Taxation Administration Act Withholding Schedules 2020

Administered by Department of the Treasury

Legislation au F2020L00768 Not in force Legislative Instrument

Legislation content

Explanatory Statement

 

Taxation Administration Act
Withholding Schedules 2020

 

 

General Outline of Instrument

  1. This instrument is made under section 15-25 of Schedule 1 to the Taxation Administration Act 1953 (TAA).
  2. The instrument makes the withholding schedules, specifying the amount, formulas and procedures to be used for working out the amount required to be withheld by an entity under the pay as you go (PAYG) system.
  3. The instrument contains eleven withholding schedules. Each schedule provides information for calculating the withholding amount, taking into account the particular circumstances presented in the schedule.
  4. This instrument repeals and replaces legislative instrument Taxation Administration Act Withholding Schedules 2019 – F2019L00894, registered on 27 June 2019.
  5. 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.
  6. This is a legislative instrument for the purposes of the Legislation Act 2003.

 

Date of effect

7.                  The instrument commences on 1 July 2020.

 

What is this instrument about

8.                  These schedules set out 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 collection of income tax, Medicare levy, Higher Education Loan Program, Student Start-up Loans, Trade Support Loans and Financial Supplement repayments.

9.                  Schedule 8 is being updated due to the annual indexing of the repayment income thresholds.

10.              There are no updates to the remaining ten schedules which will continue to apply from 1 July 2020.

11.              The purpose of this instrument is to provide certainty to payers about withholding correct amounts of tax on behalf of their payees, which then assists payees to meet their 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

12.              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.

13.              A number of groups rely upon the withholding schedules. They include employers, employees, professional tax advisers, payroll software developers, the Australian Taxation Office and payroll service providers.

14.              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.

15.              An assessment of the compliance cost impact indicates that the impact will be minor for both implementation and ongoing compliance costs. The new instrument is of a minor or machinery nature.

 

Background

16.              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.

17.              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.

18.              Each withholding schedule is tailored to meet the circumstances of a particular class of payment or payee.

 

Consultation

19.              The making and publication of withholding schedules is a routine part of tax administration.

20.              Community consultation is not appropriate or reasonably practicable for this instrument. The amended withholding schedule ensures that amounts are withheld in accordance with thresholds which have been indexed according to the applicable legislation.

21.              These schedules ensure that withholding rates will match the tax which will be payable when payees lodge their tax returns.

22.              The ATO 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.

Legislative references:

Acts Interpretation Act 1901

A New Tax System (Pay As You Go) Act 1999

Australian Federal Police Act 1979

Family Law Act 1975

Higher Education Support Act 2003

Human Rights (Parliamentary Scrutiny) Act 2011

Migration Act 1958

Legislation Act 2003

Social Security Act 1991

Student Assistance Act 1973

Taxation Administration Act 1953

Trade Support Loans Act 2014

Veterans’ Entitlements Act 1986

Higher Education Support Legislation Amendment (Student Loan Sustainability) Act 2018

Education and Other Legislation Amendment (VET Student Loan Debt Separation) Act 2018


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 Schedules 2020

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 the withholding schedules 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, 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 is compatible with human rights as it does not raise any human rights issues.

Overview

The Taxation Administration Act Withholding Schedules 2020 was introduced to provide updated withholding schedules under the pay as you go (PAYG) system, as specified in section 15-25 of Schedule 1 of the Taxation Administration Act 1953. This legislative instrument is designed to ensure that the correct amount of tax is withheld by entities on behalf of their payees, thereby assisting payees in meeting their annual income tax liabilities. It was made under the authority of the Commissioner of Taxation and is intended to provide clarity and certainty to various stakeholders, including employers, employees, tax advisers, software developers, the Australian Taxation Office, and payroll service providers. The withholding schedules were updated to reflect changes such as the annual indexing of repayment income thresholds, as specified in Schedule 8. This legislative update repeals the previous Taxation Administration Act Withholding Schedules 2019, ensuring that payers have the most current information to meet their withholding obligations. The instrument aims to facilitate the collection of income tax, Medicare levy, and other repayments, thereby supporting the PAYG system, which is designed to prevent large end-of-year tax bills and ensure steady government revenue.

Scope and Application

The Taxation Administration Act Withholding Schedules 2020 sets out the specific amounts, formulas, and procedures used to calculate the tax withholdings that entities must make under the Pay As You Go (PAYG) system. This instrument applies to various entities, including employers, professional tax advisers, payroll software developers, the Australian Taxation Office, and payroll service providers, who are involved in making payments to individuals or other entities. It facilitates the withholding of income tax, Medicare levy, Higher Education Loan Program, Student Start-up Loans, Trade Support Loans, and Financial Supplement repayments. The instrument has a national reach, applying across Australia in accordance with the provisions of the Taxation Administration Act 1953. It does not contain any specific exclusions, exemptions, or thresholds beyond those outlined in the schedules themselves, which are tailored to the particular circumstances of different classes of payments and payees. The Commissioner of Taxation has the power to amend or vary these schedules as necessary through subordinate instruments, ensuring that the withholding amounts are updated in line with changes in legislation and economic conditions.

Key Provisions

The Taxation Administration Act Withholding Schedules 2020 (sections 15-25 of Schedule 1 to the TAA) provide the necessary schedules for calculating the tax withholding amounts under the PAYG system. These schedules (sections 1-11) specify the formulas and procedures used to determine the correct withholding amount, tailored to various payment scenarios and payee circumstances. For example, Schedule 8 has been updated to reflect the annual indexing of repayment income thresholds, while the other schedules remain unchanged. The primary aim of these schedules is to ensure that entities correctly withhold tax from payments made to individuals, thus assisting payees in meeting their annual tax obligations. Entities governed by these schedules, such as employers and payroll service providers, must adhere to the specified formulas and procedures to calculate the correct withholding amount. They are required to withhold tax from payments as they are made, ensuring that the tax liability of the payee is met incrementally throughout the year. This includes updating any relevant software or systems to reflect the new schedules and ensuring that the correct amounts are withheld and remitted to the Australian Taxation Office (ATO). The schedules must be used consistently to maintain accuracy and compliance with tax obligations. Failure to comply with the withholding schedules can result in penalties and legal consequences. The TAA outlines potential penalties for non-compliance, which may include fines and other enforcement actions. Specifically, under the TAA, entities that fail to withhold the correct amount of tax may be subject to penalties, with the severity of the penalty dependent on the degree of non-compliance. In addition, entities may face civil or criminal liabilities if they deliberately or recklessly disregard their withholding obligations. The maximum penalties can vary, but they are designed to enforce compliance and ensure that the PAYG system operates effectively.

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Area of Law
Taxation Law
Instrument
Legislative Instrument
Concepts
Definitions & Interpretation
Compliance Obligations
Enforcement Powers

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Sourced from the Federal Register of Legislation at 26 August 2026. For the latest information on Australian Government law please go to https://www.legislation.gov.au.