Taxation Administration Act 1953 - Variation to the rate of withholding for certain foreign resident staff that provide support to those engaged in entertainment activities (30/08/2007)

Explanatory Statement

General Outline of Instrument

1. This instrument is a notice removing the requirement to withhold amounts from payments made to foreign resident support staff involved in entertainment activities, where those support staff are normally resident in countries which have an international tax agreement with Australia
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 (TAA).
3. This is a legislative instrument for the purposes of the Legislative Instruments Act 2003.

Date of effect

4.     The instrument applies from 14 September 2007.

What is this instrument about?

5.     The purpose of the notice is to remove the requirement to withhold amounts from payments made to support staff from the relevant countries because the international tax agreements made with those countries, act to ensure that the income earned will not be subject to tax in Australia.

What is the effect of this Instrument?

6.     The instrument removes the need for payers and payees to complete unnecessary paperwork in relation to payments which will not be subject to tax in Australia.

7.      The foreign resident withholding legislation would generally require withholding from these amounts regardless of whether they are ultimately subject to tax in Australia.  Without this instrument, payees would be required to register with the Tax Office to obtain a tax file number and Australian business number before completing an individual application seeking a variation to nil of amounts required to be withheld from payments made to them.

8.     The imposition of such administrative requirements is not justified in circumstances where there will clearly be no taxation liability and acts as a disincentive to those considering working in Australia.  This is particularly so in the film-making industry.

Background

9.     Foreign resident withholding was introduced to payments relating to the entertainment activities with effect from 1 July 2004. Since that time withholding has been required from payments made to foreign residents engaged in entertainment and sports activities, including their support staff.

10. We have worked closely with entertainment industry representatives to design processes which minimise costs of compliance and reduce unnecessary obstacles to doing business in Australia. This instrument will greatly reduce the compliance burden for payers and payees in the entertainment industry.

Consultation

11. This instrument was developed in consultation with the Film Industry Partnership, a consultative forum convened by the Tax Office, involving representatives from the entertainment industry.

12. The steering committee strongly supports the need for this variation.

Legislative references:

Taxation Administration Act 1953

Legislative Instruments Act 2003