Second Reading SpeechCampbell, Sen Ian (LP, WA, Government)
That this bill be now read a second time.
This bill will replace the outdated income tax collection systems with one comprehensive modern collection system called pay as you go, or PAYG.
The bill, together with another I will introduce in Spring, will also implement a number of administrative reforms announced by the government before the last election. One important reform is the introduction of a single activity statement reducing the number of interactions businesses have with the Australian Taxation Office. For many this will mean only four statements and payments each year.
The new PAYG will replace provisional tax, company instalments, pay as you earn, prescribed payments and reportable payments. It also draws together into one system all of the other withholding arrangements, like non-resident withholding, tax file number (TFN) withholding and withholding from mining and natural resource payments.
Under PAYG, payment dates will be aligned. Businesses in GST will pay their income tax instalments at the same time, quarterly, after their income is earned.
Currently most taxpayers pay a percentage of last year's tax and individuals also pay an uplift factor. PAYG instalments will be based on actual income. This will mean that the payments will fluctuate with trading conditions. Taxpayers will pay less when they earn less and more when their income increases. Taxpayers will be able to vary the amount of their instalments, for example, in the event of an unforeseen downturn in trading conditions. In certain circumstances this could lead to a refund.
Individuals not in the GST system will be in the PAYG system for investment income. Where they are large payers, they will pay quarterly. There will be an option to pay quarterly notional amounts if they prefer not to make quarterly instalment calculations.
PAYG takes advantage of the opportunities provided by the GST and the single activity statement. Businesses in GST will calculate their quarterly income tax instalment based on the GST sales they report.
The new integrated PAYG withholding system will reduce compliance costs by removing uncertainty and reducing the amount of paperwork and the number of payment dates. In line with the government's earlier announcement, withholding will be required from payments to employees and other office holders, payments to workers by labour hire firms, payments under voluntary agreements and payments where the payee's Australian business number, or ABN, is not quoted. The new withholding arrangements do not try to make contractors employees. PAYG does not fall back on generic descriptions and deeming provisions. It describes the payments that are subject to withholding.
The new arrangements will provide more flexibility. It will be possible to add additional categories of withholding if it is desirable to do so. This will ensure that the withholding rules are able to evolve and stay relevant over time. Withholding rules should not be an obstacle to more efficient ways of doing business.
It will also be possible for businesses and their contractors to choose to enter into a voluntary agreement. Under these agreements, the business will withhold and, in most cases, the contractor will not have to charge GST. Finally, the new `no-ABN' withholding will impact on the cash economy by making it harder for unscrupulous operators to evade their fair share of tax.
Full details of the measures in the bill are contained in the explanatory memorandum.
I commend the bill.