Edited version of private advice

Authorisation Number: 1012637532540

Ruling

Subject: Withholding

Questions and answers

1. Are you required to withhold from your employees?

Yes.

2. Are you required to pay super guarantee?

Withdrawn - general advice provided.

This ruling applies for the following periods:

Year ending 30 June 2014

Year ending 30 June 2015

The scheme commenced on:

1 July 2013

Relevant facts and circumstances

You are a resident of Country y.

You intend on sending a number of employees to Australia to carry out work.

The employees will be from Country X.

The employees will be citizens of Country X and tax residents of Country X.

The employees will be in Australia for xx months.

You do not have a branch or office in Australia.

Relevant legislative provisions:

Taxation Administration Act 1953 Subdivision 12-FB of Schedule 1

Reasons for decision

Subsection 12-315(1) of Schedule 1 to the Taxation Administration Act 1953 (TAA) provides that withholding is required if the entity carrying on the enterprise makes the payment to another entity or to other entities jointly. This means the withholding obligations can apply to a payment to a partnership if one or more of the partners in the partnership will satisfy the conditions specified in subsection 12-315(2). Similarly, the withholding obligations can also apply to a joint venture if one or more of the persons in the joint venture will satisfy the conditions in the subsection.

An entity is covered by subsection 12-315(2) of the TAA if any of the following conditions is satisfied:

a) the entity is a foreign resident;

b) the payer believes, or has reasonable grounds to believe, that the entity is a foreign resident;

c) the payer has no reasonable grounds to believe that the entity is an Australian resident, and either:

(i) the entity has an address outside Australia (according to any record that is in the payer's possession, or is kept or maintained on the payer's behalf, about the transaction to which the payment relates); or

(ii) the payer is authorised to make the payment at a place outside Australia (whether to the entity or to anyone else);

d) the entity has a connection outside Australia of a kind set out in the regulations.

Payments to foreign residents are not included in the general exceptions from withholding for exempt income in subsection 12-1(1) of Sch 1 to the TAA 1953. Therefore, withholding from payments to foreign residents will be required regardless of whether the amount is exempt income.

Withholding is required from a payment of a kind set out in the regulations.

You are a foreign resident company and is therefore required to withhold from the payments made to your employees carrying out work in Australia.

General taxation advice

The following information is provided as written guidance. A taxpayer who relies on guidance will remain liable for any tax shortfall if the guidance is incorrect or misleading and they make a mistake as a result (unless a time limit imposed by the law precludes the liability). However, they will be protected against the shortfall penalty and interest on the tax shortfall provided they relied on that guidance reasonably and in good faith.

A private ruling which is binding on the Commissioner is not available on the issues in this response because private rulings are not available on superannuation guarantee matters.

When superannuation guarantee (SG) is payable

All employers are required to provide a minimum level of superannuation support for their eligible employees by the SG period due date unless an exclusion applies under the Superannuation Guarantee (Administration) Act 1992 (SGAA).

From 1 July 2008, employers must use ordinary time earnings as the earning base to calculate the minimum SG contributions required for employees.

OTE is usually the amount an employee earns for their ordinary hours of work. It includes commissions, shift-loadings and some allowances, but doesn't include overtime payments. Superannuation Guarantee Ruling SGR 2009/2 Superannuation guarantee: meaning of the terms 'ordinary time earnings' and 'salary or wages' provides further guidance on what constitutes OTE.

From 1 July 2003, the SG periods are quarterly, with a due date of the 28th day of the month following the end of each period, as shown in the following table:

Salary and wage exclusions under the SGAA

Employers do not have to make superannuation contributions under the SGAA for certain employees. Section 27 of the SGAA sets out general exemptions for salary or wages for SGC purposes.

Subsection 27(1)(b) of the SGAA states:

(b) salary or wages paid to an employee who is not a resident of Australia for work done outside Australia (except to the extent that the salary or wages relate to employment covered by a certificate under section 15C.

Under section 15C of the SGAA an employee who is sent to work temporarily in Australia from a country with whom Australia has a scheduled international social security agreement does not have to receive superannuation support while working in Australia if their employer has obtained a Certificate of Coverage from the relevant authority in the country of their residence.

Australia does not currently have a bilateral agreement with Country X, although negotiations for this have commenced.

For more information on bilateral agreements, please see the ATO website ato.gov.au.

Subsection 27(1)(d) of the SGAA states:

(d) salary or wages paid to an employee who is a prescribed employee for the purposes of this paragraph

Subregulation 7(1) of the Superannuation Guarantee (Administration) Regulations 1993 (SGAR) sets out the classes of employees who are prescribed employees for the purposes of Subsection 27(1)(d) of the SGAA.

Subregulation 7(1)(e) of the SGAR states that the following employee is a prescribed employee

(e) an employee who is the holder of a Subclass 457 (Business (Long Stay)) visa if:

(i) the employee has been appointed by a company operating in Australia to be the national managing executive or deputy national managing executive or a state manager; and

(ii) the employee was nominated as mentioned in paragraph 457.223(2)(c), 4(d) or 5(d) of Schedule 2 to the Migrations Regulations 1994, or identified as mentioned in subparagraph 457.223(3)(b)(i) of that Schedule.

Subregulation 7(1)(f) of the SGAR states that the following employee is a prescribed employee

(f) an employee who is the holder of a Subclass 457 (Business (Long Stay)) visa if:

(i) the employee holds a position as a senior executive of a company operating in Australia; and

(ii) the employee was nominated as mentioned in paragraph 457.223(2)(c), (4)(d) or (5)(d) of Schedule 2 to the Migration Regulations 1994 or identified as mentioned in subparagraph 457.223(3)(b)(i) of that Schedule; and

(iii) the employee's position carries substantial executive responsibility; and

(iv) the employee's qualifications for the position are appropriate; and

(v) the employee's position is a full-time position;

Subregulation 7(1)(g) of the SGAR states that the following employee is a prescribed employee

(g) an employee who is the holder of a Subclass 457 (Business (Long Stay)) visa if:

(i) the employee is establishing a business activity in Australia on behalf of the employer; and

(ii) the employee's position carries substantial executive responsibility; and

(iii) the employee's qualifications for the position are appropriate; and

(iv) the employee's position is a full-time position.

As the SGAA is a self-assessment system, the employer will need to determine whether there is an SG obligation for an employee who is a 457 visa holder.

A class 457 visa is issued to a person who is sponsored by an employer. The visa is issued for a period greater than 4 months. The employee is the primary applicant, which is indicated on the visa. The existence of work conditions will be indicated by a code on the visa.

Not all employees entering Australia with a class 457 visa will be able to satisfy one of the three conditions indicated in the regulations. Employers continue to be required to make SG contributions for those employees who hold a 457 visa but do not satisfy one of the three conditions or exclusion as prescribed under section 27 of the SGAA.

Further information for your reference

Administratively binding advice (ABA) may be provided for superannuation guarantee matters outside the scope of a private ruling.

If you want to apply for administratively binding advice, you should use a private ruling application form.

Information on how to apply for ABA and what to include in your application can be found on the ATO website at ato.gov.au.

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