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Edited version of private ruling
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Ruling
Subject: PAYG Withholding - Payment Summaries
Question 1
Are payments of salary, wages, bonuses or allowances by a Statutory Authority to individuals as employees of another entity subject to the pay as you go withholding tax rules in accordance with section 12-35 of Schedule 1 to the Taxation Administration Act 1953 (TAA)?
Answer
Yes
The scheme commences on:
1 January 2011
Relevant facts and circumstances
The taxpayer is a state Statutory Authority.
The state government employs individual staff however they are paid and receive payment summaries from the taxpayer.
The taxpayer reports to a Board of Directors for all governance matters.
A new governance reporting structure is to be implemented.
Under the new governance reporting structure the taxpayer will continue as a separate legal entity and its function and performance will remain unchanged.
Relevant legislative provisions
Taxation Administration Act 1953 Part 2-5 of Schedule 1,
Taxation Administration Act 1953 Section 12-35 of Schedule 1
Taxation Administrative Act 1953 Section 16-155 of Schedule 1.
Reasons:
Question 1
Part 2-5 of Schedule 1 to the TAA contains the pay as you go (PAYG) withholding system. It deals with the collection and recovery of income tax and other liabilities.
Section 12-35 of Schedule 1 to the TAA provides that an entity must withhold amounts from salary, wages, commission, bonuses or allowances it pays to an individual as an employee (whether of that or another entity).
For the provision to apply there must be a payment by an entity:
· of salary, wages, commission, bonuses or allowances
· made to an individual, and
· made because an employer/employee relationship exists (with the paying entity or another entity).
Under the new governance structure the taxpayer will pay salary, wages, commission, bonuses or allowances to individuals as employees of the state government.
Accordingly amounts must be withheld by the taxpayer from payments to individuals as employees of the state government in accordance with section 12-35 of Schedule 1 to the TAA.
Further section 16-155 of Schedule 1 to the TAA 1953 advises that where an entity (the payer) has made one or more withholding payments under section 12-35 of Schedule 1 to the TAA to another entity (the recipient) the payer must, within 14 days after the end of a financial year, give a payment summary (and a copy of it) to the recipient.
Therefore the taxpayer must provide a payment summary where it has made one or more withholding payments under section 12-35 of Schedule 1 to the TAA to individual employees of the state government within 14 days after the end of a financial year.