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TAXATION ADMINISTRATION AMENDMENT REGULATIONS 2000 (NO. 1) 2000 NO. 73
EXPLANATORY STATEMENTSTATUTORY RULES No. 73
Issued by Authority of the Treasurer
Income Tax Assessment Act 1936
Income Tax Amendment Regulations 2000 (No. 2)
Taxation Administration Act 1953
Taxation Administration Amendment Regulations 2000 (No. 1)
Section 266 of the Income Tax Assessment Act 193 6 and section 18 of the Taxation Administration Act 1953 provide that the Governor-General may make regulations for the purpose of those Acts respectively.
On 1 July 2000 the new Pay As You Go (PAYG) Withholding system will commence. This system forms part of the New Tax System announced by the Government in August 1999 in the document 'Tax Reform: not a new tax a new tax system'. It will replace existing income tax collection systems such as Pay As You Earn (PAYE). The amendments introducing PAYG are contained in the A New Tax System (Pay As You Go) Act 1999 and the A New Tax System (Tax Administration) Act 1999. A number of supplementary amendments are also contained in the A New Tax System (Tax Administration) Bill (No. 2) 1999.
A number of new regulations are needed to support the PAYG withholding system. As the PAYG provisions form part of the Taxation Administration Act 1953, these regulations are included in the Taxation Administration Regulations.
Amendments are also needed to the Income Tax Regulations 1936 to close down the existing withholding systems such as PAYE and reflect, where necessary, the introduction of the PAYG system.
The inclusion of the new PAYG withholding regulations in the Taxation Administration Regulations requires a large number of amendments to those Regulations. In light of this, the opportunity has also been taken to modernise the Taxation Administration Regulations generally. This has been achieved through the removal of redundant rules and the revision of definitions.
A detailed explanation of the amendments is attached. The amendments to the Income Tax Regulations 1936 commence on 1 July 2000. The amendments to the Taxation Administration Regulations inserting new regulations commence on 1 July 2000; those affecting existing regulations commenced on gazettal.
ATTACHMENT
Income Tax Amendment Regulations 2000 (No. 2)
Regulation 1 - Name of Regulations
Regulation 1 names the regulations as the Income Tax Amendment Regulations 2000 (No. 2).
Regulation 2 - Commencement
Regulation 2 provides that the regulations commence on 1 July 2000.
Regulations 3 and 4 - Schedule 1 - Amendments
Regulation 2 - Definitions
Subregulation 2(1) is amended to include a definition of the term 'Australian Business Number' (ABN). The term is defined to have its meaning under the A New Tax System (Australian Business Number) Act 1999. The term is used in a number of the amendments explained below. [Item 1]
Regulation 19 - Statement to be furnished by employers
Subregulation 19(2) is amended to remove the reference to employment declarations and replace it with a reference to TFN declarations. This reflects the replacement of employment declarations with TFN declarations from 1 July 2000 under the A New Tax System (Tax Administration) Act 1999. [Item 2]
Regulation 55 - File Number Reports
Subregulations 55(1) and paragraph 55(5)(b) are amended to provide that where an investor quotes an Australian Business Number (ABN) to an investment body rather than a Tax File Number (TFN) under new section 12-155 of Schedule 1 to the Taxation Administration Act 1953, the investment body must include that ABN in any file number report given to the Commissioner of Taxation under Regulation 55. [Items 3 & 5]
Paragraph 55(2)(a) is amended to provide that the obligation to give a report under subregulation 55(1) does not apply to an investment body which has entered into an agreement with the Commonwealth relating to the reporting of TFN or ABN quotation. [Item 4]
These amendments reflect new section 12-155 which allows an investor to quote an ABN instead of a TFN to avoid PAYG withholding from investment income.
Regulation 56 - Annual investment income reports
Paragraph 56(4)(d) is amended to provide that an investment body providing an annual investment income report under Subregulation 56(1) must include details of any ABN quoted under new section 12-155 of Schedule 1 to the Taxation Administration Act 1953. [Item 6]
This amendment reflects new section 12-155 which allows an investor to quote an ABN instead of a TFN to avoid PAYG withholding from investment income.
Paragraph 56(4)(g) is amended to provide that the annual investment report given under Regulation 56 must also include details of any amounts withheld by the investment body under new sections 12-140 or 12-145 of Schedule 1 to the Taxation Administration Act 1953 or paid to the Commissioner under Division 14 of that Schedule because of those sections. From 1 July 2000 sections 12-140 and 12-145 replace the obligation under Division 3B of Part VI of the Income Tax Assessment Act 1936 to withhold from certain payments of investment income if the payee does not quote a TFM The amendment of the regulation to include a reference to these sections will ensure the regulation continues to have effect after 30 June 2000. [Item 7]
Subparagraph 56(4)(h)(iii) is amended to provide that an investment body must include in the annual investment income report details of any amounts withheld under new Subdivision 12-F of Schedule 1 to the Taxation Administration Act 1953 or paid to the Commissioner under Division 14 of that Schedule because of that Subdivision. From 1 July 2000 new Subdivision 12F will replace the obligation under Division 4 of Part VI of the Income Tax Assessment Act 1936 to withhold from payments of dividends, interest or royalties made to, or received on behalf of, foreign residents. The amendment of the regulation to include a reference to this Subdivision will ensure the regulation continues to have effect after 30 June 2000. [Item 8]
Paragraph 56(4A)(d) is amended to provide that where an annual investment income report is given under subregulation 56(4A), the investment body must include details of any ABN quoted under new section 12-155 of Schedule 1 to the Taxation Administration Act 1953. [Item 9]
This amendment reflects new section 12-155 which allows an investor to quote an ABN instead of a TFN to avoid PAYG withholding from investment income.
Paragraph 56(4A)(g) is amended to provide that the annual investment report given under subregulation 56(4A) must also include details of any amounts withheld by the investment body under new sections 12-140 or 12-145 of Schedule 1 to the Taxation Administration Act 1953 or paid to the Commissioner under Division 14 of that Schedule because of those sections. From 1 July 2000 sections 12-140 and 12-145 replace the obligation under Division 3B of Part VI of the Income Tax Assessment Act 1936 to withhold from certain payments of investment income if the payee does not quote a TFN. The amendment of the regulation to include a reference to these sections will ensure the regulation continues to have effect after 30 June 2000. [Item 10]
Subregulation 56(5B) is amended to include a reference to amounts required to be withheld under new sections 12-140 or 12-145 of Schedule 1 to the Taxation Administration Act 1953 or paid to the Commissioner under Division 14 of that Schedule because of those sections. These sections are the PAYG withholding equivalent to the subsection that is currently referred to in subregulation 56(5B). The inclusion of a reference to these sections will ensure that the subregulation continues to have effect when the PAYG arrangements commence on 1 July 2000. [Item 11]
Retiring the Pay As You Earn regulations
The regulations are amended to omit Subdivisions 1 and 2 of Division 2 of Part 7. These Subdivisions prescribe the rate of withholding from payments currently subject to the PAYE system. This system will cease to apply from 1 July 2000. From that date such payments will be covered by the new PAYG arrangements. As the PAYE system ceases to apply from 1 July 2000, the rules in these Subdivisions prescribing the PAYE rate of withholding will become redundant from that date. The transitional rule set out at regulation 4 ensures that the Subdivisions will apply to payments made before 1 July 2000. [Item 12]
Regulation 97 - Interpretation
The heading to regulation 97 is amended to clarify that the section covers definitions for terms used in Subdivision 3 and 3A of Division 2 of Part 7 of the Income Tax Regulations 1936. [Item 13]
Subregulation 97(1) is amended to make the intended meaning of the provision easier to understand. No change to the current operation of the provision is intended by the amendment. [Item 14]
Subregulation 97(2) is amended to omit a number of the definitions currently set out in the provision. These definitions will become redundant after 30 June 2000 due to the introduction of the PAYG withholding arrangements. [Items 15 to 21]
Regulation 98 - Rate of deduction from eligible termination payments
The regulations are amended to omit regulation 98. This regulation will become redundant from 1 July 2000 as the rates of withholding currently prescribed in the regulation will instead be prescribed in a withholding schedule made by the Commissioner of Taxation under new section 15-25 of Schedule 1 to the Taxation Administration Act 1953. [Item 22]
Regulation 99F - Technical Correction
This regulation is amended to make a technical correction. The references to a post July 83 component are replaced with references to a post-June 83 component. [Item 23]
Subregulations 99I(3) and 99I(4), Regulations 99J and 99K - ETP Group Certificates
The regulations are amended to omit subregulations 991(3) and (4) and regulations 99J and 99K. These provisions will become redundant from 1 July 2000 as the 'ETP Group Certificate' obligations to which they relate are being replaced from that date by the 'Payment Summary' rules in new sections 16-165 and 16-170 of Schedule 1 to the Taxation Administration Act 1953. [Items 24 and 25]
Regulation 100 - Employee may quote tax file number
The regulations are amended to omit regulation 100, which allows a taxpayer to quote his or her TFN before receiving an ETP. From 1 July 2000 the mechanism for providing a TFN set out in that regulation will be provided for by the new TFN declaration rules in Division 3 of Part VA of the Income Tax Assessment Act 1936. [Item 26]
Subdivisions 4, 5 and 6 of Division 2 of Part 7
The regulations are amended to omit Subdivisions 4, 5 and 6 of Division 2 of Part 7.
The 'Home Loan Interest' provisions to which Subdivision 4 relates were repealed in 1994 and have no continuing operation. For this reason Subdivision 4 is now redundant.
Subdivisions 5 and 6 impose obligations on entities required to withhold amounts under the current PAYE arrangements. As those arrangements cease to apply from 1 July 2000, the rules in Subdivisions 5 and 6 will consequently become redundant from that date. [Item 27]
Division 3 of Part 7 - Notional tax
The regulations are amended to omit Division 3 of Part 7. This Division relates to the calculation of notional tax for companies that had company tax instalment obligations in the 1993/1994 income year. The rules set out in the Division have no current application and are now redundant. [Item 28]
Retiring the Prescribed Payments System regulations
The regulations are amended to omit Division 4 of Part 7. This Division relates to the Prescribed Payments System (PPS) which is an income tax collection system applying within certain industries. The PPS ceases to apply on 30 June 2000 and will be replaced from 1 July 2000 by the new PAYG arrangements. To close down the legislative scheme underpinning the PPS, it is necessary to omit this Division with effect from 1 July 2000. The transitional rule in regulation 4 will ensure that the obligations set out in Division 4 apply to prescribed payments made on or before 30 June 2000. [Item 29]
Rate of withholding where TFN not quoted - relocation to Taxation Administration Regulations
The regulations are amended to omit Division 5 of Part 7. Division 5 contains several rules about the obligation imposed on investment bodies under Subdivision 3 of Division 3B of Part VI of the Income Tax Assessment Act 1936 to withhold from payments of income in relation to certain investments. The Division will become redundant from 1 July 2000 as the rules it sets out will be provided for from that date by new section 12-170 of Schedule 1 to the Taxation Administration Act 1953 together with new Taxation Administration Regulations 34 and 35. [Item 29]
Rate of withholding from dividends, interest and royalties - relocation to Taxation Administration Regulations
The regulations are amended to omit Division 6 of Part 7. Division 6 prescribes the rate of withholding from dividends, interest and royalties paid to foreign residents. From 1 July 2000 these rates will instead be prescribed by new Taxation Administration Regulations 39 to 42. These rules are being relocated from the Income Tax Regulations to the Taxation Administration Regulations because under the new PAYG arrangements, the withholding obligations relating to these payments are set out in Schedule 12-F of Schedule 1 to the Taxation Administration Act 1953. [Item 29]
Rate of withholding from payments for mining on Aboriginal land - relocation to Taxation Administration Regulations
The regulations are amended to omit Division 7 of Part 7. The Division imposes certain obligations on entities required to withhold from payments for mining on Aboriginal land under section 221ZB of the Income Tax Assessment Act 1936. Under the new PAYG arrangements, these obligations will either become redundant or are provided for elsewhere in the PAYG legislation. [Item 29]
Retiring the Reportable Payments System regulations
The regulations are amended to omit Divisions 9, 10, 11, 11A and 11B of Part 7. These Divisions relate to the Reportable Payments System (RPS) which is an industry specific payment reporting and income tax collection system established by Division 1AA of Part VI of the Income Tax Assessment Act 1936. The Divisions will become redundant after 30 June 2000 as the RPS does not apply to payments made after that date. The Divisions are therefore omitted with effect from 1 July 2000. The transitional arrangement in regulation 4 will ensure that the obligations imposed under the Divisions will apply to payments made on or before 30 June 2000. [Item 30]
Taxation Administration Amendment Regulations 2000 (No. 1)
Regulation 1 - Name of Regulations
Regulation 1 names the regulations as the Taxation Administration Amendment Regulations 2000 (No. 1).
Regulation 2 - Commencement
Regulation 2 provides that the regulations commence as follows:
(a) on gazettal - regulations 1 to 3 and Schedule 1;
(b) on 1 July 2000 - Schedule 2.
Regulation 3 - Amendment of Taxation Administration Regulations
Regulation 3 provides that Schedules 1 and 2 amend the Taxation Administration Regulations.
Schedule 1 Amendments commencing on Gazettal.
Regulation 1 - Name of regulations
The regulations are amended by substituting new regulation 1. Regulation 1 provides that the regulations are to be called the Taxation Administration Regulations 1976. These regulations, in their original form, were gazetted on 24 June 1976. [Schedule 1, Item 1]
Regulation 2 - Definitions
The regulations are amended by substituting new regulation 2. In the new regulation the following definitions have been omitted:
* Board of Review;
* Deputy Commissioner;
* Second Commissioner;
* branch of the Australian Taxation Office; and
* debt.
The definition of 'Board of Review" has been omitted as the regulations using this term have been omitted from the regulations.
The definition of "Deputy Commissioner" and "Second Commissioner" have been omitted as these terms have been defined for the purposes of the Taxation Administration 1953 in section 2 of that Act. These definitions apply for the purposes of the Regulations removing the need for a separate definition.
The definition of "branch of the Australian Taxation Office" has been omitted as this term has been omitted from the regulations where it was previously used.
The definition of "debt" has been omitted as references to this term have been replaced with references to a "tax related liability". This term has been adopted to ensure the regulations are consistent with the new generic recovery provisions applying to taxation debts.
The definition of "Commissioner" has been amended to include the Commissioner in his or her capacity as the Registrar of the Australian Business Register under the A New Tax System (Australian Business Number) Act 1999.
A definition of the term "approved form" has been included. This term is used throughout the legislation introducing the New Tax System. It has been incorporated where relevant into the Taxation Administration Regulations to ensure consistency and remove unnecessary repetition of rules.
A definition of the term "deposit-taking institution" has been included. This term is used in amended regulations 20 and 22. The reason for the introduction of this term is explained in the comments for those regulations. [Schedule 1, Item 2]
Regulation 2AA - Prescribed royal commissions
The regulations are amended to omit regulation 2AA. The Royal Commissions referred to in this regulation have now concluded and the regulation has no ongoing operation. [Schedule 1, Item 2]
Regulation 2A -Prescribed Acts for the purpose of the definition of 'taxation law'
The regulation is renumbered as regulation 4 and amended to omit references to three Acts which have been repealed. [Schedule 1, Item 2]
Regulation 2B - Certificate of failure to comply with requirements under taxation law
The regulation is renumbered as regulation 5 and retitled according to current drafting practice. [Schedule 1, Item 3]
Regulation 2C - Manner of serving order
The regulation is renumbered as regulation 6 and retitled according to current drafting practice. [Schedule 1, Item 4]
Regulation 2D - Form of certificate
The regulation is renumbered as regulation 7 and retitled according to current drafting practice. [Schedule 1, Item 5]
Regulation 2E - Election to have case tried in Supreme Court
The regulation is renumbered as regulation 8. [Schedule 1, Item 6]
Regulation 3 -Address where objection must be lodged
The regulations are amended to omit regulation 3. It deals with the posting to, or lodging with, the Commissioner of an objection under section 14G of the Taxation Administration Act 1953. Section 14G was repealed by Taxation Laws Amendment Act (No 3) 1991 with effect from 1 March 1992. Under section 14E, an applicant now objects against a decision of the Commissioner of Taxation to refuse an application for a tax clearance certificate in the manner set out in Part IVC of the Taxation Administration Act 1953. [Schedule 1, Item 7]
Regulations 4 to 10 - Board of Review
The regulations are amended to omit current regulations 4, 5, 6, 7, 8, 9 and 10. These regulations relate to the former Taxation Boards of Review. With effect from 1 July 1986, Division 1 of Part V of the Income Tax Assessment Act 1936, under which the Boards of Review were constituted, was repealed. There is no longer any such body as a Board of Review constituted under either the Taxation Administration Act 1953 or the Income Tax Assessment Act 193 6. [Schedule 1, Item 7]
New regulation 3 - Approval of Authorised Deposit Taking Institution
The regulations are amended to include new regulation 3. This provides that the Commissioner may approve an authorised deposit-taking institution within the meaning of the Banking Act 1959 as a deposit-taking institution for the purposes of the Regulations. The Commissioner may approve such an institution by way of notice published in the Gazette. The concept of a deposit-taking institution is relevant to amended regulation 20 and 22. [Schedule 1, Item;]
Regulation 11 - Giving of notices
The regulation is renumbered as regulation 9.
The regulation is amended to omit subregulation 11(1). This relates to the former Boards of Review. As outlined above, these Boards no longer exist.
The reference to subregulation 11 (2) is omitted as regulation 11 now contains only that provision. [Schedule 1, Item 8]
Regulation 12 - Presumption as to signatures
The regulation is omitted. It has become redundant due to section 150 of the Evidence Act 1995. [Schedule 1, Item 9]
Regulation 13 - Address for service
The regulation is renumbered as regulation 10. [Schedule 1, Item 10]
Regulation 14 - Expenses
Subregulation 14(1) prescribes the scale of expenses to which a person required to attend before the Commissioner of Taxation or an authorised delegate is entitled for the purposes of subsection 141(3) of the Taxation Administration Act 1953. New section 353-10 of Schedule 1 to that Act also requires a scale of expenses to be prescribed. The regulation is amended to prescribe the High Court Rules scale of expenses for the purposes of both subsection 141(3) and new section 353-10. The regulation is also renumbered as regulation 11 and the title redrafted in accordance with current drafting practice. [Schedule 1, Item 11]
Regulation 15 - Certificate of failure to furnish information
The regulation is renumbered as regulation 12 and the title redrafted in accordance with current drafting practice. [Schedule 1, Item 12]
New Part Heading - Part 3 Form and services of documents
The regulations are amended to include a new Part heading. This heading will help identify the purpose of the provisions in this part of the regulations. [Schedule 1, Item 13]
Regulation 16 -Departure prohibition orders
The regulation is amended to include a new heading. The wording of the current heading has been made redundant by the inclusion of the new Part heading explained above. The regulation is also renumbered as regulation 13. [Schedule 1, Item 14]
Paragraph 16(3)(a) is amended to remove the reference to the 'Comptroller-General of Customs' and to include a reference to the current term 'Chief Executive Officer of Customs' as used in the Customs legislation. [Schedule 1, Item 15]
Regulation 17 -Service of notification
The regulation is amended to include a new heading which accords with current drafting practice. The regulation is renumbered as regulation 14. [Schedule 1, Item 16]
Regulation 18 - Service of copy of departure authorisation certificate
The regulation is amended to include a new heading which accords with current drafting practice. The regulation is renumbered as regulation 15. [Schedule 1, Item 17]
Regulation 18A - Service of notice of private ruling
The regulation is renumbered as regulation 16. [Schedule 1, Item 18]
New Part Heading - Part 4 Payments
The regulations are amended to include a new Part heading. This heading will help identify the purpose of the provisions in this part of the regulations. [Schedule 1, Item 19]
Regulation 19 - Prescribed provisions
The regulation is amended to include a new heading which accords with current drafting practice. The regulation is renumbered as regulation 17. [Schedule 1, Item 20]
Paragraph 19(c) is omitted. The Act referred to in this paragraph has been repealed. The paragraph is now redundant. [Schedule 1, Item 21]
Paragraph 190) is amended to refer to subregulation 168(4) of the Income Tax Regulations 1936. The current reference to subregulation 58R(4) does not reflect the 1990 renumbering of the Income Tax Regulations 1936. [Schedule 1, item 22]
Regulation 20 - Payment of tax debts
The regulation is renumbered as regulation 18.
Paragraph 20(1)(a) is amended to provide that a tax related liability may be paid by posting the amount of the liability to an address approved by the Commissioner of Taxation. The reference in this paragraph to posting or delivering the amount of a debt to a branch of the Australian Taxation Office (ATO) has been removed. This is because taxation debts may no longer be paid or left at branches of the ATO. This is a result of the closure of cashier and payment processing facilities at ATO branches. Payments must now be sent to dedicated payment processing sites.
Paragraph 20(1)(b), which provides for a person to pay a debt by delivering the relevant amount to the Reserve Bank of Australia, is omitted. It is considered that this payment mechanism is provided for by paragraph 20(1)(e) and 20(1)(f) and does not need to be stated separately.
Paragraphs 20(1)(c) and 20(1)(d) are amended to replace references to 'debt' with references to 'tax related liability'. These amendments will ensure the payment rules set out in regulation 20 are consistent with the new generic collection and recovery provisions in Schedule 1 to the Taxation Administration Act 1953.
Paragraph 20(1)(f) is amended to include a reference to an 'authorised deposit-taking institution'. This amendment will allow financial institutions other than the Reserve Bank of Australia to receive payments of tax debts should this option become desirable. Under new administrative arrangements, Commonwealth agencies may now use banking institutions other than the Reserve Bank of Australia to provide banking services.
The new regulation also clarifies that a tax-related liability must be paid in Australian currency. [Schedule 1, Item 23]
Regulations 21 - A person may ask for a receipt
The regulation is amended to replace references to 'debt' with references to 'tax related liability'. These amendments will ensure the payment rules set out in the regulation are consistent with the new generic collection and recovery provisions in Schedule 1 to the Taxation Administration Act 1953. The regulation is renumbered as regulation 19. [Schedule 1, Item 24]
Regulation 22 - Information about a debt
The regulation is renumbered as regulation 20 and references to 'debt' are replaced with references to 'tax related liability'. [Schedule 1, Items 25 and 26]
Subregulation 22(2) is amended to include a reference to an 'authorised deposit taking institution'. This reflects the amendment to paragraph 20(1)(e). [Schedule 1, Item 27]
Regulation 23 - Payment of postage of mail
The regulation is renumbered as regulation 21 and references to 'debt' are replaced with references to a 'tax related liability'. [Schedule 1, Items 28 to 30]
Schedule 1, Form 1
The form is amended to include a reference to subregulation 2D(1) as renumbered regulation 7 and to remove the reference to a year starting with the digits 19. [Schedule 1, Items 31 and 32]
Schedule 1, Form 2
The form is amended to include a reference to regulation 2E as renumbered regulation 8 and to remove the reference to a year starting with the digits 19. [Schedule 1, Items 33 and 34]
Schedule 1, Form 3
The form is amended to include a reference to regulation 2E as renumbered regulation 8 and to remove the reference to a year starting with the digits 19. [Schedule 1, Items 35 and 36]
Schedule 2, Heading
The heading to Schedule 2 is amended to reflect current drafting practice, and to refer to regulation 14 as renumbered regulation 11. [Schedule 1, Item 37]
Schedule 2, Items 1 to 3
The items are amended to replace the references to the High Court Rules with the current official name of those rules and to include a reference to an officer authorised by the Commissioner referred to in new regulation 11. The reference to item 1 in item 3 of Schedule 2 is amended to conform with the current drafting practice. [Schedule 1, Items 38 to 45]
Schedule 2 - Amendments commencing on 1 July 2000
New Part 5 - PAYG Withholding
The regulations are amended to include new Part 5. The regulations in this Part will support the new PAYG withholding system established under the A New Tax System (Pay As You Go) Act 1999 and the A New Tax System (Tax Administration) Act 1999. The regulations in this Part will deal mainly with:
* the prescribed rate of withholding from certain types of payments. Section 15-10 of Schedule 1 to the Taxation Administration Act 1953 allows for the regulations to prescribe the rate of withholding for particular payments; and
* the declarations which recipients of certain types of withholding payments may make if they wish to have a matter taken into account by the payer in working out the amount to be withheld from the payment. Section 15-50 of Schedule 1 to the Taxation Administration Act 1953 allows for the regulations to prescribe rules governing these declarations.
Regulation 2 - Definitions
Item 1 of Schedule 2 includes a definition of 'foreign resident' in regulation 2. This defines the term to have the same meaning as under the Income Tax Assessment Act 1997, ie a person who is not a resident of Australia under the Income Tax Assessment Act 1936.
A definition of the term 'Medicare Levy Surcharge' is also included in regulation 2. It defines the term to mean the surcharge imposed under the A New Tax System
(Medicare Levy Surcharge - Fringe Benefits) Act 1999.
These terms are used in a number of the regulations explained below.
New Regulation 22 - Working out how much to withhold - truncation rule
The regulations are amended to include new regulation 22. This regulation provides that a person who is required to work out how much to withhold under the regulations must:
* not do so if the amount of the relevant payment is less than $1; and
* disregard the amount of cents if the relevant payment exceeds a whole dollar amount. [Schedule 2, Item 2]
New Regulation 23 - Working out how much to withhold - rounding rule
The regulations are amended to include new regulation 23. This provides that where a person calculates how much to withhold under the regulations and the result is an amount that is not a whole dollar, the person must ignore any cents and withhold the whole dollar amount only. [Schedule 2, Item 2]
New regulation 24 - Withholding schedules - tax offsets the Commissioner must take into account
Paragraph 15-30(d) of Schedule 1 to the Taxation Administration Act 1953 provides that the Commissioner must have regard to any prescribed tax offsets when making a withholding schedule under section 15-25. This is because an individual's entitlement to a tax offset may have the effect of reducing the amount that needs to be withheld from payments to him or her. For the purposes of paragraph 15-30(d), new regulation 24 prescribes a rebate mentioned in sections 79A (zone rebate), 159J (rebate for a dependant), 159L (housekeeper rebate), 159SA (rebate on eligible assessable income), 159SM (superannuation pension rebate), 159SU (rebateable ETP annuity) and 159ZRA (lump sum payment rebate) of the Income Tax Assessment Act 1936 as a tax offset the Commissioner must have regard to. This will ensure that in prescribing an appropriate rate of withholding in a withholding schedule, the Commissioner must have regard (where relevant) to the effect an individual's entitlement to a particular kind of rebate may have on that rate. [Schedule 2, Item 2]
New regulation 25 - Withholding schedules - other matters the Commissioner must take into account
Paragraph 15-30(g) of Schedule 1 to the Taxation Administration Act 1953 provides that the Commissioner must have regard to any other prescribed matter when making a withholding schedule under section 15-25. For the purposes of that paragraph, the regulations are amended to include new regulation 25. The effect of regulation 25 is that the Commissioner must have regard to any entitlement of an individual to a deductible section 27H amount (annuities and pensions) when making a withholding schedule under section 15-25. This is because an entitlement to such an amount will reduce the amount required to be withheld from payments to that individual. [Schedule 2, Item 2]
New regulation 26 - The matters that you can give a declaration about
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. These matters can either increase or decrease how much must be withheld. However a declaration can only be given about a prescribed matter. For the purposes of subsection 1550(1), subregulation 26(1) prescribes the following matters under paragraph 15-50(4)(a):
* whether the individual is entitled to a deductible amount under section 27H (annuities and pensions) of the Income Tax Assessment Act 1936;
* whether the individual is entitled to a zone rebate under section 79A of that Act or to a concessional rebate under section 159J or section 159L of that Act;
* whether the individual is entitled to a rebate mentioned in section 159SM or section 159SU of that Act;
* whether the individual is entitled to full or partial relief from the Medicare Levy;
* whether the individual elects to have an additional amount withheld on account of their expected liability to the Medicare Levy or Medicare Levy Surcharge; or
* whether the individual is entitled to the Family Tax Benefit.
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 TFN declaration given under Part VA of the Income Tax Assessment Act 1936 may give a new declaration if their circumstances in relation to the matter change. For the purposes of paragraph 15-30(3)(b), the following matters are prescribed under paragraph 15-50(4)(a):
* whether the individual wishes to have the tax free threshold taken into account when the rate of withholding is calculated;
* whether the individual has an accumulated debt under the Higher Education Contribution Scheme; and
* whether the individual is an Australian resident for income tax purposes.
Regulation 26 allows individuals to give declarations about broadly the same range of matters that employees can currently give declarations about under the PAYE arrangements. This reflects the fact that these declarations will be given in relation to the same kinds of payments as currently dealt with under the PAYE system. [Schedule 2, Item 2]
New Regulation 2 7 - Defence Force personnel deemed to have given a Medicare levy variation declaration
This regulation maintains the effect of current regulation 87 in the Income Tax Regulations 1936. It provides that members of the Defence Force will be taken to have given a declaration to the effect that they are entitled to a 50% reduction in the Medicare Levy. [Schedule 2, Item 2]
New Regulation 28 - When a declaration ceases to have effect
The regulations are amended to include new regulation 28. This regulation provides when a declaration given by an individual under section 15-50 of Schedule 1 to the Taxation Administration Act 1953 will cease to have effect. This is provided for under paragraph 1550(4)(b).
Under regulation 28 a declaration will cease to have effect where the individual who gave the declaration:
* directs the relevant entity in writing to disregard the declaration;
* gives that entity a later declaration;
* ceases permanently to receive certain kinds of withholding payments from the entity; or
* ceases to have an effective TFN declaration in place with the entity for the purposes of Division 3 of Part VA of the Income Tax Assessment Act 1936.
New regulation 28 is similar in effect to existing regulation 90 of the Income Tax Regulations 1936 which governs when declarations given by employees under the PAYE arrangements cease to have effect. It provides certainty for businesses about when they are to take a declaration into account. [Schedule 2, Item 2]
New regulation 29 - Commissioner may determine that declarations no longer have effect
The regulations are amended to include new regulation 29 which is made under subsection 1540 of Schedule 1 to the Taxation Administration Act 1953. This provides that the Commissioner of Taxation may determine in a notice published in the Gazette that any or all declarations or part thereof made under section 15-30 cease to have effect on a particular date. This mechanism is needed to allow for the cessation of declarations that become redundant or where it becomes necessary for certain categories of taxpayers to make new declarations or refresh earlier declarations. New regulation 29 maintains the current effect of subregulations 90(6) and 90(7) of the Income Tax Regulations 1936. These allow for the Commissioner of Taxation to determine that all or particular declarations made by employees subject to the PAYE arrangements cease on a given date. [Schedule 2, Item 2]
New regulation 30 - When an individual must give a new declaration
The regulations are amended to include new regulation 30 which is made under subsection 1540 of Schedule 1 to the Taxation Administration Act 1953. This regulation governs when an individual must make a new declaration under section 15-50. The regulation provides that an individual must make a new declaration if..
he or she has given a declaration under subsection 15-50(1) or 15-50(3) about a prescribed matter and the individual's circumstances in relation to the matter change; the individual elects to receive the Family Tax Benefit through direct Centrelink payments rather than through a reduced rate of PAYG withholding; or the individual is claiming the tax free threshold but becomes a non-resident, thereby losing his or her entitlement to that threshold.
The making of a new declaration in these situations will help to ensure that the correct amount is withheld from payments to the individual to meet their income tax liability at the end of the income year.
The new declaration must be given in the "approved form" as defined in regulation 2.
An individual who fails to make a new declaration when required is liable to pay a civil penalty of 5 penalty units. The current value of a penalty unit is $110. [Schedule 2, Item 2]
New Regulation 31 - Payment summaries sent by post
The regulations are amended to include new regulation 3 1. Regulation 31 governs the steps a business must take when a payment summary given by post to another person under section 16155, 16-160 or 16-165 of Schedule 1 to the Taxation Administration Act 1953 is returned undelivered to the business. Payment summaries are given to recipients of certain payments subject to PAYG withholding as a record of the amounts withheld from those payments. Broadly, these summaries will replace the current Group Certificate arrangements applying under the PAYE system. To this end, regulation 31 replicates the effect of current subregulation 119(2) of the Income Tax Regulations 1936. [Schedule 2, Item 2]
New Regulations 32 and 33 - Signature of documents
The regulations are amended to include new regulations 32 and 33. Regulation 32 governs who must sign a document required to be signed under the PAYG withholding provisions in Schedule 1 to the Taxation Administration Act 1953. It contains the same rules as apply to signatures under the PAYE arrangements as set out in regulation 120 of the Income Tax Regulations 1936. Regulation 33 contains a new rule allowing an entity to seek review of a decision by the Commissioner of Taxation to disallow a nominated individual as signatory of certain documents. The review must be sought from the Administrative Appeals Tribunal. [Schedule 2, item 2]
New regulation 34 - Rate of withholding where TFN not quoted
The regulations are amended to include new regulation 34. Subregulation 34(2) provides that the rate of withholding under section 12-140 or 12-145 of Schedule 1 to the Taxation Administration Act 1953 from income paid on certain investments where a TFN is not quoted to the payer by the recipient. The prescribed rate of withholding is 48.5% of the amount of the payment.
Partly franked dividends
Subregulations 34(3) and 34(4) adjust that rate of withholding for partly franked dividends (dividends on which some tax has already been paid) to ensure that only 48.5% of the unfranked amount is withheld.
Sections 12-140 and 12-145 together with new regulation 34 will replicate the effect of existing subsection 221YHZC(1A) of the Income Tax Assessment Act 1936 and regulation 134 of the Income Tax Regulations 1936 from 1 July 2000. They impose no new withholding obligations and maintain the existing rate of withholding from investment income caught by the rules.
New regulation 35 -payments below certain amounts
The regulations are amended to include new regulation 35. The regulation has the effect that no amount is to be withheld under section 12-140 or 12-145 where the amount of the payment is below certain threshold amounts. This maintains the current rule in relation to withholding from investment income under subsection 221YHZC(1A) of the Income Tax Assessment Act 1936 and regulation 133 of the Income Tax Regulations 1936.
New regulation 36 - Rate of withholding from Eligible Termination Payments where TFN not quoted
The regulations are amended to include new regulation 36. This regulation prescribes the rate of withholding from eligible termination payments (ETPs) where a TFN has not been quoted by the recipient of the payment to the payer. It provides for the same rate of withholding as is currently required under the PAYE arrangements by regulation 98 of the Income Tax Regulations 1936. The rate is 48.5% of the payment for residents and 47% of the payment for non-residents.
New regulation 3 7 - Rate of withholding from payments where TFN not quoted
The regulations are amended to include new regulation 37. This regulation prescribes the rate of withholding from payments covered by Subdivisions 12-B (payments for work and services) except payments under a voluntary agreement under section 12-55, Subdivision 12-C (retirement payments, ETPs and annuities) and Subdivision 12-D (benefit and compensation payments) of Schedule 1 to the Taxation Administration Act 1953 where a TFN is not quoted to the entity making the payment.
The rate of 48.5% is prescribed. In effect regulation 37 will replicate the operation of current regulation 81 of the Income Tax Regulations 1936. This prescribes a 48.5% rate of withholding from the same types of payments as covered by Subdivisions 12B, 12-C and 12-D where a TFN is not quoted.
Where a voluntary agreement under section 12-55 covers a payment, there is no requirement to quote a TFN because under section 12-55 the recipient's ABN must be quoted in the agreement for it to be effective.
New regulation 38 - Rate of withholding where ABN not quoted
The regulations are amended to include new regulation 3 8. This regulation prescribes the rate of withholding from payments subject to withholding under section 12-190 of Schedule 1 to the Taxation Administration Act 1953. This requires withholding from payments for services where the recipient of the payment does not provide the payer with its ABN. The rate prescribed is 48.5% of the payment.
New regulation 39 - Dividend, Interest and Royalty payments
The regulations are amended to include new regulation 39. This regulation contains a number of definitions for terms used in the new regulations 40, 41 and 42.
New regulation 40 - Rate of withholding from dividend payments
The regulations are amended to include new regulation 40. Regulation 40 prescribes the rate of withholding from dividend payments for the purposes of subsection 1510(2) of Schedule 1 to the Taxation Administration Act 1953.
Under the regulation, the prescribed amount to be withheld from a dividend under section 12-2 10 (dividend payment to overseas person) is:
(a) if the address mentioned in paragraph 12-210(a) or the place mentioned in paragraph 12210(b) is not in a country with which Australia has a double tax agreement - an amount equal to 30% of the dividend; or
(b) if the address mentioned in paragraph 12-210(a) or the place mentioned in paragraph 12210(b) is in a country with which Australia has a double tax agreement - the amount calculated at the rate provided for in the double tax agreement with that country.
The amount to be withheld from a dividend under section 12-215 (dividend payment received for foreign resident) is:
(a) if the foreign resident mentioned in paragraph 12-215(b) is a resident of a foreign country which is not a country with which Australia has a double tax agreement - an amount equal to 30% of the payment; or
(b) if the foreign resident mentioned in paragraph 12-215(b) is a resident of a country with which Australia has a double tax agreement - the amount calculated at the rate provided for in the double tax agreement with that country.
Paragraph 1(b) and 2(b) do not apply to a dividend paid to a resident of the USA that is included in a class of dividends exempt from tax under the law of the USA.
Broadly, new regulation 40 prescribes the same rate of withholding from dividends as currently prescribed under regulation 136 of the Income Tax Regulations 1936. The new regulation does however simplify the manner in which the rate of withholding is prescribed for cases involving countries with which Australia has a double tax agreement. It does this by referring the payer directly to the rate in the relevant agreement rather than by listing rates for some individual countries and then setting a general default rate. This will ensure that payers consult the particular rules governing rates of withholding in the relevant agreement and withhold the correct rate in force at that time under that agreement.
New regulation 41 - Rate of withholding from interest payments
The regulations are amended to include new regulation 41. This regulation prescribes the rate of withholding from interest payments subject to withholding under sections 12-245, 12-250 or 12-255 of Schedule 1 to the Taxation Administration Act 1953. The rate of 10% is prescribed. This maintains the current rate of withholding prescribed by regulation 137 of the Income Tax Regulations 1936.
New regulation 42 - Rate of withholding from royalty payments
The regulations are amended to include new regulation 42. This regulation prescribes the rate of withholding from royalties subject to withholding under sections 12-280 or 12-285 of Schedule 1 to the Taxation Administration Act 1953. The rate imposed is 30% of the royalty in cases where the royalty is paid to or received on behalf of a person with an address in a country with which Australia does not have a double tax agreement. If the address is in a country with which Australia does have a double tax agreement ' the rate is prescribed to be the rate calculated in accordance with that agreement. If the royalty is paid to an Australian resident, the prescribed rate is 30%. This regulation prescribes the same rates of withholding as imposed currently under regulation 137A of the Income Tax Regulations 1936.
New regulation 43 - Rate of withholding from mining payments
The regulations are amended to include new regulation 43. This regulation prescribes the rate of withholding from mining payments subject to withholding under section 12-320 of Schedule 1 to the Taxation Administration Act 1953. The rate prescribed is 4% of the payment. This reflects the rate of withholding imposed on such payments under section 6 of the Income Tax (Mining Withholding Tax) Act 1979.