescribe the rates of instalment deductions to be made where an employee has claimed a rebate value of $780 (the maximum rebate allowable to a sole parent), $830 (the maximum rebate allowable in respect of a spouse, daughter-housekeeper or housekeeper where there are not dependent children) or $1,030 (the maximum rebate allowable in respect of a spouse, daughter-housekeeper or housekeeper where there is a dependent child or student).
Where the total value of the rebates claimed in the declaration furnished by the employee is not covered by sub-columns (ii), (iii) or (iv) of Column 3, the instalments to be deducted are to be ascertained under the formula laid down in paragraph (b) of regulation 54C - that is, in broad terms, by reducing the instalment deduction shown in sub-column (i) of Column 3 by an amount ascertained by multiplying 1.9 cents by the rebate value claimed in the employee’s declaration.
Regulation 15 and the Schedule to which it relates make a number of further minor amendments to amounts specified in the regulations to reflect changes in personal tax rates and the increase in the maximum sole parent rebate form $580 to $780.
The regulation increases to $84.99 the level of weekly earnings up to which tax instalment deductions will not be made in respect of an employee who furnishes a declaration claiming the general exemption. It also makes amendments to those regulations that specify the tax instalments to be deducted where they cannot be ascertained from one of the tables in the Third Schedule to the Regulations, for example, where salary or wages exceed the level of earnings covered by Table B of the Third Schedule, as well as taking into account the increased sole parent rebate.