PAYG Withholding Variation: Insurance and Compensation

General Outline of Instrument

1. This instrument is made under section 15-15 and 16-180 of Schedule 1 to the Taxation Administration Act 1953.
2. This instrument varies the amount of withholding to nil in certain classes of cases described below.
3. This instrument also removes the requirement to provide payment summaries for those payments.
4. The instrument is a legislative instrument for the purposes of the Legislation Act 2003.

Date of effect

5.      The instrument commences on 1 April 2016.

What is this instrument about

6.      Legislative Instrument No. F2006B00211, provided a variation to the rate of withholding to NIL for any payment made by:

• An insurer to another entity in settlement of a claim under an insurance policy, or
• An entity operating a statutory compensation scheme to another entity in settlement of a claim for compensation under that scheme, or
• An entity operating a compulsory third party scheme to another entity in settlement of a claim for compensation under that scheme.

7.       This instrument repeals and replaces Legislative Instrument No. F2006B00211 Tax Administration Act 1953 – PAYG Withholding Variation: Insurance and Compensation (17/11/2003).

What is the effect of this instrument

8.       This instrument reduces compliance costs for insurers and their insured clients when settling a claim or paying compensation to another entity by not requiring an ABN to be supplied.

9.       The variation provides a NIL withholding amount for payments made by an insurer in settlement of a claim under an insurance policy, an entity operating a compensation scheme settling a compensation claim under that scheme and a compulsory third party scheme to another entity in settlement of a claim.

10.   This provides for more efficient processing of claims where it may be unclear whether an amount is being received by the insured party in circumstances where an ABN may ordinarily be required to be quoted.

11.  A withholding rate of NIL will apply to these payments.

12.  Because the withholding rate is reduced to NIL, the requirement to provide payment summaries in respect of these payments is removed.

13.  An assessment of the compliance cost 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.  The variation is created to lessen the compliance burden on insurers, other relevant payers and recipients of the relevant payments.

Consultation:

15.  The Insurance Council of Australia were consulted in updating this instrument and they have confirmed that they want the arrangements to continue

16.  Wider consultation was not considered to be necessary because the instrument merely preserves a concession that would otherwise be removed as a consequence of the impending repeal of the existing instrument.

Legislative references:

Taxation Administration Act 1953

Legislation Act 2003

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: Insurance and Compensation

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

The variation provides a NIL withholding amount for payments made by an insurer in settlement of a claim under an insurance policy, an entity operating a compensation scheme settling a compensation claim under that scheme and a compulsory third party scheme to another entity in settlement of a claim.

This provides for more efficient processing of claims where it may be unclear whether an amount is being received by the insured party in circumstances where an ABN may ordinarily be required to be quoted.

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.