Taxation Administration Act 1953 - PAYG withholding - Occasional payroll donations to deductible gift recipients

Explanatory Statement

General Outline of Instrument

1. This instrument enables a variation to the amount of withholding required by a payer under the pay as you go withholding system for payees who make donations to a deductible gift recipient under an occasional workplace giving arrangement implemented by their payer.
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.

Date of effect

4.     The instrument commences on the day after it is registered on the Federal Register of Legislative Instruments.

5.     It provides a variation to the amount of withholding required from payments made after the date the instrument is registered.

What is this instrument about?

6.     This instrument varies the amount required to be withheld by a payer who makes donations to a deductible gift recipient at the direction of a payee where the variation for donations made under a regular planned workplace giving arrangement would not apply.

What is the effect of this instrument?

7.     The instrument is a pay as you go withholding class variation that reduces the amount of withholding by a payer for the relevant payees for the pay period in which the donation is made. It has been developed to enable a more accurate withholding calculation for occasional donations.

8.     The reduction in withholding reflects the payees’ entitlement to a tax deduction for the donation in their tax assessment for that income year.

9.     Without this instrument the payee would not obtain the full taxation benefit of making the donation until they lodged their tax return after the end of the income year.

10. This instrument is provided to allow payers wishing to facilitate a program for making donations at the direction of their payees where those donations are not made under a regular planned giving arrangement.

Background:

11. An earlier pay as you go withholding class variation (Legislative Instrument No. F2006B00300) provides a reduction in withholding when payers make donations at the direction of payees under a regular planned workplace arrangement.

12. The recent Victorian bushfires disaster resulted in a demand from payers and payees to provide similar assistance when donations are made to deductible gift recipients through payroll systems under occasional workplace giving arrangements such as making a one-off donation.

13. The earlier class variation does not apply to donations made outside a regular planned giving arrangement.

Consultation:

14. The need for this instrument was identified by payers wishing to make donations at the direction of their employees following the recent Victorian bushfires disaster. Requests for variations received from various payers were actioned on a case by case basis.

15. No further consultation has been conducted as the affect of the instrument is to provide an immediate taxation benefit for payees who direct their payers to make donations that are not made under a regular planned giving arrangement.

16. This instrument has been subject to a cost compliance calculation as recommended by the Office of Best Practice and Regulation. An assessment of the compliance cost impact indicates that the impact will be low for implementation and there will be no change in on-going compliance costs. The instrument is routine in nature.

Erin Holland

Deputy Commissioner of Taxation

18th March 2009

Legislative references:

Taxation Administration Act 1953

Legislative Instruments Act 2003