A payer is required to withhold an amount from a payment it makes to another entity where:
- the payment is for a supply that the other entity has made, or proposes to make, to the payer in the course or furtherance of an enterprise carried on in Australia by the other entity, and
- none of the exceptions to withholding applies.
The principal exception to withholding is where the other entity quotes their ABN to the payer on an invoice or some other document relating to the supply (for more exceptions, refer to Statement by a supplier (reason for not quoting an ABN to an enterprise) (NAT 3346)). The amount to withhold is 46.5% of the payment. This withholding event is commonly referred to as 'No ABN Withholding'.
Services supplied in the course of an enterprise by the owner
Generally, the body corporate is required to withhold 46.5% of the payment where an owner:
- makes a supply of services to the body corporate as part of an enterprise they carry on
- does not quote their ABN to the body corporate, and
- the payment exceeds $75 (excluding GST).
Example
Patrick carries on a gardening business. He is asked by the body corporate to perform garden maintenance services for the body corporate, of which he is a member. Patrick invoices the body corporate for $250 but does not quote his ABN. The body corporate would be required to withhold 46.5% of the payment to Patrick.
If the body corporate pays the owner in a form other than money (for example a gift or discount on levies), and the body corporate is required to withhold from the payment in the circumstances outlined above, the body corporate must pay an amount equivalent to 46.5% of the market value of the gift or discount to us.
Services not supplied in the course of an enterprise carried on by the owner
However if the owner does not perform the services for the body corporate in the course of an enterprise (for example, the services are performed as part of a hobby or private recreational pursuit, or are wholly of a private or domestic nature for the owner), the body corporate is not required to withhold an amount from the payment. The owner may wish to provide the body corporate with a written statement to this effect (or they could use the Statement by a supplier (reason for not quoting an ABN to an enterprise) form (NAT 3346) if the body corporate is not satisfied that they have no obligation to withhold).
Example
Daphne is a pensioner. Once a month she tends the front garden of the unit complex in which she owns a unit. For this work, the body corporate gives Daphne a $100 discount off her levies. Daphne does not have an ABN. She would be considered to be making the supplies of her services in the course of a hobby or private recreational pursuit. The body corporate would, therefore, not be required to withhold from the discount given to Daphne.
If the body corporate is required to withhold an amount for the owner's failure to quote their ABN, they need to:
- register as a PAYG withholder (phone us on 13 28 66)
- send the withheld amounts to us and report those amounts on their activity statement
- issue the owner with a Payment summary that includes details of how much has been withheld from the payment (the payee would then lodge the Payment summary with their income tax return and claim a credit for amounts withheld), and
- complete a PAYG withholding where ABN not quoted - annual report (NAT 3448) and send it to us by 31 October after the end of the financial year.
Last Modified: Wednesday, 30 January 2013