Taxation Administration Act
Withholding Schedules 2009
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 withholding schedules, 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 in accordance with the pay as you go (PAYG) system.
- In making the instrument, the Commissioner has had regard to the Income Tax Rates Act 1986 and relevant amendments contained in the Tax Laws Amendment (Personal Income Tax Reduction) Act 2008.
- The instrument contains 26 withholding schedules based on the threshold changes contained in the Tax Laws Amendment (Personal Income Tax Reduction) Act 2008. Each schedule provides information for calculating the withholding amount, taking into account the particular circumstances presented in the schedule.
- This is a legislative instrument for the purposes of the Legislative Instruments Act 2003.
Date of effect
6. The instrument applies from 1 July 2009.
7. It provides for PAYG withholding on or after 1 July 2009 based on threshold changes in the Tax Laws Amendment (Personal Income Tax Reduction) Act 2008.
What is this instrument about?
8. The purpose of this instrument is to help taxpayers meet their annual income tax liability. They are required to pay amounts of their income at regular intervals as it is earned during the year. The system for collecting these amounts is called the PAYG system.
9. When a change in income tax rates or thresholds is made, the Commissioner prepares and publishes a new set of withholding schedules to notify the community of the amounts, formulas and procedures to be used for calculating the amount required to be withheld by an entity from a withholding payment. The withholding schedules facilitate the efficient collection of income tax, Medicare levy, Higher Education Loan Program and Financial Supplement repayments.
10. This instrument provides information on how to work out the amount an entity must withhold from payments to individual taxpayers. The information is contained in the schedules to the instrument, also known as withholding schedules.
What is the effect of this Instrument?
11. The effect of this 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.
12. The people who find the information most useful are employers, employees, professional advisers, software developers, the Australian Taxation Office, electronic payroll stockists, electronic payroll producers and payroll service providers.
13. This instrument also withdraws the earlier version of each affected withholding schedule to provide certainty to PAYG withholding payers with regard to their withholding obligations.
14. In addition, this instrument also withdraws another schedule titled Special Tax Table for Individuals in the Shearing Industry covered by the Shearing Contractors Association of Australia and West Australian Shearing Contractors Association. Payers who used the schedule that has been withdrawn will now use Schedule 25 - Special tax table for individuals employed in the shearing industry - to calculate the amount to withhold from payments that they make to their payees.
15. An assessment of the compliance cost impact indicates that the impact will be minimal for both implementation and on-going compliance costs. The instrument is routine in nature.
Background
16. 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.
17. 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.
18. The changes in Tax Laws Amendment (Personal Income Tax Reduction) Act 2008 that affect payments made in the 2009/10 financial year have resulted in changes to most of the current schedules. However, some remain unchanged. This explains why there are some gaps in the schedule numbering.
19. Each withholding schedule is tailored to meet the circumstances of a particular class of employees. For example the weekly tax table is produced for payers who pay their employees weekly.
Consultation
20. The making and publication of withholding schedules is a routine part of tax administration.
21. The Tax 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 packages.
22. The Tax Office will distribute paper copies of the relevant schedules to all registered employers.
23. The Shearing Contractors Association of Australia and the West Australian Shearing Contractors Association were consulted regarding the withdrawal of their special tax table. They support the removal of the Special Tax Table.
Erin Holland
Deputy Commissioner of Taxation
21 May 2009
Legislative references:
Taxation Administration Act 1953
Higher Education Act 1988
Legislative Instruments Act 2003
Tax Laws Amendment (Personal Income Tax Reduction) Act 2008
Income Tax Rates Act 1986
A New Tax System (Pay As You Go) Act 1999