OPS 2005/JPDA01 - Explanatory statement
COMMONWEALTH OF AUSTRALIA
Taxation Administration Act 1953
Explanatory Statement
General Outline of Instrument1. This instrument is made by the Commissioner of Taxation (the Commissioner) pursuant to section 15-25 of Schedule 1 of the Taxation Administration Act 1953 (TAA).
2. The instrument makes publicly available the withholding schedule, which the Commissioner is empowered to make, specifying the formulas and procedures to be used when working out the amount required to be withheld by an entity in accordance with the Pay As You Go (PAYG) system.
3. It also revokes the previous version of this withholding schedule that was published in the Commonwealth Gazette - Special Gazette No 232 dated Monday 28th June 2004.
4. In making the instrument the Commissioner has had regard to the Income Tax Rates Act 1986 and the amendments in the Tax Laws Amendment (Personal Income Tax Reduction) Act 2005. This Act provides reductions of the income tax rates in the 2005-2006 income year and for later years.
5. The instrument contains one (1) Schedule that provides information for calculating the withholding amount taking into account the particular circumstances presented in that Schedule.
6. This is a legislative instrument for the purposes of the Legislative Instruments Act 2003.
Date of effect7. The Instrument applies from 1 October 2005.
What is this instrument about:8. To help taxpayers meet the annual income liability, they are required to pay amounts of their income at regular intervals as it is earned during the year. The system for collecting these amounts is called the "Pay As You Go" system.
9. This instrument provides information on how to work out the amount an entity must withhold from the income of individual taxpayers. The information is contained in the Schedule to the Instrument, also known as the withholding schedule.
What is the effect of this instrument:10. The effect of this instrument is to support the PAYG withholding system, which provides a simple and convenient way for most people to meet their annual tax obligations as income is earned.
11. The people who find the information most useful are employers, professional advisors, software developers, the Australian Taxation Office (ATO) and any other party that may be involved in engaging workers in the Joint Petroleum Development Area.
Background:12. Each withholding schedule is tailored to meet the circumstances of a particular class of employee. The version of the Schedule to the instrument has been developed to:
- •
- update the reference to the country from East Timor to 'Timor-Leste', the title preferred by the Timor-Leste government,
- •
- clarify how much of the tax paid to Timor-Leste is to be allowed as a credit in the Australian tax return - the credit is subtracted from the PAYG amount that would otherwise be remitted to the ATO,
- •
- clarify the information that needs to be provided to the payee, and
- •
- update the examples to reflect these changes.
13. Consultation has occurred with several payers who supplied incorrect payment summaries to identify why the current schedule was not being correctly applied. They indicated that they had misunderstood what was required. A payer who got it right indicated that they had had discussions with the Tax Office prior to preparing their payment summaries. Another payer who got it right had had no discussions but thought the schedule could be improved. There should be no impact as a result of the revision as all it does is clarify an area where misunderstandings had arisen.
29 August 2005
Deputy Commissioner of Taxation
Legislative References:
Taxation Administration Act 1953
The Act
Tax Laws Amendment (Personal Income Tax Reduction) Bill 2005
The Act
Legislative Instruments Act 2003
The Act
OPS 2005/JPDA01