Replacement Explanatory Statement
Taxation Administration
Withholding Schedules 2022
General outline of instrument
- This instrument is made under section 15-25 of Schedule 1 to the Taxation Administration Act 1953 (TAA).
- 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.
- The instrument contains fifteen withholding schedules. Each schedule provides information for calculating the withholding amount, taking into account the particular circumstances presented in the schedule.
- This instrument repeals and replaces legislative instrument Taxation Administration Act Withholding Schedules 2021 – F2021L00779, registered on 18 June 2021, and Taxation Administration Act Withholding Schedule – Working Holiday Makers – F2016L01964, registered on 15 December 2016.
- 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.
- This is a legislative instrument for the purposes of the Legislation Act 2003.
Date of effect
7. The instrument commences on 1 July 2022.
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, VET Student Loans and Financial Supplement repayments.
9. The withholding schedules being updated are schedules 8 and 15.
10. These withholding schedules are being updated due to either the annual indexing of the repayment income thresholds for study and training support loans or the inclusion of an additional visa type (COVID-19 pandemic event 408 visa) for working holiday makers. These updates are needed in order for payers to work out the amount they must withhold from payments made to individual payees.
11. There are no updates to the remaining thirteen schedules which will continue to apply from 1 July 2022.
12. 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
13. 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.
14. Subsection 15-25(1) of Schedule 1 to the TAA enables the Commissioner to make withholding schedules that specify the formulas and procedures to be used for working out the amount to be withheld by an entity. These schedules are relied upon by a number of groups including employers, employees, professional tax advisers, payroll software developers, the Australian Taxation Office and payroll service providers.
15. To assist entities to determine the correct amount to withhold, several withholding schedules include withholding lookup tools. The lookup tools are spreadsheets where the amount to withhold is populated in the spreadsheet after an earnings amount is included for the pay period.
16. The lookup tools are freely available for entities to apply when using the withholding schedule. The withholding schedules with a lookup tool can be accessed on the ATO website (ato.gov.au) by searching for the withholding schedule’s quick code number or the ATO website address which are listed below:
Schedule number | Quick code number | Title | ATO website address |
2 | 63799 | Schedule 2 – Tax table for individuals employed in the horticultural or shearing industry | https://www.ato.gov.au/Rates/Schedule-2---Tax-table-for-individuals-employed-in-the-horticultural-or-shearing-industry/ |
3 | 63800 | Schedule 3 – Tax table for actors, variety artists and other entertainers | https://www.ato.gov.au/Rates/Schedule-3---Tax-table-for-actors,-variety-artists-and-other-entertainers/ |
9 | 63805 | Schedule 9 – Tax table for seniors and pensioners | https://www.ato.gov.au/Rates/Schedule-9---Tax-table-for-seniors-and-pensioners/ |
15 | 69650 | Schedule 15 – Tax table for working holiday makers | https://www.ato.gov.au/Rates/Schedule-15---Tax-table-for-working-holiday-makers/ |
17. Withholding lookup tools are incorporated by reference in this instrument in accordance with paragraph 14(1)(b) of the Legislation Act 2003, which allows a legislative instrument to incorporate any other document in writing which exists at the time the legislative instrument commences, or at a time before its commencement.
18. This instrument incorporates the withholding lookup tools immediately before this instrument was registered on the Federal Register of Legislation. These lookup tools will remain unchanged for the life of this instrument. Changes to the withholding lookup tools will only be made when it is necessary to give effect to a new legislative instrument that both contains new withholding schedules and repeals the current instrument.
19. 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. It also withdraws a 2016 version of the withholding schedule for working holiday makers.
20. 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
21. 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.
22. 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.
23. Each withholding schedule is tailored to meet the circumstances of a particular class of payment or payee.
Consultation
24. The making and publication of withholding schedules is a routine part of tax administration.
25. 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, and the application of an additional visa type for working holiday makers.
26. These schedules ensure that withholding rates will approximate the tax which will be payable when payees lodge their tax returns.
27. 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
Education and Other Legislation Amendment (VET Student Loan Debt Separation) Act 2018
Family Law Act 1975
Higher Education Support Act 2003
Higher Education Support Legislation Amendment (Student Loan Sustainability) Act 2018
Human Rights (Parliamentary Scrutiny) Act 2011
Legislation Act 2003
Migration Act 1958
Social Security Act 1991
Student Assistance Act 1973
Taxation Administration Act 1953
Trade Support Loans Act 2014
Veterans’ Entitlements Act 1986
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 Withholding Schedules 2022
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.