1051575990796 | Legal database

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Edited version of private advice

Authorisation Number: 1051575990796

Date of advice: 4 September 2019

Ruling

Subject: PAYG withholding

Question

Is there an obligation on the entity to withhold PAYG Withholding from payments made to workers engaged by the entity under section 12-35 of Schedule 1 to the Taxation Administration Act 1953?

Answer

No.

After considering your facts against the relevant indicators, we accept that there is no obligation on entity to withhold from payments made to individuals and entities engaged through the entity as they are not employees. Further information on the Commissioner's view can be found in Taxation Ruling TR 2005/16 Income tax: Pay As You Go - withholding from payments to employees.

This ruling applies for the following periods:

Year ended 30 June 20XX

The scheme commences on:

1 January 20XX

Relevant facts and circumstances

The entity provides booking agency services for internal and external customers.

The main purpose of the agency is to encourage workers to have practical experience and to prepare them for job opportunities.

The customers of the agency include internal customers of the entity, for example, the workers will often be engaged to perform during student orientations or other university events. External customers like councils and local businesses can also engage the workers through the agency.

The potential workers to be hired through the agency need to have adequate skills. Their experience would be checked by the agency to make sure that the workers have the proper skills. The profiles of the workers are also listed on the agency's website and can be checked by customers prior to making any booking.

The usage of the workers are on a demand basis. On average, each worker is used three or four times per month.

The agency is not a separate entity. The agency has only one staff member who oversees the whole process from end to end.

The workers are paid by the entity and not by the entity's agency.

There is no formal contract signed between entity and the workers. After expressing their interest to be represented through the agency, the workers would be checked and if the agency is satisfied with the workers' skills, their profiles will be published on the agency's website and can be checked by customers prior to booking.

The workers are not paid based on a pre-set hourly rate, times the number of hours they worked. Before each engagement, the agency would negotiate a fee with the customer and each engagement is quoted individually according to the budget of the client. The workers invoice the entity to receive the payment. The entity does not have the expectation of making a profit or gain but to assist the workers and to obtain some practical experience. Therefore, no commission or similar payment is retained by entity and all the money collected from the client is passed on to the workers.

Generally, the client will determine the style or what kind of work they require from the entity's list of workers. The client also determines start and finish times of the workers. There is a description of what kind work and the format for each worker on the entity's website. The workers may decide how to perform the work within the requirements set by the client.

If the workers have to cancel, they would notify the entity who will alert the client and attempt to find a suitable replacement. In some cases, the booking may have to be cancelled if the time is limited or the client wishes to book another worker from a different entity.

Workers supply their own equipment. Most of the time the larger equipment is supplied by the client. Sometimes workers must supply the larger equipment and in which case, they can rent the equipment from entity free of charge.

The workers are representing entity when they are performing.

The workers are free to and encouraged to source their own work. The purpose of entity is to provide practical experience to the workers (who are mainly students and trainees) and the relationship between the entity and the workers is not exclusive.

The workers are encouraged to have their own insurance but they are also covered by the entity's insurance if they don't have their own.

Relevant legislative provisions

Taxation Administration Act 1953 Section 12-35 of Schedule 1

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