PAYG Withholding variation to the rate of withholding for certain foreign resident staff that provide support to those engaged in entertainment or sports activities

General Outline of Instrument

1. This instrument is made under section 15-15 of Schedule 1 to the Taxation Administration Act 1953 (TAA).
2. This instrument removes the requirement to withhold amounts from payments made to foreign resident support staff involved in entertainment or sports activities, where those support staff are normally resident in countries which have an international tax agreement with Australia
3. This instrument repeals legislative instrument F2007L03532, registered on 30 August 2007.
4. This is a legislative instrument for the purposes of the Legislation Act 2003.
5. Under subsection 33(3) of the Acts Interpretation Act 1901, where an Act confers a power to make, grant or issue any instrument of a legislative or administrative character (including rules, regulations or by-laws), the power shall be construed as including a power exercisable in the like manner and subject to the like conditions (if any) to repeal, rescind, revoke, amend, or vary any such instrument.

Date of effect

6.      The instrument commences on the day after its registered on the Federal Register of Legislation.

What is this instrument about?

7.      The purpose of the notice is to remove the requirement to withhold amounts from payments made to support staff from the relevant countries because the international tax agreements made with those countries, act to ensure that the income earned will not be subject to tax in Australia.

8.      Instrument F2007L03532 removed the requirement to withhold from payments made to support staff engaged in entertainment activities. That instrument is repealed by this instrument.

9.      This instrument continues with that treatment but extends the exemption from withholding to payments to support staff engaged in sports activities.

What is the effect of this Instrument?

10.  The instrument removes the need for payers and payees to complete unnecessary paperwork in relation to payments which will not be subject to tax in Australia.

11.  The foreign resident withholding legislation would generally require withholding from these amounts regardless of whether they are ultimately subject to tax in Australia.  Without this instrument, payees would be required to register with the Tax Office to obtain a tax file number and Australian business number before completing an individual application seeking a variation to nil of amounts required to be withheld from payments made to them.

12.  The imposition of such administrative requirements is not justified in circumstances where there will clearly be no taxation liability and acts as a disincentive to those considering working in Australia. 

Background

13.  Foreign resident withholding was introduced to payments relating to entertainment or sports activities with effect from 1 July 2004. Initially withholding was required from payments made to foreign residents engaged in entertainment and sports activities, including their support staff.

14.  We have worked closely with entertainment and sports industry representatives to design processes which minimise costs of compliance and reduce unnecessary obstacles to doing business in Australia. This instrument will greatly reduce the compliance burden for payers and payees in the entertainment and sports industries.

Consultation

15.  This instrument has been revised in consultation with key stakeholders from the film industry, sporting associations and industry specific tax agents.

16.  Copies of this instrument were provided to 8 key stakeholders who represent the majority of foreign resident sportspeople and entertainers. All key stakeholders are in favour of adding foreign resident support personnel for those engaged in sports activities.

Deborah Jenkins

Deputy Commissioner of Taxation

30 August 2017

Legislative references:

Legislation Act 2003

Taxation Administration Act 1953

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 to the rate of withholding for certain foreign resident staff that provide support to those engaged in entertainment and sports activities

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 removes the requirement to withhold amounts from payments made to support staff from the relevant countries, who are engaged in entertaining and sports activities, because the international tax agreements made with those countries act to ensure that the income earned will not be subject to tax in Australia.

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. The instrument avoids unnecessary withholding in circumstances where no tax will be payable.

Conclusion

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