11. Disputes concerning credits on pay as you go amounts
The professional association members have raised two issues in relation to the Perdikaris matter.
Following the Federal court’s decision on the appeal in Perdikaris v. Deputy Commissioner of Taxation [2008] FCAFC 186 (5 December 2008) members have raised two issues relating to pay as you go (PAYG) matters.
11.1 How are disputes concerning credits on PAYG amounts to be resolved without recourse to litigation?
Response
Section 18–15 of Schedule 1 to the Taxation Administration Act 1953 (TAA) provides for credits to be allowed to a taxpayer for PAYG credits withheld from their salary and wages. The income tax laws do not provide for a specific right of review on this matter.
Moreover, section 18-15 is a self executing provision in that if the relevant withholding has been made, it operates to allow the relevant credit. Allowance of the credit is not dependent upon any act or decision of the Commissioner. As such there is no administrative decision of the Commissioner which can be the subject of a judicial review under the Administrative Decisions (Judicial Review) AD(JR) Act.
The judicial remedies available to a person are proceedings under section 39B of the Judiciary Act 1903 or alternatively, if a matter is the subject of debt recovery action, they may contest the debt by asserting that the employer had withheld the relevant PAYG deductions.
As a matter of practice, a person is given every opportunity to provide evidence that an amount was in fact withheld from their salary or wages.
If a credit has not been allowed because the employee has been unable to reasonably demonstrate that an amount has been withheld, they may seek an internal review, either generally or to consider any further material they may have obtained which they believes evidences that the amount claimed has been withheld.
11.2 What guidelines exist for Tax Office staff on the criteria to apply when determining to deny PAYG withholding credits to a taxpayer in cases where the wages or salary in question have been paid by a company which is related to the taxpayer? In particular, if there are moneys owing by that company to the Tax Office, is that fact a material consideration for the Tax Office in resolving the dispute with the taxpayer?
Response
Section 18-15 of Schedule 1 to the TAA provides that an entity is entitled to a credit against their income tax assessment for an income year equal to the total amounts withheld from withholding payments made to that entity during the income year. A payment summary will normally be evidence that amounts were withheld from payments.
Where there appears to be a non-arms length relationship between the payer and the payee, further verification that amounts were withheld may be required. In determining this, the Commissioner would consider all the facts and circumstances, including verification that the payer has lodged annual withholding reports, business activity statements and made payments of withheld amounts to the Tax Office. In this regard we note the comments of the Full Federal Court in Perdikaris that while a failure to remit is not of itself evidence of a failure to withhold, it will put into legitimate question whether amounts were withheld.
On this point, the relevant guidelines provide:
'If a company has withheld the correct amount of liability but has not paid in full we cannot hold onto the refund or demand the company to pay. Under law we must allow employees, including directors the credits that have been withheld from their salary and wages. However if the company is still trading and they have not paid the withholding we should ensure the debt is known.'
Meeting discussion
Members accepted the response provided.
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Last Modified: Friday, 3 July 2009
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