OPS 2015/2 - 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) under section 15-25 of Schedule 1 to the Taxation Administration Act 1953 (TAA).
2. The instrument makes withholding schedules, specifying the formulas and procedures to be used for working out the amount to be withheld by an entity under the pay as you go (PAYG) system.
3. The instrument contains 11 withholding schedules. Each schedule provides information for calculating the withholding amount, taking into account the particular circumstances presented in the schedule.
4. This is a legislative instrument for the purposes of the Legislative Instruments Act 2003.
5. The withholding schedules in this instrument replace schedules which currently apply. This instrument revokes those schedules that will be withdrawn.
Date of effect6. The instrument applies from 1 July 2015.
What is this instrument about?7. These schedules set out the formulas and procedures to be used for calculating the amount to be withheld by entities from withholding payments. The withholding schedules facilitate the collection of income tax, Medicare levy, Temporary Budget Repair levy, Higher Education Loan Program, Trade Support Loan and Financial Supplement repayments.
8. These withholding schedules are being updated to reflect the rates and thresholds which will apply from 1 July 2015 under Schedule 7 to the Income tax Rates Act 1986 and the annual indexation of repayment thresholds for the Higher Education Loan Program, Trade Support Loan and Financial Supplement.
What is the effect of this Instrument?9. The effect of this instrument is to provide withholding schedules which support the PAYG withholding system.
10. A number of groups rely upon the withholding schedules. They include: employers, employees, professional tax advisers, payroll software developers, the Australian Taxation Office and payroll service providers.
11. This instrument also withdraws 11 withholding schedules which will not apply to payments made after its date of effect.
12. An assessment of the compliance cost impact indicates that the impact will be minor for both implementation and on-going compliance costs. The new instrument is of a minor or machinery nature.
Background13. The PAYG system is a simple and convenient way for individual taxpayers to meet their annual income tax either through instalments or through withholding as their income is earned. This system aims to prevent large end-of-year tax bills for individuals. It also ensures that Government has the revenue it needs during the year to provide services and benefits to the community.
14. The TAA empowers the Commissioner to make withholding schedules specifying the amounts, formulas and procedures to be used for working out the amounts required to be withheld by entities. The TAA requires the Commissioner to make each withholding schedule publicly available.
15. Each withholding schedule is tailored to meet the circumstances of a particular class of payee or category of payment.
Consultation17. The making and publication of withholding schedules is a routine part of tax administration.
18. The ATO will provide the necessary information to payroll and software providers, and those employers who code their own in-house payroll systems, to ensure that they have sufficient time to update their software packages.
Statement of Compatibility with Human RightsThis Statement is prepared in accordance with Part 3 of the Human Rights (Parliamentary Scrutiny) Act 2011.
Taxation Administration Act Withholding Schedules 2015This Legislative Instrument is compatible with the human rights and freedoms recognised or declared in the international instruments listed in section 3 of the Human Rights (Parliamentary Scrutiny) Act 2011.
OverviewThis Legislative Instrument makes publicly available withholding schedules updated in accordance with the Pay As You Go (PAYG) system. The schedules provide certainty to payers about withholding correct amounts of tax on behalf of their payees, which then assists payees to meet their annual income tax liability.
Human rights implicationsThis legislative instrument does not engage any of the applicable rights or freedoms because the new instrument is of a minor or machinery nature. The schedules set out the amounts, formulas and procedures to be used for calculating the amount required to be withheld by entities from withholding payments.
ConclusionThis legislative instrument is compatible with human rights as it does not raise any human rights issues.
27 May 2015
Steve Vesperman
Deputy Commissioner of Taxation
Legislative References:
Taxation Administration Act 1953
Legislative Instruments Act 2003
OPS 2015/2