PAYG Withholding variation to the rate of withholding for superannuation income stream beneficiaries who turn 60 during the financial year

General Outline of Instrument

1. This instrument is made under section 15-15 of Schedule 1 to the Taxation Administration Act 1953 (‘TAA’).
2. The pay as you go withholding system allows many taxpayers to make provision for their income tax liabilities by requiring payers to withhold amounts from certain payments, including taxable superannuation income stream benefits. This instrument provides for a more accurate amount of withholding for the relevant payees by taking into account all of their circumstances.
3. 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.
4. This determination is a legislative instrument for the purposes of the Legislation Act 2003.
5.  

Date of effect

5.      The instrument commences 1 July 2018.

What is this instrument about?

6.      The TAA empowers the Commissioner to make withholding schedules specifying the amounts and formulas to be used for working out the amount required to be withheld by an entity from certain categories of payments, including superannuation income streams.

7.      The TAA empowers the Commission to vary the rate of withholding specified in the schedules to meet the special circumstances of a particular class of payees. The Commissioner uses these powers to ensure that amounts withheld in most cases closely approximate the amount of income tax which will ultimately be payable on the relevant income.

8.      The withholding schedule for superannuation income stream covers amounts paid from a taxed source prior to the beneficiary turning 60 years of age. This income can be tax free when paid after the beneficiary’s 60th birthday.

What is the effect of this instrument

9.      The instrument is to ensure that the amount withheld under the PAYG withholding system, for this class of payments, does not exceed the amount of tax which would be payable when the payee receives their income tax assessment.

10.  The withholding schedules assume that regular payments of assessable income will occur throughout the financial year.

11.  This instrument reduces the amount to be withheld from payments made prior to the beneficiary’s 60th birthday in recognition of the tax free status of amounts paid following that day.

12.  The instrument is used by superannuation funds, professional advisers, software developers and the Australian Taxation Office to calculate the amount to be withheld from superannuation income streams in line with the instructions given.

Consultation

13.  This instrument has been developed in consultation with the Association of Superannuation Funds of Australia to prevent excessive withholding for beneficiaries of superannuation income streams who are turning 60 in the financial year.  

Legislative references:

Acts Interpretation Act 1901

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 to the rate of withholding for superannuation income stream beneficiaries who turn 60 during the financial year

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 instrument is to ensure that the amount withheld under the PAYG withholding system, for this class of payments, does not exceed the amount of tax which would be payable when the payee receives their income tax assessment.

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.