Taxation Administration Act
Withholding Schedules 2012
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, the Clean Energy (Income Tax Rates Amendments) Act 2011 and the Clean Energy (Tax Laws Amendment) Act 2011.
- The instrument contains 22 withholding schedules. 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 2012.
7. It provides for PAYG withholding on or after 1 July 2012 having regard to the Income Tax Rates Act 1986, the Clean Energy (Income Tax Rates Amendments) Act 2011 and the Clean Energy (Tax Laws Amendment) Act 2011.
What is this instrument about?
8. The purpose of this instrument is to help taxpayers meet their annual income tax liabilities. They are required to pay amounts of 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 entities from withholding payments. 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 schedules contained in this instrument are 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. Those who find the information most useful include employers, employees, professional tax 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. An assessment of the compliance costs indicates that the impact will be minimal for both implementation and on-going compliance costs. The instrument is routine in nature.
Background
15. 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 liabilities either through instalments or through withholding as their 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.
16. 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 each withholding schedule publicly available.
17. The introduction of the Clean Energy (Income Tax Rates Amendments) Act 2011 and the Clean Energy (Tax Laws Amendment) Act 2011 acts affect payments made in the 2012/13 and following financial years. It has resulted in changes to most of the current schedules. However, some remain unchanged. This explains why there are some gaps in the schedule numbering.
18. Each withholding schedule is tailored to meet the circumstances of a particular class of payee. The weekly tax table, for example, is produced for payers who pay their employees weekly.
Consultation
19. The making and publication of withholding schedules is a routine part of tax administration.
20. 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 software packages.
Human Rights Compatibility
21. This 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.
Erin Holland
Deputy Commissioner of Taxation
Date 21 May 2012
Legislative references:
Taxation Administration Act 1953
Higher Education Funding Act 1988
Legislative Instruments Act 2003
Income Tax Rates Act 1986
Medicare Levy Act 1986,
Taxation Administration Regulations 1976
A New Tax System (Pay As You Go) Act 1999
Clean Energy (Income Tax Rates Amendments) Act 2011
Clean Energy (Tax Laws Amendment) Act 2011