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Ruling

Subject: Tax File Number Declarations

Question 1

Can you obtain and retain TFN details from your employees in a proprietary retrievable electronic form, which is not the present physical (paper) Tax File Number Declaration form?

Answer

You are able to have your payees complete an electronic TFN declaration provided it is in the approved form and contains a declaration which meets the electronic signature requirements.

This ruling applies for the following periods:

01/07/2012 to 30/06/2013

The scheme commences on:

01/07/2012

Relevant facts and circumstances

You have established an online management system.

The purpose of the system is that, subject to security and access rights, the entities working on the relevant job (including payees, their managers etc) will be able to log onto the system and see in real time the state of contract negotiations, costs, invoices, contract variations, renewal dates and a copy of the advertisement.

When the payee registers with the system they are required to supply payroll data. This includes details regarding superannuation funds and membership numbers, date of birth, address, their agent and their Tax File Number (TFN).

The TFN data capture point is the registration on the system, not handing over of a form.

Relevant legislative provisions

Section 202C of the Income Tax Assessment Act 1936

Section 388-50 of Schedule 1 to the Taxation Administration Act 1953

Section 388-75 of Schedule 1 to the Taxation Administration Act 1953

Section 995-1 of the Income Tax Assessment Act 1997

Reasons for decision

Summary

You are able to have your payees complete an electronic TFN declaration provided it is in the approved form and contains a declaration which meets the electronic signature requirements.

Detailed reasoning

Subsection 202C(1) of the Income Tax Assessment Act 1936 (ITAA 1936) provides that a person who is a recipient of a payer, or expects to become a recipient of a payer, may make a Tax File Number (TFN) declaration in relation to the payer.

Subsection 202C(2) of ITAA 1936 states that to be effective, the declaration must be in the approved form.

Section 388-50 of Schedule 1 to the Taxation Administration Act 1953 (TAA 1953) provides criteria for what is an 'approved form'. The following are requirements of an 'approved form':

a) it is in the form approved in writing by the Commissioner for that kind of return, notice, statement, application or other document

b) it contains a declaration signed by a person or persons as the form requires

c) it contains the information that the form requires, and any further information, statement or document as the Commissioner requires, whether in the form or otherwise

d) for a return, notice, statement, application or document that is required to be given to the Commissioner - it is given in the manner that the Commissioner requires (which includes electronically).

TFN Declarations are now able to be completed electronically by the payee and submitted electronically by the payer provided they meet the above conditions. In accordance with section 388-50 of Sch1 to the TAA 1953 a TFN declaration in an electronic format must still be an approved form and contain the information that the form requires.

Information on what is required on a TFN Declaration can be found on a paper copy of the form. This can be obtained on www.ato.gov.au by searching for a TFN Declaration (NAT 3092) and its associated instructions. Details that are required include (but are not limited to) the following:

· Name

· TFN

· Address

· Residency for tax purposes

· Whether the tax free threshold is being claimed

· Whether the payee has a Higher Education Loan Repayment (HELP) debt

A declaration by the payee

Whilst a payee may complete an electronic version of the TFN Declaration it still must meet the approved form requirements as set out in section 388-50 of Sch1 to the TAA 1953 and contain all relevant required information.

You have advised that you obtain payroll data from the payee at the time of registration which includes a TFN etc. Whilst you collect this type of data from the payee at registration this would not suffice as a TFN declaration. If the payee is to complete a TFN declaration, either by paper or electronically, the payee must provide all details as required and set out on NAT 3092 "Tax File Number Declaration".

As stated above the TFN Declaration must also contain a declaration by the payee. Section 388-60 of Sch1 to the TAA 1953 states that if you give a return, notice, statement, application or other documents to the Commissioner in the approved form, you must make a declaration in the approved form that any information in the document is true and correct.

Paragraph 388-75(3)(a) of Sch1 to the TAA1953 states that any return, notice, statement, application or other document of yours that is lodged electronically if you give it to the Commissioner - must contain your declaration with your electronic signature.

In summary, any electronic TFN declaration completed by a payee must contain a declaration to the effect that the statement being made is true and correct and the payee's electronic signature. Section 995-1(1) of the Income Tax Assessment Act 1997 defines an electronic signature as a unique identification of a payee in electronic format that is approved by the Commissioner. Electronic signatures must be able to satisfy a number of criteria which include the following:

· Be adequate to authenticate the identity of the payee

· Be unique to the payee and secure using a password

· Minimise the risk of repudiation to declarations made by a payee when signing the virtual declaration form.

The Commissioner has issued a fact sheet regarding electronic signatures and the minimum requirements that must be satisfied with regard to TFN Declarations - "Fact sheet for payers and software developers - Signature requirements for approved electronic tax file number declarations - payee to payer process" (NAT 73963-03.2012).

Further, www.ato.gov.au/softwaredevelopers, provides details on standard ATO format and electronic reporting specifications that are required to be met when developing an electronic version of a TFN declaration.

In conclusion, you are able to have your payees complete an electronic TFN declaration provided it contains all information required (as per the paper version of a TFN declaration) which includes a declaration by the payee and that the declaration meets the electronic signature requirements.