Pay As You Go (PAYG) Withholding
Variation of rate of withholding
I, Michael Joseph Carmody, Commissioner of Taxation, vary to nil the amount required to be withheld from withholding payments that are:
- covered by sections 12-35, 12-40 and 12-45, Schedule 1 of the Taxation Administration Act 1953; and
- within the class of cases described below.
I make this variation of the rate of withholding under the power contained in section 15-15 of Schedule 1 of the Taxation Administration Act 1953 to meet the special circumstances of that class of cases.
Effective for payments made after 1 July 2000
This variation applies to payments made after 1 July 2000.
Class of cases
There is no requirement to withhold an amount, for the 2000/01 and future income years, from allowances as described below, provided:
- the payee is expected to incur expenses that may be able to be claimed as a tax deduction at least equal to the amount of the allowance, and
- the amount and nature of the allowance is shown separately in the accounting records of the payer.
Allowances:
- Cents per kilometre car expense payments calculated using the approved rates for payments made up to 5000 business kilometres by applying the rate to the number of kilometres travelled. The rate varies depending on the engine capacity of the vehicle and is prescribed by regulation.
2. Award transport payments for deductible transport expenses. An award transport payment is a transport payment paid under an industrial instrument (i.e. an award, order, determination or industrial agreement) that was in force under Australian law on 29 October 1986.
3. Laundry (not dry cleaning) allowance for deductible clothing up to the threshold amount. The income tax law specifies an amount of $150 as the threshold amount, but this can be increased from time to time by regulation.
4. Award overtime meal allowances up to reasonable allowances amount published in the annual Tax Office Ruling. The allowance must be paid under an industrial instrument in connection with overtime worked.
5. Domestic or overseas travel allowance (excluding overseas accommodation allowance) involving an overnight absence from the payee’s ordinary place of residence up to reasonable allowances amount published in the annual Tax Office Ruling.
Signed at Canberra, this 28th day of June 2000.
Signed by Michael Carmody
Commissioner of Taxation
Overview
The Pay As You Go (PAYG) Withholding Variation of Rate of Withholding instrument (F2006B00395) was enacted in 2000 to address a specific problem within the Australian tax system regarding the withholding of payments for certain allowances and expenses. The instrument was introduced under the authority of section 15-15 of Schedule 1 of the Taxation Administration Act 1953. This legislative instrument was enacted by the Parliament of Australia, aiming to alleviate the administrative burden on taxpayers by reducing the need for withholding payments in particular circumstances. The policy objective was to provide relief to taxpayers who could reasonably claim the same amount as a deduction for their expenses, thereby simplifying the withholding process for certain payments and ensuring that the PAYG system was both fair and efficient.
Scope and Application
This legislative instrument applies to withholding payments covered by specific sections of the Taxation Administration Act 1953, namely sections 12-35, 12-40, and 12-45, and applies to payments made after 1 July 2000. The instrument varies the rate of withholding to nil for certain allowances, contingent upon the payee expecting to incur expenses that may be deductible and the amount and nature of the allowance being distinctly recorded in the payer's accounting records. The allowances in question include cents per kilometre car expense payments, award transport payments for deductible transport expenses, laundry allowances for deductible clothing up to a specified threshold, award overtime meal allowances up to a reasonable amount, and domestic or overseas travel allowances up to a reasonable amount. This variation applies to Commonwealth jurisdictions and is subject to the conditions specified, with no requirement to withhold tax from these allowances provided the outlined criteria are met.
Key Provisions
The legislative instrument F2006B00395 pertains to the variation of the rate of Pay As You Go (PAYG) withholding under the Taxation Administration Act 1953. Section 15-15 of Schedule 1 of the Act provides the Commissioner of Taxation with the authority to vary the withholding rates based on special circumstances. Specifically, this legislative instrument sets the withholding rate to nil for certain allowances, effective for payments made after 1 July 2000 (Section 1). These allowances include cents per kilometre car expense payments, award transport payments, laundry allowances, award overtime meal allowances, and domestic or overseas travel allowances, subject to certain conditions.
The obligations imposed by this Act include the necessity for the payee to anticipate incurring expenses that could be claimed as a tax deduction at least equal to the amount of the allowance. Furthermore, the amount and nature of the allowance must be distinctly recorded in the accounting records of the payer. The specific allowances outlined are subject to the condition that the payee expects to incur expenses that may be deducted from their taxable income, thereby making the withholding unnecessary.
Failure to comply with the conditions specified in the Act may result in penalties or other consequences. While the Act does not explicitly state the penalties for non-compliance, breaches of tax laws generally can lead to civil or criminal penalties. For instance, under the Taxation Administration Act 1953, penalties for non-compliance with withholding obligations may include fines and, in severe cases, imprisonment. The exact penalties would depend on the nature and extent of the non-compliance, as well as any applicable tax laws. It is important for taxpayers and payers to adhere to the requirements set forth to avoid potential legal repercussions.