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Edited version of your written advice
Authorisation Number: 1012903587195
Date of advice: 29 October 2015
Ruling
Subject: PAYG withholding remitted from salary
Question and answer
Are you required to have PAYG withholding remitted from your salary by the foreign country embassy?
No.
Are you required to remit PAYG withholding yourself to the ATO?
No.
This ruling applies for the following periods:
Year ended 30 June 2016
The scheme commenced on:
1 July 2015
Relevant facts and circumstances
This ruling is based on the facts stated in the description of the scheme that is set out below. If your circumstances are materially different from these facts, this ruling has no effect and you cannot rely on it. The fact sheet has more information about relying on your private ruling.
You and your partner work for a foreign embassy in Australia.
You and your partner are residents of Australia.
The foreign country embassy has advised you and your partner that they are not required to withhold PAYG from your wages.
The foreign country embassy has offered to withhold PAYG on your behalf and remit this to the ATO.
You and your partner wish to withhold your own PAYG in your personal bank account and remit this after you have lodged your income tax return and raised a tax liability.
Relevant legislative provisions:
Taxation Administration Act 1953 section 12-35
Income Tax Assessment Act 1997 section 6-5
Income Tax Assessment Act 1997 section 6-10
Reasons for decision
The assessable income of an Australian resident includes ordinary income and statutory income from all sources, whether inside or outside of Australia (section 6-5 and section 6-10 of the Income Tax Assessment Act 1997 (ITAA 1997)).
Ordinary income is income according to ordinary concepts.
Statutory income is an amount that a provision of the ITAA 1936 or ITAA 1997 specifically provides for as assessable income.
Section 12-35 of the Taxation Administration Act 1953 states that an entity must withhold an amount from salary, wages, commission, bonuses or allowances it pays to an individual as an employee.
However in your situation you are employed by a foreign embassy in Australia, and as embassy operations are conducted by a foreign country, the foreign embassy is not required to withhold PAYG for Australian taxation purposes.
PAYG instalments are a system for making regular payments towards your expected annual income tax liability. You can voluntarily register for PAYG instalments at any time to reduce the chances of having to pay a large tax liability at the end of the financial year. However PAYG instalments only apply to you if you earn business and/or investment income over a certain threshold.
Therefore you are not required to have the foreign embassy withhold PAYG on your behalf, and you are not required to remit PAYG to the ATO on a withholding basis.
ATO view documents
Straightforward interpretation of the law.
Does Part IVA or any other anti-avoidance provision apply to this ruling?
The application of Part IVA of the ITAA 1936 has not been considered as this topic is in the SBIT low risk PART IVA list as specified in ORCLA.