Australian Taxation Office Legislative Instrument
Instrument ID 2012/MEI/0020
Taxation Administration Act
Variation of withholding for low income minors where no TFN or ABN provided
Explanatory Statement
General Outline of Instrument
- This instrument varies to nil the amount of withholding required by a payer under the pay as you go withholding system for low income minors.
- This instrument also replaces two separate instruments:
- PAYG withholding variation – Under 18 years of age and no Tax File Number (TFN) declared and
- PAYG withholding variation – Under 18 years of age and no Australian Business Number (ABN)
- 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.
- This is a legislative instrument for the purposes of the Legislative Instruments Act 2003.
- This legislative instrument will revoke Legislative Instrument No. F2006B00403 registered on the 21st February 2006 and Legislative Instrument No. F2006B00230 registered on 6th February 2006.
Date of effect
6. The instrument commences on the day after registration.
7. It provides a variation to the amount of withholding required from payments made on or after 1st July 2012.
What is this instrument about?
8. The instrument varies to nil the amount required to be withheld by a payer who makes payments to low income minors who do not provide their TFN or ABN.
9. It has been developed to compliment changes to the tax-free threshold which takes effect on 1 July 2012.
What is the effect of this instrument?
10. This instrument removes the requirement that a minor quote their TFN or ABN when their earnings are below the tax-free threshold.
11. The thresholds quoted in the instrument reflect the personal income tax thresholds that apply from 1 July 2012.
12. 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:
13. Previous pay as you go (PAYG) withholding class variations:
- Legislative Instrument No. F2006B00403 registered on the 21st February 2006, and
- Legislative Instrument No. F2006B00230 registered on 6th February 2006
provided a variation in withholding to low income minors who had not provided their TFN or ABN to their payer.
14. Those variations removed the withholding requirement where the payee’s income was below the former tax free threshold.
15. This legislative instrument replaces the two previous variations and reflects the higher tax free threshold which will apply from 1 July 2012.
Statement of compatibility with Human Rights
16. 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. Accordingly, in the ATO’s assessment, this legislative instrument is compatible with human rights.
Consultation:
17. No consultation has been conducted as to the affect of the instrument. This instrument replaces two previous instruments in order to reflect the higher tax free threshold which will apply from 1 July 2012. The instrument is of a routine nature.
Erin Holland
Deputy Commissioner of Taxation
Legislative references:
Taxation Administration Act 1953
Legislative Instruments Act 2003
Human Rights (Parliamentary Scrutiny) Act 2011
Overview
The Taxation Administration Act 1953, enacted by the Commonwealth Parliament, serves as the framework for the administration of taxation laws in Australia. To address the issue of withholding tax from low income minors who do not provide their Tax File Number (TFN) or Australian Business Number (ABN), the Commissioner of Taxation introduced the legislative instrument, F2012L00884, on 13 April 2012. This instrument aims to streamline the tax withholding process for minors by varying the withholding amount to nil for those with incomes below the tax-free threshold, effective from 1 July 2012. The policy objective is to simplify compliance for minors and their payers by aligning the withholding requirements with the updated tax-free threshold. The instrument revokes two previous legislative instruments from 2006, F2006B00403 and F2006B00230, and is deemed compatible with human rights as per the Human Rights (Parliamentary Scrutiny) Act 2011.
Scope and Application
This legislative instrument pertains to modifications in the withholding requirements under the pay as you go (PAYG) system for low income minors who do not provide their Tax File Number (TFN) or Australian Business Number (ABN). Specifically, it reduces to nil the amount of withholding for minors under 18 years of age whose earnings are below the tax-free threshold. The instrument applies to individuals who fall under these criteria and who are paid by entities such as employers or service providers. It is effective from 1 July 2012 and is intended to align with the updated tax-free threshold that comes into effect on the same date. The instrument revokes two previous legislative instruments and is made by the Commissioner of Taxation under the Taxation Administration Act 1953. The instrument applies nationally across Australia and is designed to ensure that the withholding requirements are adjusted in accordance with legislative changes, thereby reflecting the new tax thresholds. There are no stated exclusions or exemptions within the instrument itself, though its application is inherently limited to the specified conditions of income and age. The instrument does not extend or restrict its application through subordinate instruments but serves as a standalone revision to the withholding rules for the targeted demographic.
Key Provisions
The Taxation Administration Act (section 15-15) allows for the Commissioner of Taxation to create legislative instruments to modify the requirements of the pay as you go (PAYG) withholding system. This instrument, made under that power, varies the withholding tax rates for low-income minors who do not provide a Tax File Number (TFN) or Australian Business Number (ABN) (sections 8 and 9). Specifically, it sets the withholding tax rate to nil for minors with earnings below the tax-free threshold (section 10). This instrument is effective from 1 July 2012 and replaces two previous instruments (sections 6 and 12).
Entities and individuals who pay low-income minors and who have not provided a TFN or ABN must ensure that their payments comply with this instrument (section 8). Payers must now withhold no tax from payments to minors earning below the tax-free threshold, as set out in the instrument (section 10). The thresholds in the instrument reflect the personal income tax thresholds that apply from 1 July 2012 (section 11).
Failure to comply with the requirements of this instrument could result in civil or criminal penalties, as outlined in the Taxation Administration Act 1953. The maximum penalties for providing false or misleading statements can include fines up to $2,220 for individuals and $11,100 for corporations, as well as potential imprisonment terms. However, the explanatory statement indicates that the compliance cost impact of this instrument is expected to be minor, both in terms of implementation and ongoing compliance (section 12).