EXPLANATORY STATEMENT
STATUTORY RULES 1984 No. 173
ISSUED BY THE AUTHORITY OF THE TREASURER
PAY-ROLL TAX (TERRITORIES) REGULATIONS
The purpose of these regulations is to increase the level of exemption for pay-roll tax in the Australian Capital Territory from $120,000 to $130,000 per annum, with effect from 1 January 1984.
Introductory Note
The Pay-roll Tax (Territories) Act 1971 imposes tax in the Australian Capital Territory, at a rate of 5%, on any wages paid or payable by an employer either -
• in the ACT, otherwise than in respect of services rendered wholly in a State or the Northern Territory; or
• outside the ACT for services rendered wholly in the ACT.
Under the provisions of the Pay-roll Tax (Territories) Assessment Act 1971 (the Act) pay-roll tax is payable on a monthly basis, although the Commissioner of Taxation has a discretion to allow payment to be made on a quarterly, half-yearly or annual basis.
Sub-section 16(1) of the Act requires an employer to register and lodge pay-roll tax returns if, during any month, he pays or is liable to pay wages subject to ACT pay-roll tax and his Australia-wide wages payable in that month exceed a rate of $2,250 per week or such higher amount as is prescribed by regulation under the Act.
For the purposes of determining the amount of tax payable by an employer during a full income year, section 14 of the Act authorises a deduction against the employer’s Australia-wide wages paid or payable during the income year equal to the amount (the annual exemption level) prescribed in the Act. The deduction is reduced by $2 for every $3 by which the Australia-wide wages exceed the exemption level. The current annual exemption level is $120,000.
For the purposes of calculating the amount of the tax payable in respect of wages included in a return for a month or other period, sub-section 12(1) of the Act authorises a monthly deduction from those wages of an amount equal to the monthly equivalent of the annual exemption level (referred to as the ‘prescribed amount’). As is the case with the annual exemption level, the prescribed amount, currently $10,000, is reduced by $2 for every $3 by which the wages included in the return exceed the prescribed amount. Where an employer pays wages in the ACT and also in one or more States or the Northern Terriroty, no deduction is allowable unless the employer nominates to the Commissioner a monthly deduction amount which generally bears to the maximum monthly deduction the same proportion as his ACT wages bear to his Australia-wide wages.
An employer is entitled to a refund or rebate of the whole of the pay-roll tax paid or payable by an employer over the course of a financial year if the total wages included in returns required to be furnished under the Act or corresponding State or Northern Territory laws does not exceed the annual exemption level.
A refund or rebate is also made if, over the course of a financial year, there has not been deducted in returns furnished by an employer under the Commonwealth Act or State or Northern Territory laws an amount equal to the annual exemption that would have been allowable if the total Australia-wide pay-roll was related to the Australian Capital Territory.
Comments on the regulations which will give effect to the proposed increase in the exemption level follow. The regulations are the first made under amendments made to the pay-roll tax law in 1982 to enable increases in the exemption level to be effected by regulation. Prior to that, increases were effected by way of amendment to the pay-roll tax law.
By regulation 1 the regulations are to be cited as the Pay-roll Tax (Territories) Regulations.
By virtue of regulation 2, the regulations are deemed to have come into operation on 1 July 1984, thus ensuring that wages included in returns lodged for July 1984 and subsequent months are taxable on the basis of the higher exemption levels. But for this regulation, the regulations would have come into operation on the day on which they were notified in the Gazette.
Regulation 3 is a drafting measure which enables the Pay-roll Tax (Territories) Assessment Act 1971 to be referred to in the Regulations as ‘the Act’.
Regulation 4 increases, from $10,000 to $10,833.33, the amount that is specified under sub-section 12(9) of the Act as the maximum amount that may be deducted per month from the Australia-wide wages that are payable by an ACT employer and are included in a monthly or other periodic pay-roll tax return. The increased amount is the monthly equivalent of the increased annual exemption level of $130,000 prescribed by sub-regulation 5(1).
Sub-regulation 5(1) increases from $120,000 to $130,000 the amount of the maximum annual deduction that may be made from the Australia-wide wages payable by an ACT employer in the 1983-84 financial year and each subsequent financial year. Authority to prescribe that amount by regulation is contained in paragraph 14(4c)(a) of the Act.
By virtue of sub-regulation 5(2), the increased annual deduction will be taken to have applied, in relation to the 1983-84 financial year, to the period that commenced on 1 January 1984 and ended on 30 June 1984. The effect of the sub-regulation is that in the 1983-84 financial year the amount of the maximum annual deduction is $125,000, representing $60,000 (one-half of the previous annual deduction of $120,000) for the period 1 July 1983 to 31 December 1983 and $65,000 (one-half of the increased annual deduction of $130,000) for the period 1 January 1984 to 30 June 1984.
Employers who have lodged returns, including on an annual basis in respect of the 1983-84 financial year will not have received the benefit of the higher monthly exemption. Annual adjustment provisions will allow these employers to obtain the full benefit of the 1 January 1984 starting date for the higher annual exemption.
Under sub-section 16(1) of the Act an employer is required to register for pay-roll tax purposes where total Australia-wide wages paid or payable during any month exceed a rate of $2,250 per week or such higher amount as is prescribed by regulation. Sub-regulation 6(1) increases this rate to $2,500 per week which is the weekly equivalent of the increased annual exemption level of $130,000 (sub-regulation 5(1)). Sub-regulation 6(2) ensures that the increased weekly rate applies from 1 July 1984.