Pay as you go withholding - Variation and exemption of withholding requirements for certain payments made to religious practitioners

Administered by Department of the Treasury

Legislation au F2016L00107 Not in force Legislative Instrument

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Explanatory Statement

 

Pay as you go withholding – Variation and exemption of withholding requirements for certain payments made to religious practitioners

 

 

General outline of instrument

  1. This instrument is made under section 15-15, subsection 16-153(6) and section 16-180 of Schedule 1 to the Taxation Administration Act 1953.
  2. This instrument varies to nil the amount of withholding required by a payer under the pay as you go withholding system for allowance payments, payments made for locum services, and payments made by non-religious entities to religious practitioners, in a certain class of cases. It also removes the requirement to issue payment summaries and provide an annual report for those payments, when they are made by an entity which is not a religious institution.
  3. The instrument is a legislative instrument for the purposes of the Legislative Instruments Act 2003. This legislative instrument repeals Legislative Instruments numbers F2006B00294, F2006B00298 and F2006B00292 registered on 7 February 2006, Legislative Instrument No.F2006B00322 registered on 10 February 2006 and Legislative Instrument No.F2006B00299 registered on 24 February 2006.

 

Date of effect

4.      The instrument commences on the day after it is registered.

 

What is this instrument about

5.      The purpose of this instrument is to continue with existing arrangements for withholding and reporting requirements for certain payments made to religious practitioners, as the current Legislative Instruments are due to sunset on 1 April 2016.

 

6.      Legislative Instrument numbers F2006B00294, F2006B00298, F2006B00292 were registered on 7 February 2006, and provide variations to the rate of withholding from payments made to religious practitioners covered by section 12-47 of Schedule 1 to the Taxation Administration Act 1953 when certain conditions are met. Broadly the variations apply in the following class of cases:

  1. allowances which are expected to be fully expended on tax deductible items where the payee can substantiate the expenditure incurred or which the payee would not be required to substantiate because of the provisions contained in Division 900 of the Income Tax Assessment Act 1997 (ITAA 1997);
  2. payments made by a religious institution to a religious practitioner for locum services performed for a period of not greater than two (2) days in a quarter;
  3. payments made by an entity that is not a religious institution to a religious practitioner for work or services performed as a religious practitioner except for the performance of chaplaincy and/or counselling services; and
  4. payments made by an entity that is not a religious institution to a religious practitioner, for chaplaincy and/or counselling services, where the payment does not exceed amounts stipulated in the Legislative Instrument.

7.      This instrument consolidates the five instruments listed in paragraph 3 and continues the existing withholding arrangements, with the exception that the payment amounts stipulated in Legislative Instrument No. F2006B00292 will be increased from 1 July 2016.

8.      For that instrument, the withholding variation to nil applied for payments made by an entity that is not a religious institution to a religious practitioner, for chaplaincy and/or counselling services, where the payment does not exceed the following amounts:

- where the entity pays the religious practitioner weekly: $100; or

- where the entity pays the religious practitioner fortnightly: $200; or

- where the entity pays the religious practitioner monthly: $433

 

This instrument increases these amounts to $150, $300 and $650 respectively for payments made from 1 July 2016, in order to reflect general growth in incomes.

9.      This instrument also exempts payment summary and varies annual reporting requirements for an entity which is not a religious institution for certain payments covered by this instrument. Those requirements were formerly contained in Legislative Instrument number F2006B00322 registered on 10 February 2006 and Legislative Instrument number F2006B00299 registered on 24 February 2006.

 

What is the effect of this instrument

 

10.  The effect of this instrument is to vary to nil the amount of withholding required by a payer for payments made to religious practitioners in respect to allowances and payments made for locum services.

 

11.  The effect of this instrument is to also vary to nil the amount of withholding required for payments by non-religious entities for work or services performed as a religious practitioner, and for chaplaincy and counselling services up to the amounts stipulated in the instrument, and to remove payment summary and annual reporting obligations for non-religious entities in relation to those payments.

 

12.  This will avoid the need for unnecessary withholding and will make administration easier for payers that include both religious institutions and non-religious entities, for payments that are fully expendable allowances and for minor or infrequent payments made to religious practitioners.

 

13.  An assessment of the compliance cost impact indicates that the impact will be minor for both implementation and on-going compliance costs. The new instrument is of a minor or machinery nature.

 

Background

 

14.  This instrument has been developed to ensure that the current withholding and reporting arrangements continue for certain payments made to religious practitioners.  The instruments were originally created to lessen withholding and reporting burdens on religious institutions and non-religious entities, to allow religious practitioners to receive payments for allowances, locum services, work and services performed as a religious practitioner, chaplaincy and counselling services, without unnecessary withholding.

 

Consultation

 

15.  This instrument was developed in consultation with a number of religious institutions of various faiths and denominations, along with a large non-religious entity where its members make payments to religious practitioners. No negative feedback was received.

 

16.  No further consultation has been conducted as the effect of the instrument is to essentially support current practices.

 

 

Steve Vesperman

Deputy Commissioner of Taxation

4 February 2016

 

Legislative references:

 

Taxation Administration Act 1953

Legislative Instruments Act 2003

Income Tax Assessment Act 1997

Human Rights (Parliamentary Scrutiny) Act 2011

Statement of compatibility with Human Rights

This Statement is prepared in accordance with Part 3 of the Human Rights (Parliamentary Scrutiny) Act 2011.

 

Pay as you go withholding – Variation and exemption of withholding requirements for certain payments made to religious practitioners

 

This Legislative Instrument is compatible with the human rights and freedoms recognised or declared in the international instruments listed in section 3 of the Human Rights (Parliamentary Scrutiny) Act 2011.

 

Overview

 

This Legislative Instrument varies to nil the amount to withhold from the following payments made to religious practitioners:

 

-          when certain allowances are expected to be fully expended on tax deductible items and the payee either has evidence to substantiate their claim or would not be required to substantiate the expenditure incurred in relation to the allowance;

-          payments made by a religious institution to a religious practitioner for locum services performed for a period of not greater than two (2) days in a quarter;

-          payments made by an entity that is not a religious institution to a religious practitioner for work or services performed as a religious practitioner except for the performance of chaplaincy and/or counselling services; and

-          payments made by an entity that is not a religious institution to a religious practitioner, for chaplaincy and/or counselling services, where the payment does not exceed the amounts stipulated in the Legislative Instrument.

 

This Legislative Instrument also exempts payment summary and varies annual reporting requirements for the payers of certain payments.  Specifically, payers who make the following types of payments will be exempt from providing payment summaries in respect of those payments and are not required to report those amounts in their annual report:

 

-          payments made by an entity that is not a religious institution to a religious practitioner for work or services performed as a religious practitioner except for the performance of chaplaincy and/or counselling services; and

-          payments made by an entity that is not a religious institution to a religious practitioner, for chaplaincy and/or counselling services, where the payment does not exceed amounts stipulated in the Legislative Instrument.

 

Human rights implications

 

This legislative instrument does not engage any of the applicable rights or freedoms because the new instrument is of a minor or machinery nature.

 

Conclusion

 

This legislative instrument is compatible with human rights as it does not raise any human rights issues.

 

Overview

The Legislative Instrument F2016L00107, made under the Taxation Administration Act 1953, aims to continue existing withholding and reporting arrangements for specific payments made to religious practitioners. Enacted in 2016, it addresses the impending sunset of several legislative instruments from 2006 that had previously varied withholding rates and exempted certain payments from withholding. The instrument consolidates these older instruments and maintains the existing arrangements, with adjustments to payment thresholds to reflect income growth. This legislative instrument is designed to alleviate the administrative burden on payers, both religious and non-religious entities, by exempting certain payments from withholding and reporting requirements, thereby avoiding unnecessary withholding and simplifying compliance for these entities.

Scope and Application

The F2016L00107 legislative instrument pertains to the variation and exemption of withholding requirements for certain payments made to religious practitioners under the pay-as-you-go withholding system in Australia. It applies to payments made by both religious and non-religious entities to religious practitioners, specifically those made for allowances, locum services, work or services performed as a religious practitioner, and chaplaincy and counselling services. This legislative instrument is applicable nationally, covering entities and individuals engaged in these types of payments across the Commonwealth of Australia. The exemptions and variations from withholding and reporting requirements are intended to ease administrative burdens where the payments meet specific criteria, such as allowances that are fully expended on tax-deductible items or infrequent locum services. Additionally, the instrument adjusts the thresholds for chaplaincy and counselling payments made by non-religious entities to religious practitioners, increasing them to reflect general income growth. The instrument repeals and consolidates previous legislative instruments and ensures that the current withholding and reporting arrangements continue, thereby maintaining the existing framework established to reduce unnecessary withholding burdens on religious institutions and non-religious entities.

Key Provisions

The legislative instrument made under section 15-15, subsection 16-153(6), and section 16-180 of Schedule 1 to the Taxation Administration Act 1953 (sections 15-15, 16-153(6), 16-180) sets out variations to the withholding requirements for certain payments made to religious practitioners. The instrument effectively reduces the withholding tax to zero for specific types of payments, and also removes the obligation for payers to issue payment summaries and provide annual reports for these payments when made by non-religious entities. The main types of payments affected are allowances that are expected to be fully expended on tax-deductible items, payments for locum services, and payments for work or services performed as religious practitioners, excluding chaplaincy and counselling services, as well as those chaplaincy and counselling services that do not exceed certain stipulated amounts. The instrument also increases the threshold amounts for payments made by non-religious entities to religious practitioners for chaplaincy and counselling services from 1 July 2016. This Act imposes several obligations on parties making payments to religious practitioners. Payers must ensure that the conditions specified in the Act are met to benefit from the withholding variations and exemptions. For instance, allowances must be fully expended on tax-deductible items, or the payee must be able to substantiate the expenditure. Similarly, payments for locum services must not exceed two days in a quarter, and payments for chaplaincy and counselling services must not exceed the stipulated amounts. Payers must also ensure that they do not issue payment summaries or include the exempted payments in their annual reports if they are non-religious entities. The Act does not explicitly outline offences, penalties, or civil/criminal consequences for non-compliance with the withholding variations and exemptions. However, non-compliance with the general withholding and reporting obligations under the Taxation Administration Act 1953 could result in penalties. For example, failure to withhold tax as required can lead to penalties under section 285-10 of the Income Tax Assessment Act 1997 (ITAA 1997), which can be up to 100% of the unpaid withholding tax. Similarly, failure to provide a payment summary or report certain payments can result in penalties under section 284-115 of the ITAA 1997. These penalties can include fines up to a certain amount, depending on the nature and extent of the non-compliance.

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Taxation Law
Instrument
Legislative Instrument
Concepts
Definitions & Interpretation
Reporting & Disclosure Obligations
Offence Provisions
Repeal & Amendment
Transitional Provisions
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Sourced from the Federal Register of Legislation at 26 August 2026. For the latest information on Australian Government law please go to https://www.legislation.gov.au.