Supplementary Explanatory Memorandum
Chapter 3 - PAYG monthly withholding for non-standard quarters
Outline of chapter
3.1 30 This chapter explains amendments to the Bill to allowalign due dates for PAYG medium withholders to pay amounts withheld during a month on the 28th of the next month (or 28 February for amounts withheld in December) if another BAS amount is due on that day. who have substituted accounting periods.
3.2 Medium withholders are required to remit to the Commissioner on a monthly basis the amounts they withhold.
Context of reform
3.3 30 The Bill as introduced allows medium monthly PAYG withholders to pay amounts withheld during a month on the 28th of the next month (or 28 February for amounts withheld in December) defer a PAYG withholding payment to the 28th of a month where there is a quarterly obligation payable on the same activity statement. This enables all amounts due in a particular month to be paid on the same date. The current Bill limits thisis deferralis currently limited to March, June, September and December, the end of standard quarters.
3.4 For income tax purposes, some taxpayers have an income year known as a substituted accounting period that is not the standard period of 1 July to 30 June.
3.5 A small number of mMonthly withholders withon substituted accounting periods have non-standard quarters (which do not end on 30 September, 31 December, 31 March and 30 June) for PAYG instalments or deferred COIN, and standard quarters for FBT or GST. The current Bill does not allow the deferral for non-standard quarters, resulting in amounts that are payable in the same month being due on different dates.
Summary of new law
3.6 The proposed amendment to the Bill will allow a monthly withholder to pay and notify amounts withheld on the 28th of the next month (or 28 February for amounts withheld in December) for any month if it isin which it is a deferred BAS payer at that time.
3.7 An entity will only be a deferred BAS payer for a month in which it has a quarterly obligation. For example, if the only obligation payable on an activity statement is a PAYG monthly withholding obligation, the entity will not be a deferred BAS payer for that month, and will notify and pay on the 21st. However, if the entity also has a quarterly obligation payable in a month, for example, GST or a PAYG instalment, the entity will be a deferred BAS payer for that month. An entity with a monthly GST obligation will never be a deferred BAS payer.
Date of effect
3.8 The amendments will have effect from 1 April 2001.
Detailed explanation of new law
3.9 Proposed sSubsection 13-5(5) in (item 20 of Schedule 3 to the Bill) outlines the due dates for payment by a deferred BAS payer of PAYG withholding from alienated personal services income. It allows taxpayers with PAYG monthly withholding who are deferred BAS payers to defer monthly obligations for March, June, September and December. This enables these payments to be aligned with quarterly obligations due on the same activity statement. The current subsection does not give a deferral to PAYG medium withholders who have substituted accounting periods for income tax, and may have PAYG instalments or deferred COIN for months other than March, June, September or December. This results in their PAYG withholding amount being due on the 21st of the month and their PAYG instalment or deferred COIN being due on the 28th of the month.
3.10 This subsection will be amended to align the payment of all BAS amounts due in the same month in which the monthly withholder is a deferred BAS payer to the 28th day of the month.
3.11 Proposed sSubsection 16-75(2A) (item 24 ofin Schedule3 to the Bill) is the general provision allowing deferral to the 28th for monthly PAYG withholders who are deferred BAS payers for March, June, September and December.
3.12 30 This subsection will be amended to align the payment of all BAS amounts due in the same month in which the monthly withholder is a deferred BAS payer, to the 28th day of the month.
3.13 Table 30 outlines the due dates for PAYG medium withholders.
| Month | Deferred BAS payer | Not a deferred BAS payer |
|---|---|---|
| January to November | 28th of the next month | 21st of the next month |
| December | 28 February | 21 January |