PAYG Withholding Variation: Body corporates

Explanatory Statement

General outline of instrument

1. This instrument is made by the Commissioner of Taxation (the Commissioner) under section 15-15 of Schedule 1 to the Taxation Administration Act 1953.
2. This instrument enables a variation to the rate of withholding required by a payer under the pay as you go withholding system for payments in a certain class of cases.
3. The instrument is a legislative instrument for the purposes of the Legislation Act 2003.

4.      This legislative instrument repeals and replaces Legislative Instrument No. F2006B00402 registered on the 21st of February 2006.

Date of effect

5.      The instrument applies from 1 April 2016 and will be withdrawn on 31 October 2016.

What is this instrument about

6.      Legislative Instrument number F2006B00402 provided a variation to the rate of withholding to nil from payments for a supply to a body corporate where no ABN has been quoted by the body corporate.

7.      This instrument is due for repeal on 1 April 2016, under the sunsetting provisions contained in section 50 of the Legislation Act 2003. This instrument replaces that instrument from that date.

8.      We are currently consulting with industry bodies about the continuation of the withholding rules set down in that instrument. To enable that consultation to be completed through a proper process, we have used this new instrument to extend the provisions of the current instrument for a further seven months.

What is the effect of this instrument

9.      The effect of this instrument is to continue the present withholding arrangements and vary to nil the amount of withholding required to any payment covered by section 12-190 in Schedule 1 to the Taxation Administration Act 1953 to a body corporate of residential or commercial property made by a member of that body corporate in respect of:

(i)     body corporate levies;

(ii)   access fees to inspect books of account, insurance policies, rolls, minutes etc; or

(iii) fees payable to the body corporate for the collection of rents from the common property.

10.  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

11.  The 2006 variation was originally created to lessen the withholding and reporting burden on body corporates when not quoting their ABN for the payment of levies and fees by members of that body corporate.

12.  The variation helps avoid unnecessary over withholding from payments made to body corporates.

13.  This instrument extends that treatment for a further seven months to enable consultation with industry groups to be completed before we determine what rules should be put in place for the longer term.

14.  The existing variation was developed after industry consultation and is well understood by participants. It is beneficial to both payers and payees. Allowing its rules to remain in operation while consultation is completed will reduce compliance costs for payers who would otherwise have to change their processes.

15.  Due to complications with the consultation process the Office of Best Practice Regulation may not have had time to confirm that a Regulation Impact Statement is not required.  Delaying the registration of this Legislative Instrument could lead to the situation where there is not an instrument in force and affected taxpayers would face increased reporting or withholding obligations. To avoid this situation the Commissioner will be registering this Legislative Instrument as an interim measure. This will allow for the continuation of the status quo while the Commissioner finalises consultation and is able to address all stakeholder concerns before reregistering a replacement Legislative Instrument by 31 October 2016.

Consultation

16.  Consultation is currently occurring; when complete a new instrument will be made reflecting the requirements of affected industry participants.

Legislative references:

Taxation Administration Act 1953

Legislation Act 2003

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.

PAYG Withholding Variation: Body corporates

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 any payment covered by section 12-190 in Schedule 1 to the Taxation Administration Act 1953 to a body corporate of residential or commercial property made by a member of that body corporate in respect of:

(i)                  body corporate levies;

(ii)                access fees to inspect books of account, insurance policies, rolls, minutes etc; or

(iii)               fees payable to the body corporate for the collection of rents from the common property.

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 does not raise any human rights issues.