Taxation Administration (PAYG Withholding Variation for Certain Insurance and Compensation Payments when an ABN is not Quoted) Legislative Instrument 2026

Explanatory Statement

Taxation Administration (PAYG Withholding Variation for Certain Insurance and Compensation Payments when an ABN is not Quoted) Legislative Instrument 2026

General outline of instrument

1.                   This instrument is made under section 15-15 in Schedule 1 to the Taxation Administration Act 1953 (the Act).
2.                   This instrument varies the amount a payer must withhold from certain insurance and compensation payments to nil, where the payee has not quoted their Australian business number (ABN).
3.                   The instrument is a legislative instrument for the purposes of the Legislation Act 2003.
4.                   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.

Date of effect

1.                   This instrument commences on the day after it is registered on the Federal Register of Legislation.

Background

1.                   Under subsection 12-190(1) in Schedule 1 to the Act, a payer must withhold an amount from a payment made to an entity that does not quote its ABN (where it would ordinarily be required to be quoted), unless an exemption in section 12-190 in Schedule 1 to the Act applies.
2.                   Section 15-15 in Schedule 1 to the Act enables the Commissioner to vary the amount required to be withheld by an entity (through a written notice) or classes of entity (by legislative instrument) from a withholding payment.
3.                   This instrument repeals and replaces the instrument titled PAYG Withholding Variation: Insurance and Compensation (2016 instrument) which would otherwise sunset on 1 April 2026. This instrument has the same substantive effect as the 2016 instrument.

Effect of this instrument

1.                   Where a payment is made in circumstances where an ABN is not quoted but would ordinarily be required to be quoted by a payee, an amount may be required to be withheld from that payment under subsection 12-190(1) in Schedule 1 to the Act.
2.               However, where that payment is made in settlement of an insurance or compensation claim, it may be unclear whether the payment is one in which an ABN would ordinarily be required to be quoted, and from which an amount is required to be withheld.
3.               This instrument varies to nil the amount required to be withheld from certain payments made in settlement of an insurance or compensation claim. This variation applies to payments that are made by:

• an insurer to another entity in settlement of a claim under an insurance policy
• an entity operating a statutory compensation scheme to another entity in settlement of a claim for compensation under that scheme
• an entity operating a compulsory third party scheme to another entity in settlement of a claim for compensation under that scheme.

1.               Statutory compensation scheme is defined in the A New Tax System (Goods and Services Tax) Act 1999 (GST Act) and is a scheme or arrangement established by an Australian law under which compensation is payable for particular kinds of injury, loss or damage which is specified in the regulation or of a kind specified in the regulations. Section 78-105.01 of the A New Tax System (Goods and Services Tax) Regulations 2019 specifies various compensation schemes for this purpose including workers’ compensation and military rehabilitation and compensation schemes.
2.               Compulsory third party scheme is defined in the GST Act as a scheme or arrangement established by an Australian law that is specified in the regulations as a compulsory third party scheme. Section 195-1.01 of the A New Tax System (Goods and Services Tax) Regulations 2019 specifies various state or territory transport accident compensation schemes for this purpose.
3.               Varying the amount required to be withheld from these payments to nil:

• provides certainty that withholding from these payments is not required when an ABN is not quoted
• reduces compliance costs for insurers, entities operating these schemes and recipients of these payments by not requiring an ABN to be supplied and enables more efficient processing of claims, and
• removes the requirement for the payer to provide a payment summary to the payee for these payments.

1.               Under subsection 16-167(1) in Schedule 1 to the Act, an entity that makes a withholding payment covered by section 12-190 in Schedule 1 to the Act must give a payment summary to the recipient, unless the amount required to be withheld from that payment is nil.
2.               The payer is therefore not required to issue a payment summary for payments to which section 6 applies, as the amount required to be withheld has been varied to nil.

Compliance cost assessment

1.               Compliance cost impact: Minor – There will be no additional regulatory impacts as the instrument is minor and machinery in nature (OIA25-10489).

Consultation

1.               Subsection 17(1) of the Legislation Act 2003 requires that the Commissioner is satisfied that appropriate and reasonably practicable consultation has been undertaken before they make a determination.
2.               Public consultation was undertaken for a period of 4 weeks from 31 October to 28 November 2025.
3.               The draft instrument and draft explanatory statement were published to the ATO Legal database and publication was advertised via the ‘What’s new’ page on that website. Major tax and superannuation publishers and associations monitor these pages and include details in the daily and weekly alerts and newsletters that they provide to their subscribers and members.
4.               No submissions were received during the consultation period.

Statement of compatibility with Human Rights

Prepared in accordance with Part 3 of the Human Rights (Parliamentary Scrutiny) Act 2011

Taxation Administration (PAYG Withholding Variation for Certain Insurance and Compensation Payments when an ABN is not Quoted) Legislative Instrument 2026

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 of the legislative instrument

Under subsection 12-190(1) in Schedule 1 to the Taxation Administration Act 1953 (the Act), an amount may be required to be withheld from a payment that is made to a payee who does not quote an ABN, in circumstances where an ABN would ordinarily be required. This instrument varies to nil the amount that must be withheld from certain payments to which subsection 12-190(1) in Schedule 1 to the Act may otherwise apply, where the payment is made by:

• an insurer in settlement of a claim under an insurance policy
• an entity operating a statutory compensation scheme to another entity in settlement of a claim for compensation under that scheme
• an entity operating a compulsory third party scheme to another entity in settlement of a claim for compensation under that scheme.

This variation reduces the compliance burden on insurers, other relevant payers and recipients of the relevant payments by not requiring an ABN to be supplied in these circumstances. Additionally, by varying the amount to be withheld from these payments to nil, the payer is no longer required under subsection 16-167(1) in Schedule 1 to the Act to provide a payment summary to the payee in respect of these payments.

Human rights implications

This legislative instrument does not engage any of the applicable rights or freedoms. It merely varies to nil the amount that must be withheld from payments made in settlement of a claim for compensation or under an insurance policy, in certain circumstances.

Conclusion

This legislative instrument is compatible with human rights as it does not raise any human rights issues.