House of Representatives

A New Tax System (Pay As You Go) Bill 1999

Explanatory Memorandum

(Circulated by authority of the Treasurer, the Hon Peter Costello, MP)

Guide to this Bill and Explanatory Memorandum

This Bill

1. This Bill has the following Schedules and Parts.

Schedule 1 -
Pay as you go (PAYG) system for collecting income tax and other liabilities
Part 1 - Amendment of the Taxation Administration Act 1953
Part 2 - Consequential amendment of Acts
Schedule 2 -
Running balance accounts, general interest charge and related matters
Part 1 - Running balance accounts
Part 2 - General interest charge
Part 3 - Fringe benefits tax
Schedule 3 -
Consequential amendment of Chapter 6 (the Dictionary ) of the Income Tax Assessment Act 1997

2. Schedule 1 to this Bill introduces the PAYG system into new Schedule 1 to the Taxation Administration Act 1953 (TAA 1953). The amendments to support the PAYG system are in the following 3 Parts:

Part 2-1
Introduction to the Pay as you go (PAYG) system
Part 2-5
Pay as you go (PAYG) withholding
Part 2-10
Pay as you go (PAYG) instalments

3. New Part 2-1 contains a legislative guide for both the PAYG withholding in new Part 2-5 and the PAYG instalments in new Part 2-10 . Under PAYG, amounts collected under either the withholding or instalment systems will give rise to credit entitlements which can be applied under Division 3 of Part IIB of the TAA 1953 against tax debts with any excess credits being refunded. [New sections 6-1, 6-5 and 6-10 in Schedule 1 to the TAA 1953]

4. The running balance account (RBA) amendments in Schedule 2 to this Bill will build on the recently enacted RBA framework in anticipation of tax reform. In particular, those amendments will support the provision of a single activity statement to record PAYG and other debts and related payments, including voluntary payments, as well as other administrative arrangements such as the refunding of excess credits referred to above.

The Explanatory Memorandum

5. This Explanatory Memorandum has the following 3 Chapters:

Chapter 1
Pay as you go (PAYG) withholding
Chapter 2
Pay as you go (PAYG) instalments
Chapter 3
Running balance accounts, general interest charge and related matters

Location and interpretation of PAYG provisions

6. As described above, the amendments to support the new PAYG system will be in new Schedule 1 to the TAA 1953. This will be the first step towards putting the collection, recovery and administration rules for all the Acts administered by the Commissioner of Taxation (the Commissioner) in one place.

7. New Schedule 1 to the TAA 1953 containing the PAYG provisions is intended to work together with the Income Tax Assessment Act 1997 (ITAA 1997) and the Income Tax Assessment Act 1936 (ITAA 1936) as one body of law until the rewrite of the ITAA 1936 is completed. To achieve this outcome, a new paragraph (c) will be included in the definitions of this Act in subsection 6(1) of the ITAA 1936 and subsection 995-1(1) of the ITAA 1997 to extend those definitions to include new Schedule 1 containing the PAYG provisions. [Item 10 of Part 2 in Schedule 1 to this Bill and item 63 of Schedule 3 to this Bill]

8. To further assist in interpreting the new PAYG provisions, item 1 of Part 1 of Schedule 1 to this Bill will insert new section 3AA in the TAA 1953. That section will provide that:

·
new Schedule 1 to the TAA 1953 containing the PAYG provisions has legal effect [subsection 3AA(1)] ;
·
expressions used throughout the PAYG provisions will have the same meaning as in the ITAA 1997 [subsection 3AA(2)] ;
·
the rules in Division 950 of the ITAA 1997 for interpreting that Act will apply in interpreting the PAYG provisions [subsection 3AA(3)] ;
·
section 264B of the ITAA 1936, which contains rules regarding signatures and electronic signatures for notices given to the Commissioner will apply to PAYG provisions [subsection 3AA(4)] .

9. Subsection 6(1AA) of the ITAA 1936 currently applies so that a definition giving an expression a particular meaning can only have effect for the ITAA 1997 where the definition is provided in the ITAA 1997 and adopts the ITAA 1936 meaning. Subsection 995-1(2) of the ITAA 1997 has similar application in relation to ITAA 1997 definitions having effect for the purposes of the ITAA 1936.

10. Subsection 6(1AA) of the ITAA 1936 will be amended to expand its current application by ensuring that defined terms in the ITAA 1936 do not also have effect for the purposes of the new PAYG provisions unless those terms are provided for in the ITAA 1997 or those provisions and adopt the ITAA 1936 meaning. [Item 9 of Part 2 in Schedule 1 to this Bill]

11. Defined terms used throughout this Bill are asterisked and listed in the Dictionary in section 995-1 of the ITAA 1997. New definitions are also being added to the Dictionary through Schedule 3 to this Bill.

Terms

12. The following terms and abbreviations are used throughout the Explanatory Memorandum.

Abbreviation Description
ABN Australian Business Number
ABNA 1999 A New Tax System (Australian Business Number) Act 1999
ANTS Governments Tax Reform Document : Tax Reform: not a new tax, a new tax system
DIR Dividend, interest and royalty
ETP Eligible termination payment
FBT Fringe benefits tax
FBTAA 1986 Fringe Benefits Tax Assessment Act 1986
FMD Farm management deposit
GIC General interest charge
GST Goods and Services Tax
GSTA 1999 A New Tax System (Goods and Services Tax) Act 1999
HECS Higher Education Contribution Scheme
ITAA 1936 Income Tax Assessment Act 1936
ITAA 1997 Income Tax Assessment Act 1997
MWT Mining withholding tax
NRP Natural resource payments
PAYE Pay as you earn
PAYG Pay as you go
PPS Prescribed payments system
RBA Running balance account
RPS Reportable payments system
TAA 1953 Taxation Administration Act 1953
TFN Tax file number
The Commissioner The Commissioner of Taxation
TLAA3 1999 Taxation Laws Amendment Act (No. 3) 1999
TLIP Taxation Law Improvement Project


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