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  • Issue 21 PAYG

    21.1 If wages are paid by a bureau that has in the past remitted PAYE, how should PAYG (withholding) be paid by the bureau?

    Can it be paid under reference of the ABN of the employer or should there be a branch registration of some kind? If PAYG is paid by the bureau, does the employer have an obligation to report the payments in its BAS?

    ATO response

    The payroll bureau industry provides a range of services for clients. This includes running the full processing, payments distribution and taxation compliance matters, while at the other end of the scale, a bureau will provide a basic wages calculation service. Generally, the payroll bureau provides the processing and payments distribution while the employer will undertake lodgment of the BAS/IAS and makes the tax payments to the ATO.

    The following reflects the general circumstances but individual arrangements can vary.

    Payroll Bureau makes the Withholding payment

    For large withholders

    • The bureau makes payment against the clients ABN using the EFT Code (Type 70).
    • The client reports amount of Salary & Wages at label W1 on the BAS.

    Note: No liability amount is reported at Label W2 or W4.

    For monthly and quarterly withholders

    • The bureau makes the tax payment against the client's ABN using EFT code (Type 60)
    • The client must report the amounts at Labels W1 to W4 on the monthly or quarterly BAS. This records the liability and due date details on the account.

    Business makes the payments and lodges the BAS.

    Large withholders

    • The large withholder pays the withheld amount to the ATO using EFT Code (Type 70) and reports the total of the salary & wages payments at Label W1 on the BAS. Liabilities at label W2 & W4 are not reported.

    Note: Investment bodies may need to report withholding for No TFN quotation at label W3. The amount can be paid with other liabilities on 21st of the month.

    Monthly and quarterly withholders

    • The business pays and reports on the monthly or quarterly BAS or IAS.

    Operate a specific Withholding Branch Registration.

    Where circumstances may make it impractical for the business to include their withholding obligations on their normal BAS. A separate Branch Registration for withholding may be set up. This registration would be a unique account with a separate activity statement generated which could be issued to the payroll bureau. The bureau would complete the PAYG labels on that activity statement on behalf of the business. The legislation also provides for a payroll bureau to act as a BAS lodgment agent.

    21.2 Honorariums and GST

    What is the GST treatment for a monetary honorarium received? Honorariums are given in a wide variety of circumstances to recognise persons for their voluntary services. The honorarium would never equate to the value of services provided by the volunteer. In football circles honorariums may be given to strappers, runners etc who at the end of a season be given by the club board amounts ranging from $600 to $5,000. Further, do contractual elements have any bearing on the treatment of honorariums?

    ATO response

    The answer to this issue depends largely on whether the honorarium is consideration for a supply. There must be a nexus between a supply and consideration for the supply to be 'made for consideration'. Where a payment, act or forbearance is 'in connection with', or 'in response to', or 'for the inducement of' a supply, it will constitute consideration for a supply. Whether or not there is any contractual obligation to provide the honorarium may be relevant in establishing the true nature of the transaction. However, the fact that there is no obligation to make a payment does not of itself determine whether there is a nexus. Other factors relevant to the true nature of the transaction may include the nature of the supply, the nature of the consideration, and the arrangement between the parties.

    In determining whether the honorarium constitutes consideration, it is irrelevant whether the payment is based on an hourly rate, or whether it is merely a flat payment that bears no relationship to the duration or value of the services provided. From the point of view of GST any payment made to a person for a supply in the course of their enterprise will be treated as consideration for a supply.

    If the honorarium does represent consideration for a supply and the supplier is registered for GST, the supplier will have made a taxable supply and will be required to account for GST on that supply. If the recipient of the supply is registered or required to be registered for GST purposes and the acquisition is a creditable acquisition in terms of section 11-5, the recipient may claim an input tax credit in respect of that acquisition.

    Clearly, the payment of an honorarium (even if the honorarium represents consideration for a supply) will have no GST consequences if the supplier does not receive the payment in the course of an enterprise they conduct. Nor will the payment have any GST consequence if the supplier is not registered for GST (nor required to be registered).

    Given the many variables associated with honorariums, it is recommended that a private ruling be sought to answer specific issues.

    Please note: The ATO's view on non-monetary issues will be addressed in a separate ruling.

    View the treatment of honoraria from a PAYG withholding perspective.

      Last modified: 22 May 2014QC 28063