Taxation Administration Act 1953 -
Tax table for employment termination payments
Explanatory Statement
General Outline of Instrument
- This instrument is made by the Commissioner of Taxation (the Commissioner) pursuant to section 15-25 of Schedule 1 to the Taxation Administration Act 1953 (TAA).
- The instrument makes publicly available the employment termination payment withholding schedule, which the Commissioner is empowered to make, specifying the amounts, formulas and procedures to be used for working out the amount required to be withheld by an entity from employment termination payments in accordance with the pay as you go (PAYG) withholding system.
- In making the instrument, the Commissioner has had regard to the Income Tax Rates Act 1986 and the Tax Laws Amendment (2012 Measures No. 3) Act 2012.
- The instrument contains one withholding schedule. The schedule provides information for calculating the withholding amount from employment termination payments.
- This is a legislative instrument for the purposes of the Legislative Instruments Act 2003.
Date of effect
6. The instrument applies from 1 July 2012.
7. It provides for PAYG withholding on employment termination payments made on or after 1 July 2012 based on the Income Tax Rates Act 1986 and the Tax Laws Amendment (2012 Measures No. 3) Act 2012.
What is this instrument about?
8. The instrument provides information explaining how to work out the amount an entity must withhold from payments made to individual taxpayers who are paid an employment termination payment. The information is contained in the schedule attached to the instrument, also known as a withholding schedule.
What is the effect of this Instrument?
9. The effect of the instrument is to support the PAYG withholding system, which provides a simple and convenient way for most people to meet their annual tax obligations as income is earned.
10. The information contained in the instrument is most useful to employers, employees, professional advisers, software developers, the Australian Taxation Office, electronic payroll stockists, electronic payroll producers and payroll service providers.
11. This instrument also withdraws the earlier version of the affected withholding schedule to provide certainty to PAYG withholding payers with regard to their withholding obligations.
12. An assessment of the compliance cost impact indicates that the instrument will affect only a small proportion of businesses and confirms existing practice. There is no ongoing compliance cost impact and a low implementation impact reflecting the need for some taxpayers to be aware of the change and make some minor adjustments to their processes. The instrument is routine in nature.
Background
13. The PAYG arrangements, introduced in A New Tax System (Pay As You Go) Act 1999, represent the most effective, simple and convenient way for most people to meet their annual income tax liability, either through instalments or withholding, as income is earned. They eliminate large end-of-year tax bills and ensure that Government has the revenue it needs during the year to provide benefits and services to the community.
14. The TAA empowers the Commissioner to make withholding schedules specifying the amounts, formulas and procedures to be used for working out the amount required to be withheld by an entity. The TAA requires the Commissioner to make each withholding schedule publicly available.
15. Each withholding schedule is tailored to meet the circumstances of a particular class of employee or payment type.
Consultation
16. The making and publication of withholding schedules is a routine part of tax administration.
17. The Australian Taxation Office will provide the necessary information to payroll and software providers, and those employers who code their own in-house payroll systems, to ensure that they have sufficient time to update their software packages.
Statement of Compatibility with Human Rights prepared in accordance with Part 3 of the Human Rights (Parliamentary Scrutiny) Act 2011
18. This 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
19. This instrument contains one withholding schedule. The schedule provides information for calculating the withholding amount from employment termination payments.
Human rights implications
20. This legislative instrument does not engage any of the applicable rights or freedoms.
Conclusion
21. This legislative instrument is compatible with human rights as it does not raise any human rights issues.
Erin Holland
Deputy Commissioner of Taxation
28 June 2012
Legislative references:
Taxation Administration Act 1953
Legislative Instruments Act 2003
Income Tax Rates Act 1986
A New Tax System (Pay As You Go) Act 1999
Tax Laws Amendment (2012 Measures No 3) Act 2012