Taxation Administration Act 1953 - Variation to the rate of withholding for certain superannuation beneficiaries who have not quoted a tax file number (28/06/2007)

Taxation Administration Act
Variation to the rate of withholding for certain superannuation beneficiaries who have not quoted a tax file number

Explanatory Statement

General outline of instrument

1. The pay as you go withholding system allows many taxpayers to make provision for their income tax liabilities by requiring payers to withhold amounts from certain income payments, including taxable superannuation benefits.
2. Superannuation recipients who do not quote their tax file number (TFN) to their payer are subject to withholding at the highest marginal tax rate plus Medicare levy (currently 46.5%) from any payment made. This requirement provides an incentive for payees to identify themselves in relation to the assessable income which they receive.
3. The instrument ensures that payees are not subject to withholding from superannuation payments which are not subject to tax, when those payments are made in conjunction with other assessable amounts and the recipient has not quoted their TFN.
4. This is a legislative instrument for the purposes of the Legislative Instruments Act 2003.

Date of effect

5.     The instrument applies from 1 July 2007.

What is this instrument about?

6.     This instrument varies the rate of withholding to zero for the non assessable non exempt component of superannuation payments, when the payee has not quoted a TFN.

What is the effect of this instrument?

7.     This variation ensures that amounts of non assessable non exempt income paid to a superannuation beneficiary are not subject to withholding when the payee has not quoted their TFN. Without this variation, withholding would be required from these amounts when paid in conjunction with other assessable income.

8.     The information in this instrument will be used by superannuation funds, professional advisers, software developers and the Tax Office.

Background

9.     A superannuation beneficiary over the age of 60 is not required to pay income tax on benefits which are paid from a taxed source. These amounts are classified as non assessable non exempt income of the beneficiary.

10. Some beneficiaries will receive payments of benefits which include amounts from both a taxed source and from an untaxed source.

11. In the absence of this variation, a payee who has not quoted their TFN would be subject to withholding at the highest marginal rate, plus Medicare levy, from the whole payment, including that part which will not be subject to tax. This is a consequence of the application of regulation 37 of the Taxation Administration Regulations 1976.

12. This instrument acts to ensure that withholding is only applied to the assessable portion of such a payment in these circumstances.

Consultation

13. The power to vary amounts required to be withheld is a routine part of tax administration.

14. The Tax Office will provide the necessary information to superannuation funds and software providers. 

Legislative references:

Legislative Instruments Act 2003

Taxation Administration Regulations 1976