Taxation Administration Amendment Regulations 2000 (No. 3) 2000 No. 152
EXPLANATORY STATEMENT
STATUTORY RULES 2000 NO. 152
Issued by Authority of the Assistant Treasurer
Taxation Administration Act 1953
Taxation Administration Amendment Regulations 2000 (No.3)
Section 18 of the Taxation Administration Act 1953 (the Act) provides that the Governor-General may make regulations prescribing matters required to give effect to the Act.
Subsection 15-50(4) of Schedule 1 to the Act provides that the Regulations may prescribe the matters about which a declaration under subsections 15-50(1) or 15-50(3) may be given.
Subsection 15-35(1) of Schedule 1 to the Act provides that the Regulations may specify the amounts, formulas and procedures to be used for working out the amount required to be withheld by an entity from a withholding payment covered by Division 12 (except one covered by section 12-325).
Subsection 12-60(2) of Schedule 1 to the Act provides that the Regulations may specify a kind of payment for work or services to an individual that an entity makes in the course or furtherance of the enterprise must withhold from.
The new Pay As You Go (PAYG) Withholding system commences on 1 July 2000. It replaces income tax collection systems such as Pay As You Earn (PAYE). The PAYG provisions were inserted in Schedule 1 of the Taxation Administration Act 1953 by the A New Tax System (Pay As You Go) Act 1999 and the A New Tax System (Tax Administration) Act 1999.
A number of new regulations have already been introduced by the Taxation Administration Amendment Regulations 2000 (No. 1) to support the PAYG Withholding system. These new Regulations further amend the Taxation Administration Regulations 1976 (the Principal Regulations) to supplement the rules in the PAYG Withholding system.
Financial Supplement Debt
In the new PAYG Withholding system, an individual who expects to receive certain kinds of payments subject to withholding can give the payer a Tax file number declaration and/or a Withholding declaration about matters affecting the amount to be withheld from those payments. These matters can either increase or decrease how much must be withheld. However, a Withholding declaration can only be given about a prescribed matter (subsection 15-50(1) of Schedule 1 to the Act).
Some of the prescribed matters include certain tax offsets, the family tax benefit and full or partial exemption from the Medicare levy.
An individual who has made a statement about a prescribed matter in a TFN declaration may also give a new Withholding declaration if their circumstances in relation to the prescribed matter change.
The A New Tax System (Tax Administration) Act (No. 1) 2000 amended the PAYG provisions to enable Financial Supplement debts (which arise from loans to tertiary students) to be collected through the PAYG Withholding system.
This new Regulations will allow an individual to make a statement about their financial supplement debt, or a change in circumstances relating to that debt, in a Withholding declaration.
Rate for Non-resident Payees
Another amendment relates to prescribing a separate rate of PAYG Withholding for prescribed non-resident payees who do not provide the payer with their tax file number (TFN).
This rate applies to payments covered by Subdivision 12-B (payments for work and services), 12-C (retirement payments and annuities) or 12-D (benefit and compensation payments), but not to payments under a voluntary withholding agreement.
The withholding rate for payees who do not quote their TFN would be 48.5% generally if Regulation 37 of the Principal Regulations is not amended. This rate does not reflect the intended treatment for prescribed non-resident payees, whose withholding rate is 47% if they do not quote their TFN. The new Regulations effectively maintain the withholding rate that has applied to prescribed non-residents who do not quote their TI7N for payments covered by the PAYE system.
Specified Payments
The Department of Education, Training and Youth Affairs (DETYA) engages individuals under contract for the Aboriginal Tutorial Assistance Scheme (ATAS) to provide tutoring to indigenous students. The Department of Immigration and Multicultural Affairs (DIMA) engages individuals to provide interpreting services for the Translating and Interpreting Service (TIS). The contractual arrangements between these individuals and the respective Departments do not constitute contracts of employment.
Previously, both DETYA and DIMA withheld payments to the individuals under these contracts through the PAYE system. This is due to the application of paragraph (a) in the definition of salary or wages under subsection 22 1 A(I) of the Income Tax Assessment Act 1936, which covers payments under a contract that is 'wholly or principally for labour'. This element of the withholding arrangements will be removed with effect from 1 July 2000.
The new regulations prescribe these payments for the purposes of subsection 12-60(2) of Schedule 1 to the Taxation Administration Act 1953. These payments are subject to the normal withholding arrangements that apply to employees, office holders and certain other workers. The activity to which the payment relates is specifically excluded from the definition of enterprise for the Australian Business Number (ABN) and Goods and Services Tax (GST) purposes and therefore these tutors and interpreters are not entitled to obtain an ABN, or required to charge GST.
Details of the amending regulations are set out in the Attachment.
The proposed Regulations will commence on the commencement of items 4 to 9 of Schedule 4 to the A New Tax System (Tax Administration) Act (No. 1) 2000. Those items commence on 1 July 2000.
ATTACHMENT
Taxation Administration Amendment Regulations 2000 (No. 3
Regulation 1 - Name of Regulations
Regulation 1 names the regulations as the Taxation Administration Amendment Regulations 2000 (No. 3).
Regulation 2 - Commencement
Regulation 2 provides that the regulations commence on the commencement of items 4 to 9of Schedule 4 to the A New Tax System (7~tx Administration) Act (No. 1) 2000. This effectively means that these regulations commence on 1 July 2000, immediately after the commencement of Schedule 2 to the Taxation Administration Amendment Regulations 2000 (No. 1).
Regulation 3
Regulation 3 provides that Schedule 1 amends the Taxation Administration Regulations 1976.
Schedule 1
Regulation 2 - Definitions
Item 1 of Schedule 1 includes a definition of 'prescribed non-resident' in Regulation 2. This definition is moved out of Regulation 36 because the term applies to other provisions in the Taxation Administration Regulations 1976.
The definition means a foreign resident who is not entitled to receive an assessable pension, allowance or benefit, under the Social Security Act 1991 (except youth allowance, Newstart allowance, sickness allowance or special benefit), the Veterans' Entitlements Act 1986 and the Veterans' Entitlements (Transitional Provisions and Consequential Amendments) Act 1986.
Subregulation 26(1) - Declarations about prescribed matters
Subsection 15-50(1) of Schedule 1 to the Taxation Administration Act 1953 provides that an individual, who expects to receive certain kinds of payments subject to withholding, may give the payer a declaration about matters affecting the rate of withholding from those payments. For the purposes of paragraph 15-50(1)(b), subregulation 26(1) is amended to allow an additional matter to be prescribed under paragraph 15-50(4)(a).
The additional prescribed matter for a declaration relates to whether the individual has an accumulated Financial Supplement debt.
Subregulation 26(2) - Declarations changing information given in Tax file number declaration
Subsection 15-50(3) of Schedule 1 to the Taxation Administration Act 1953 provides that an individual who has made a statement about a prescribed matter in a Tax file number declaration given under Part VA of the Income Tax Assessment Act 193 6 may give a new declaration if their circumstances in relation to the matter change. For the purposes of paragraph 15-30(3)(b), subregulation 26(2) is amended to allow an additional matter to be prescribed under paragraph 15-50(4)(a).
The additional prescribed matter for a declaration relates to whether the individual has an accumulated Financial Supplement debt.
Subregulation 3 7(2) -Rate of withholding from payments where tax file number TFN) not quoted
This regulation prescribes the rate of withholding where a TFN is not quoted to the entity making payments covered by Subdivision 12-B (payments for work and services) except payments under a voluntary agreement under section 12-55, Subdivision 12-C (retirement payments and annuities) and Subdivision 12-D (benefit and compensation payments) of Schedule 1 to the Taxation Administration Act 1953.
The rate is 47% of the payment for prescribed non-residents and 48.5% of the payment for others.
Division 5 - Payments in respect of which amounts must be withheld Regulation 44 - Specified Payments (Act s 12-60 of Schedule 1)
This regulation prescribes payments for the purposes of subsection 12-60(2) of Schedule 1 to the Taxation Administration Act 1953 made by the a. Department of Education, Training and Youth Affairs to tutors under the Aboriginal Tutorial Assistance Scheme; and b. Department of Immigration and Multicultural Affairs to interpreters under the Translating and Interpreting Service.