Taxation Administration Act 1953 - Pay as you go withholding - PAYG Withholding Variation: Allowances – Legislative Instrument

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Legislation au F2015L01047 Not in force Legislative Instrument

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Taxation Administration Act 1953
PAYG Withholding Variation: Allowances

Explanatory Statement

 

General Outline of Instrument

  1. This instrument varies the amount of withholding required by a payer under the pay as you go withholding system for allowance payments in certain circumstances.
  2. This instrument is made by the Commissioner of Taxation (the Commissioner) pursuant to section 15-15 of Schedule 1 to the Taxation Administration Act 1953.
  3. This is a legislative instrument for the purposes of the Legislative Instruments Act 2003.
  4. This legislative instrument revokes Legislative Instrument No. F2013L00521 registered on the 21st March 2013.

 

Date of effect

5.        The instrument applies from 1 July 2015.

 

What is this instrument about?

6.        Legislative Instrument No. F2013L00521 registered on the 21st March 2013 provided a variation to the rate of withholding from a number of allowances when certain conditions are met. Broadly the variation applies in certain cases when the allowance is expected to be fully expended on tax deductible items and the payee would not be required to substantiate expenditure incurred in relation to the allowance because of the provisions contained in Division 900 of the Income Tax Assessment Act 1997 (ITAA 1997).

7.        This instrument varies from Legislative Instrument No. F2013L00521 in only one respect. The variation for cents per kilometre car expense payments has been adjusted because of a proposed change to calculation rules announced in the federal budget on 12 May 2015. If passed, the change is to take effect from 1 July 2015.

 

 

 

 

What is the effect of this Instrument?

8.        The variation for cents per kilometre car expense payments will now apply for up to 5,000 business kilometres at:

  • 66 cents per kilometre for the year commencing on 1 July 2015, or
  • the rate published by the Commissioner of Taxation for later years.

9.        Where the allowance for car expenses is no more than the published rate then no withholding will be required for payments up to 5,000 kilometres for a financial year. Withholding will be required from payments for distances travelled beyond 5,000 kilometres in a financial year.

10.    If the per kilometre rate paid exceeds the published rate withholding will be required from the amount of each payment which exceeds the amount calculated at the published rate.

11.    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

12.    The variation was originally created to lessen reporting burdens on employers for allowance payments that were deductible and expected to be fully expended and to allow employees to receive such allowances without unnecessary withholding.

13.    In the absence of this variation, employees would be subject to unnecessary withholding on allowances which will be fully expended.

 

Consultation

14.    This instrument is required to support ATO policy regarding reporting of deductible expenses. The change which has been made is to conform with announced law changes which, if passed, will take effect from 1 July 2015.

15.    No further consultation has been conducted as the effect of the instrument is to support current practices.

 

 

 

Steve Vesperman

Deputy Commissioner of Taxation

Date 17 June 2015

 

 

Legislative references:

Income Tax Assessment Act 1997

Taxation Administration Act 1953

Legislative Instruments 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.

 

 

Taxation Administration Act 1953

 PAYG Withholding Variation: Allowances

 

 

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 the following allowance payments:

–           cents per kilometre car expense payments

–           award transport payments for deductible transport expenses

–           laundry (not dry cleaning) allowance for deductible clothing up to the threshold amount

–           award overtime meal allowances up to reasonable allowances amount

–           domestic or overseas travel allowance.

 

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.

 

 

 

 

 

 

Overview

The Taxation Administration Act 1953 was enacted to provide a framework for the administration of taxation laws, including the pay-as-you-go (PAYG) withholding system. The Act was introduced to address issues in the collection of tax withholdings from various income sources. This particular legislative instrument, issued by the Commissioner of Taxation under section 15-15 of Schedule 1 of the Act, revises the withholding rates for specific allowance payments, such as car expense payments, to alleviate reporting burdens on employers and employees. The instrument aims to ensure that withholding is only applied when necessary, thus simplifying tax compliance and reducing unnecessary administrative costs. It reflects the policy objective of supporting the Australian Taxation Office's practices in reporting deductible expenses and aligns with announced legislative changes to take effect from 1 July 2015.

Scope and Application

The Taxation Administration Act 1953 PAYG Withholding Variation: Allowances instrument, effective from 1 July 2015, pertains to the modification of withholding amounts required under the pay as you go withholding system for specific allowance payments, particularly cents per kilometre car expense payments. This instrument applies to taxpayers who receive allowances and employers who pay these allowances, focusing on the reduction of administrative burdens where allowances are deductible and expected to be fully expended on tax-deductible items. The instrument revokes a previous legislative instrument, F2013L00521, and introduces a variation for the cents per kilometre car expense payments due to a proposed change to calculation rules announced in the federal budget on 12 May 2015. The adjustment allows for no withholding on payments up to 5,000 kilometres for a financial year if the per kilometre rate paid does not exceed the published rate, aligning with the government's policy to support the reporting of deductible expenses and reduce unnecessary withholding. This legislative instrument is of a minor or machinery nature and does not engage any of the human rights or freedoms recognised in the Human Rights (Parliamentary Scrutiny) Act 2011.

Key Provisions

The Taxation Administration Act 1953 has been amended to adjust the withholding of tax for specific allowance payments under the Pay As You Go (PAYG) system. This legislative instrument, made under section 15-15 of Schedule 1 to the Taxation Administration Act 1953, revokes the previous legislative instrument (F2013L00521) and introduces new variations, particularly for cents per kilometre car expense payments. The changes apply from 1 July 2015, aligning with a proposed change announced in the federal budget on 12 May 2015. The new variations under this instrument mean that for cents per kilometre car expense payments, withholding will not be required for payments up to 5,000 kilometres if the rate does not exceed the published rate by the Commissioner of Taxation. For payments exceeding 5,000 kilometres, or if the per kilometre rate paid exceeds the published rate, withholding will apply to the excess amount. This aims to alleviate reporting burdens on employers and employees for deductible expenses that are expected to be fully expended, reducing unnecessary withholding on allowances that will be fully utilised. Entities and individuals governed by this Act must ensure that the withholding on allowance payments is adjusted according to the new variations specified. Employers are required to calculate the withholding based on the distance travelled and the applicable rate, ensuring compliance with the provisions set out in this legislative instrument. Employees should also verify that their allowance payments are correctly reported to avoid any discrepancies in tax withholding. Failure to comply with the requirements set out in this legislative instrument may result in civil or criminal consequences. While specific penalties are not detailed in the explanatory statement, non-compliance with tax withholding provisions can generally lead to penalties under the Taxation Administration Act 1953. These may include fines and, in severe cases, criminal charges for tax evasion or fraudulent activities. The Australian Taxation Office (ATO) has the authority to enforce these penalties and take appropriate action against non-compliant parties.

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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.