Australian Taxation Office
Taxation Administration Act 1953
Notice of Variation of Rate of Withholding
I, Michael Joseph Carmody, Commissioner of Taxation, have varied to nil the amount required to be withheld from withholding payments that are:
- covered by section 12-60, Schedule 1 of the Taxation Administration Act 1953;
and
- within the class of cases described below.
I have made 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 on or after 1 July 2000
This variation is effective for payments made on or after 1 July 2000.
Class of cases
There is no requirement to withhold an amount, for the 2000/01 and future income years, from:
- A payment for reimbursement of actual expenses incurred by the payee, provided:
- the expense that the payee incurs is related directly to the payee’s work or services performed under the labour hire arrangement,
- the expenses that the payee incurred may be able to be claimed as a tax deduction at least equal to the amount of the reimbursement,
- the payee is able to substantiate the tax deduction claimed, and
- the amount and nature of the reimbursement is shown separately in the accounting records of the payer.
2. An allowance 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,
- the payee is able to substantiate the tax deduction claimed, 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. Domestic or overseas travel expenses involving an overnight absence from the payee’s ordinary place of residence.
Signed at Canberra, this 19th day of December 2000.
Signed by Michael Carmody
Commissioner of Taxation
Overview
The Taxation Administration Act 1953 was enacted by the Commonwealth Parliament to facilitate the administration of taxation laws in Australia. One of the issues this Act sought to address was the often complex and variable nature of withholding obligations for certain payments, particularly those related to labour hire arrangements. In response to this, the Act was amended to provide the Commissioner of Taxation with the authority to vary withholding rates under specific circumstances to ensure fairness and compliance. This legislative instrument, a Notice of Variation of Rate of Withholding issued by the Commissioner of Taxation, aims to streamline the withholding process by exempting certain payments from withholding tax where particular conditions are met, thereby reducing administrative burdens and ensuring taxpayers are not subjected to unnecessary tax liabilities. This variation is designed to meet the special circumstances of specified cases, reflecting the policy objective of providing clarity and flexibility in tax withholding obligations.
Scope and Application
The Taxation Administration Act 1953 governs the administration of taxation laws in Australia, with the Notice of Variation of Rate of Withholding issued under the authority of the Commissioner of Taxation, Michael Joseph Carmody, specifying particular adjustments for the withholding of tax from certain payments. This legislative instrument applies to payments covered by section 12-60, Schedule 1 of the Act and specifically exempts certain reimbursements and allowances from withholding tax, provided certain conditions are met. These conditions include the nature and substantiation of expenses related to work or services performed under a labour hire arrangement, the ability of the payee to claim a tax deduction at least equal to the reimbursement, and the clear documentation of the amount and nature of the reimbursement in the payer's accounting records. The variation of the withholding tax rate to nil is effective for payments made on or after 1 July 2000 and applies nationally, encompassing both Commonwealth and state jurisdictions, unless otherwise specified by subordinate regulations.
Key Provisions
The Taxation Administration Act 1953, as varied by Notice of Variation of Rate of Withholding, includes significant changes to the withholding requirements for certain payments (Sections 12-60 and 15-15). The variation reduces the withholding tax to nil for specific types of payments made on or after 1 July 2000. Firstly, it exempts payments for reimbursement of actual work-related expenses, provided these expenses are directly related to the work or services performed under a labour hire arrangement, can be claimed as a tax deduction, are substantiated by the payee, and are detailed in the payer's accounting records (Section 12-60). Secondly, it exempts certain allowances from withholding tax, such as cents per kilometre car expense payments and domestic or overseas travel expenses involving an overnight absence, provided similar substantiation and accounting record requirements apply.
Under the Act, both payers and payees have specific obligations. Payers must ensure that any reimbursements or allowances paid meet the criteria outlined in the legislation and that the amounts and nature of these payments are accurately recorded in their accounting records. Payees, on the other hand, must substantiate any tax deductions claimed related to these payments. Both parties must also comply with the substantiation requirements for the tax deductions claimed. Failure to meet these obligations may result in discrepancies in tax reporting and potential audits by the Australian Taxation Office.
The Act does not explicitly outline specific offences, penalties, or consequences for non-compliance within the variation notice itself. However, general provisions within the Taxation Administration Act 1953 apply. Non-compliance with withholding obligations can lead to civil penalties, including interest on unpaid tax amounts and additional penalties for late or incorrect withholding declarations. In more severe cases, the Commissioner may refer matters to the Australian Federal Police for criminal investigation, which could result in substantial fines and imprisonment. The precise penalties would depend on the nature and extent of the non-compliance, as well as any applicable tax laws.