Edited version of your private ruling

Authorisation Number: 1012543694851

Ruling

Subject: PAYG withholding

Question

Are payments made to members of advisory committees where the committees have not been established under an Act subject to Pay As You Go (PAYG) withholding?

Answer

No.

This ruling applies for the following periods

Year ended 30 June 2013

Year ending 30 June 2014

Year ending 30 June 2015

Year ending 30 June 2016

Year ending 30 June 2017

Year ending 30 June 2018

The scheme commences on:

1 July 2012

Relevant facts and circumstances

A section of an Act states the Commission may, at any time and when requested by the Minister appoint advisory committees to assist it in the performance of its functions and duties.

An advisory committee shall consist of such number of persons are appointed by the Commission. Subject to the direction of the Commission an advisory committee may determine its own procedures.

Members of advisory committees are entitled to be paid such remuneration and travelling and other allowances as may be determined by the Ministers on the recommendation of the Public Sector Commissioner.

The Commission has established several advisory committees that have been in place for several years to advise on different issues.

The advisory committees are considered long term committees each of which has a regular meeting schedule.

Each of the advisory committees has a clear area of operation which has been mandated by the Commission. The Commission has a standing agenda item for each of the advisory committees to provide a monthly report of activities undertaken and outcomes delivered.

Relevant legislative provisions

Taxation Administration Act 1953 Schedule 1 Section 12-45

Reasons for decision

Section 12-45 in Schedule 1 to the Taxation Administration Act 1953 (TAA) imposes an obligation on the paying entity to withhold an amount from salary, wages, commission, bonuses or allowances it pays to an individual as an office holder.

Where an Act provides that a Minister may appoint such persons as are necessary for the effective administration of the Act and then states the functions and powers of appointment and sets out the tenure of their appointment that individual would be considered to be person described by subsection 12-45(b) in Schedule 1 to the TAA with an obligation to withhold.

Taxation Ruling TR 2002/21 discusses PAYG withholding from salary, wages, commissions, bonuses or allowances paid to office holders and government advisory committees. This ruling makes specific comment on whether advisory committee members are office holders under the Constitution or an Australian law. 

Paragraphs 146 and 147 of TR 2002/21 state: 

146. Advisory committees may be established, often through the exercise of a statutory power, by a person or statutory body to provide advice on matters referred to the advisory committee. The positions, duties and functions of the advisory committees are not covered by a statute, nor is there a relationship created with the Crown itself. They are at the discretion of the person or body that establishes the advisory committee and would be covered by the contract with the advisory committee members. As such, the positions do not have an independent existence and cannot have powers, duties or functions attached to the positions.

147. Therefore, members of these types of advisory committees would not be statutory or common law office holders. Section 12-45 in Schedule 1 to the TAA does not apply to payments made to members of these ad hoc advisory committees.

Ad hoc is not defined in the TAA and therefore takes its meaning from the Macquarie Dictionary Sixth Edition as: for this (special purpose); an ad hoc committee is one set up to deal with one subject only… In your circumstances you have advisory committees set up to deal with specific subjects.

The example at paragraph 100 to 101 of TR 2002/21 explains why advisory committees are not in the nature of the functions or duties which would be exercisable by a statutory or common law office holder.

100. Section 20B of the Marketing of Potatoes Act 1946 (WA) states that:

The corporation may establish consultative groups of persons for the purpose of considering and advising the Corporation on, any matter relating to the performance of the functions of the Corporation that is referred to them by the Corporation...

101. Persons appointed to those consultative groups would not be considered covered by paragraphs 12-45(1)(b) or (d) in Schedule 1 to the TAA. The Marketing of Potatoes Act 1946 does not specify actual positions which members of consultative groups can occupy, and the constitution of the group may vary from time to time as the members are appointed on an ad hoc basis without tenure of appointment. There are no duties, powers or functions which attach to the position itself. The positions, duties and functions are at the discretion of the Corporation and would be covered by the contract between the Corporation and the individual engaged on the advisory group. The individual's engagement will be governed by contract between the parties - that contract will either be a common law employment contract or an independent contract. The functions or duties which the consultative group performs - that is, an advisory function - are not in the nature of the functions or duties which would be exercisable by a statutory or common law office holder.

In your circumstances even though the committees are long standing and established by the Commission they have not been established by an Act and the functions and powers of appointment of persons to the committees and the tenure of their appointment have not been set out.

The members of these committees do not satisfy the criteria to be office holders for the purposes of the PAYG withholding provisions as they are not office holders that have been appointed under a specific Act. Therefore you are not required to deduct PAYG withholding tax from payments made to the members of these committees.