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

Administered by Department of the Treasury

Legislation au F2018L00775 In force Legislative Instrument

Legislation content

Explanatory Statement

 

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.

 

 

 

Overview

The PAYG Withholding Variation to the Rate of Withholding for Superannuation Income Stream Beneficiaries Who Turn 60 During the Financial Year, enacted in 2018, was introduced to address the problem of potentially excessive withholding of tax from superannuation income stream payments made to individuals before they turn 60 years of age. The instrument, made under section 15-15 of Schedule 1 to the Taxation Administration Act 1953 (TAA), is designed to ensure that the amount withheld under the pay as you go (PAYG) withholding system does not exceed the tax liability that will ultimately be assessed when the payee receives their income tax assessment. This is achieved by adjusting the withholding rates to take into account the tax-free status of superannuation payments made after the beneficiary’s 60th birthday. The instrument was developed in consultation with relevant stakeholders, including the Association of Superannuation Funds of Australia, to ensure its effectiveness and compliance with human rights, as confirmed by the Statement of Compatibility with Human Rights under the Human Rights (Parliamentary Scrutiny) Act 2011.

Scope and Application

This instrument, made under section 15-15 of the Taxation Administration Act 1953, modifies the rate of withholding for superannuation income stream beneficiaries who turn 60 during the financial year, ensuring that the withheld amounts more accurately reflect the beneficiaries' actual tax liabilities. It applies to all superannuation funds and entities making payments to beneficiaries of superannuation income streams in Australia, particularly those payments made before the beneficiary turns 60. The instrument seeks to reduce the withholding amount for payments made before the 60th birthday, in recognition of the tax-free status of payments made after that age. The instrument is used by superannuation funds, professional advisers, software developers, and the Australian Taxation Office to calculate the correct withholding amount in line with the legislative instructions. It does not extend or restrict application through subordinate instruments, and no exclusions or exemptions are explicitly stated. The instrument is compatible with human rights as it does not raise any significant human rights issues.

Key Provisions

The main operative sections of this instrument (sections 1-12) provide for a variation to the rate of withholding for superannuation income stream beneficiaries who turn 60 during the financial year. Specifically, section 6 states that the Taxation Administration Act 1953 (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. Section 7 further empowers the Commissioner to vary the rate of withholding specified in the schedules to meet the special circumstances of a particular class of payees. Section 11 explains that 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. The obligations and requirements imposed by this instrument primarily concern superannuation funds, professional advisers, software developers, and the Australian Taxation Office. They are required to use this instrument to calculate the amount to be withheld from superannuation income streams in line with the instructions given (section 12). The 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 (section 13). The instrument does not specify any offences, penalties, or civil/criminal consequences for breach. However, if the withholding amounts calculated using this instrument are not in line with the instructions given, it could result in incorrect withholding and potential tax liabilities for the beneficiaries. It is important for all parties involved to adhere to the instrument to ensure accurate withholding and avoid potential tax issues.

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Taxation Law
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Legislative Instrument
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Definitions & Interpretation
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Sourced from the Federal Register of Legislation at 26 August 2026. For the latest information on Australian Government law please go to https://www.legislation.gov.au.