Taxation Administration: Withholding Variation to Nil for Low Income Minors Legislative Instrument 2022

Administered by Department of the Treasury

Legislation au F2022L01145 In force Legislative Instrument

Legislation content

Explanatory Statement

Taxation Administration: Withholding Variation to Nil for Low Income Minors Legislative Instrument 2022

 

 

 

General outline of instrument

  1.                This instrument is made under section 15-15 of Schedule 1 to the Taxation Administration Act 1953.
  2.                This instrument varies to nil the amount of pay as you go (PAYG) withholding for low income minors who do not provide a tax file number (TFN) declaration or quote their Australian business number (ABN) to a person making a payment to them.
  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

5.                  This instrument commences on 1 October 2022.

 

Effect of instrument

6.                  The instrument varies to nil the amount required to be withheld by a payer who makes relevant payments to a payee who is a low income minor, and who does not provide a TFN declaration or quote an ABN.

7.                  It removes the requirement that a low income minor provide a TFN declaration or quote an ABN when their earnings are below the tax-free threshold.

8.                  This instrument has been designed to give timely effect to the tax-free thresholds for low income minors.

 

Compliance cost assessment

Compliance cost impact: Minor – The Legislative Instrument is minor or machinery in nature.

 

Background

9.                  Under the PAYG Withholding system, income tax and other liabilities (e.g., Medicare levy and Higher Education Contribution Scheme liabilities) must be withheld by a person making certain payments. This includes payments for work or services (such as payments of salary or wages to employees or contractors). It also includes payments where a recipient has not quoted an ABN in relation to a supply. The payer must then remit withheld amounts to the ATO on behalf of the recipient.

10.              The purpose of this legislative instrument is to vary to nil the amount of withholding required by a payer in relation to a relevant payment made to a payee or supplier who is under 18 years of age at the time of payment (low income minors) and does not quote their TFN or ABN to the payer before the payment is made. This legislative instrument has been designed to give timely effect to the tax-free thresholds for low income minors.

11.              This is a remake of Legislative Instrument No. F2012L00884, which is to sunset on 1 October 2022. The administrative treatment by the Commissioner has been consistent since 21 February 2006.

 

Consultation

12.              Subsection 17(1) of the Legislation Act 2003 requires that a rule-maker undertake an appropriate level of consultation before making a legislative instrument.

13.              Broad public consultation was undertaken on this instrument for a period of 2 weeks.

14.              The draft instrument and draft explanatory statement were published to the ATO Legal database. Publication was advertised via the ‘What’s new’ page on that website, and via the ‘Open Consultation’ page on ato.gov.au. Major tax and superannuation publishers and associations monitor these pages and include the details in the daily and weekly alerts and newsletters that they provide to their subscribers and members.

15.              No comments were received as part of this consultation process.

 

Legislative references

Acts Interpretation Act 1901

Human Rights (Parliamentary Scrutiny) Act 2011

Income Tax Assessment Act 1997

Legislation Act 2003

Taxation Administration Act 1953

Statement of compatibility with Human Rights

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

 

Taxation Administration: Withholding Variation to Nil for Low Income Minors Legislative Instrument 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 of the legislative instrument

This legislative instrument is beneficial for low income minors who do not have a tax file number (TFN) or Australian Business Number (ABN), and are therefore unable to quote a TFN or ABN to a person making a payment to them. Without this instrument, a person making certain payments to low income minors who do not have a TFN or ABN would have to withhold amounts from the payments at the top rate of tax.

This instrument will ensure that low income minors will receive all their income, rather than have amounts withheld from payments made to them at the top rate of tax. The low income thresholds are in line with the tax-free threshold that all resident taxpayers are entitled to upon assessment of their income tax return.

Payers will also have lower compliance costs because the instrument eliminates the requirement for them to withhold amounts from payments to low income minors.

There has been a legislative instrument varying withholding to nil for payments made to low income minors who have not quoted a TFN or ABN since 21 February 2006. This is a remake of Legislative Instrument No. F2012L00884, which is to sunset on 1 October 2022.

 

Human rights implications

This legislative instrument does not engage any of the applicable rights or freedoms. It ensures that payers are not required to withhold amounts from withholding payments to low income minors, minimising compliance costs and enabling low income minors to immediately receive all income that they earn (rather than having some amounts withheld until they have lodged their income tax returns).

 

Conclusion

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

Overview

The Taxation Administration: Withholding Variation to Nil for Low Income Minors Legislative Instrument 2022 was enacted to address the problem of high withholding tax rates imposed on low-income minors who do not provide a Tax File Number (TFN) or Australian Business Number (ABN) when receiving payments. Made under section 15-15 of Schedule 1 to the Taxation Administration Act 1953, this legislative instrument aims to vary to nil the PAYG withholding for minors whose earnings are below the tax-free threshold, thereby ensuring they receive all their income without undue tax deductions. The instrument eliminates the requirement for low-income minors to quote a TFN or ABN, thus reducing compliance costs for payers and providing immediate access to earned income for minors. This measure has been in effect since 21 February 2006 and is a remake of Legislative Instrument No. F2012L00884, which is set to sunset on 1 October 2022. The policy objective is to provide timely effect to the tax-free thresholds for low-income minors, ensuring they are not disadvantaged by high withholding rates.

Scope and Application

The Taxation Administration: Withholding Variation to Nil for Low Income Minors Legislative Instrument 2022 applies to low income minors, specifically those who are under 18 years of age and do not provide a tax file number (TFN) declaration or quote an Australian business number (ABN) to a person making a payment to them. The instrument is designed to give effect to the tax-free thresholds for low income minors by varying to nil the amount of pay as you go (PAYG) withholding required by the payer. This instrument operates within the Commonwealth jurisdiction, under the authority granted by section 15-15 of Schedule 1 to the Taxation Administration Act 1953. The instrument is a legislative instrument as defined under the Legislation Act 2003. It is a remake of Legislative Instrument No. F2012L00884, which was set to sunset on 1 October 2022. The instrument does not specify any exclusions or exemptions beyond the scope of its application to low income minors without a TFN or ABN. The instrument has been designed to minimise compliance costs for payers and ensure that low income minors receive all their income without amounts being withheld at the top rate of tax.

Key Provisions

The key sections of this legislative instrument, under section 15-15 of Schedule 1 to the Taxation Administration Act 1953, specify that the amount of pay as you go (PAYG) withholding for low income minors who do not provide a tax file number (TFN) declaration or quote their Australian business number (ABN) to a person making a payment to them, will be varied to nil (paragraphs 6 and 7). The instrument removes the requirement that a low income minor provide a TFN declaration or quote an ABN when their earnings are below the tax-free threshold (paragraph 8). It also notes that this instrument is a remake of Legislative Instrument No. F2012L00884, which is to sunset on 1 October 2022, and has been designed to give timely effect to the tax-free thresholds for low income minors (paragraphs 11 and 12). This instrument is minor or machinery in nature (paragraph 9). The obligations imposed by this Act include that a payer must not withhold amounts from payments made to low income minors who do not provide a TFN declaration or quote an ABN, where their earnings are below the tax-free threshold. This obligation applies to any payer who makes relevant payments to low income minors, including payments for work or services such as salary or wages to employees or contractors, or payments where a recipient has not quoted an ABN in relation to a supply. The payer must remit any withheld amounts to the ATO on behalf of the recipient. The instrument also requires that any administrative treatment by the Commissioner has been consistent since 21 February 2006. There are no specific offences, penalties, or civil or criminal consequences for breach of this legislative instrument. However, any failure to comply with the instrument may result in the payer being required to remit withheld amounts to the ATO on behalf of the recipient, which may result in additional compliance costs for the payer. The instrument is designed to minimise compliance costs for payers by eliminating the requirement for them to withhold amounts from payments to low income minors. Overall, this legislative instrument is designed to provide low income minors with a tax-free threshold for their earnings, and to minimise compliance costs for payers by eliminating the requirement for them to withhold amounts from payments to low income minors. The instrument is compatible with human rights and does not raise any human rights issues.

Legal classification tags

Area of Law
Taxation Law
Instrument
Legislative Instrument
Concepts
Definitions & Interpretation
Compliance Obligations
Exemptions & Exclusions

Interactions

Authorises

All Versions

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.