Taxation Administration Act
Withholding Schedule – Working Holiday Makers
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 a 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 in accordance with the pay as you go (PAYG) system publicly available.
- The instrument contains a withholding schedule that provides information for calculating the withholding amount for individuals working in Australia under certain visas.
- This is a legislative instrument for the purposes of the Legislation Act 2003.
Date of effect
5. This instrument commences on the day after it is registered on the Federal Register of Legislative Instruments and applies from 1 January 2017.
What is this instrument about?
6. The schedule set out the rates, formulas and procedures to be used for calculating the amount required to be withheld by entities from withholding payments made to individuals working in Australia under working visas subclass 417 (‘Working holiday makers’) and subclass 462 (‘Work and holiday makers’).
7. The date of effect for this schedule is 1 January 2017.
8. The purpose of this instrument is to provide certainty to payers about withholding correct amounts of tax on behalf of their payees, who are working in Australia under visas subclass 417 and 462. This assists such payees to meet their Australian annual income tax liability. Payers are required to withhold and pay amounts of income earned by payees, at regular intervals, as it is earned during the year. The system for collecting these amounts is called the PAYG withholding system.
What is the effect of this Instrument?
9. The effect of this instrument is to support the PAYG withholding system, which provides a simple and convenient way for individuals working in Australia under working holiday makers visas to meet their annual tax obligations as income is earned.
10. A number of groups rely upon withholding schedules. They include: employers, employees, professional tax advisers, software developers, the Australian Taxation Office, electronic payroll stockists, electronic payroll producers and payroll service providers.
11. 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
12. The PAYG system, introduced in A New Tax System (Pay As You Go) Act 1999, is a simple and convenient way for individual taxpayers to meet their annual income tax liabilities either through instalments or through withholding as their income is earned. This system aims to prevent large end-of-year tax bills for individuals. It also ensures that Government has the revenue it needs during the year to provide services and benefits to the community.
13. The TAA empowers the Commissioner to make withholding schedules specifying the amounts, formulas and procedures to be used for working out the amounts required to be withheld by entities. The TAA requires the Commissioner to make withholdings schedule publicly available.
14. Under subsection 33(3) of the Acts Interpretation Act 1901, where an Act confers a power to make, grant or issue any instrument of a legislative or administrative character (including rules, regulations or by-laws), the power shall be construed as including a power exercisable in the like manner and subject to the like conditions (if any) to repeal, rescind, revoke, amend, or vary any such instrument.
15. Each withholding schedule is tailored to meet the circumstances of a particular class of payee.
Consultation
16. The making and publication of this withholding schedule is a routine part of tax administration.
17. Community consultation is not appropriate or reasonably practicable for this instrument. The withholding schedule ensures that amounts are withheld in accordance with the Income Tax Rates Amendment (Working Holiday Maker Reform) Bill 2016 and Treasury Laws Amendment (Working Holiday Maker Reform) Act 2016.
18. The schedule ensures that withholding rates will approximate the tax which will be payable when payees lodge their tax returns.
19. The ATO will provide the necessary information to payroll providers, software developers, and those employers who code their own in-house payroll systems, to ensure that they have sufficient time to update their software packages.
Legislative references:
Taxation Administration Act 1953
Legislation Act 2003
Income Tax Rates Amendment (Working Holiday Maker Reform) Bill 2016
Treasury Laws Amendment (Working Holiday Maker Reform) Act 2016
Acts Interpretation Act 1901
Statement of Compatibility with Human Rights
This Statement is prepared in accordance with Part 3 of the Human Rights (Parliamentary Scrutiny) Act 2011.
Taxation Administration Act Withholding Schedule – Working Holiday Makers
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.
Overview
This Legislative Instrument makes publicly available a withholding schedule updated in accordance with the pay as you go (PAYG) system. The schedules provide certainty to payers about withholding correct amounts of tax on behalf of their payees who are working holiday makers employed under certain subclasses of working visas, which then assists payees to meet their annual income tax liability.
Human rights implications
This legislative instrument does not engage any of the applicable rights or freedoms because the new instrument is of a minor or machinery nature. The schedules set out the amounts, formulas and procedures to be used for calculating the amount required to be withheld by entities from withholding payments.
Conclusion
This legislative instrument does not raise any human rights issues.