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Edited version of your written advice
Authorisation Number: 1013109437557
Date of advice: 19 October 2016
Ruling
Subject: Payments to administrators
Question 1
Are payments by the local Council to Administrators subject to Pay As You Go (PAYG) withholding?
Answer
No.
Question 2
Are benefits provided to Administrators subject to fringe benefits tax (FBT)?
Answer
No.
This ruling applies for the following periods:
Years ended 30 June 20XX - 20ZZ
The scheme commences on:
1 July 20WW
Relevant facts and circumstances
The Administrator for the Local Council was appointed by proclamation in accordance with the applicable State's law.
The Administrator holds, for a specified term, all of the statutory functions of the governing body and Mayor of the Local Council.
Administrator remuneration is paid out of council funds.
The Council has not made a resolution pursuant to section 446-5 of Schedule 1 to the Taxation Administration Act 1953 (TAA).
Relevant legislative provisions
Taxation Administration Act 1953 Schedule 1 Section 12-45
Taxation Administration Act 1953 Schedule 1 Section 446-5
Reasons for decision
Question 1
Summary
The Council is not required to withhold an amount of tax from remuneration paid to its Administrator.
Detailed reasoning
Section 12-45 of Schedule 1 to the TAA provides that an entity must withhold an amount of tax from payments to an individual who is:
(a) a member of an Australian legislature; or
(b) a person who holds, or performs the duties of, an appointment, office or position under the Constitution or an Australian law; or
(c) a member of the Defence Force, or of a police force of the Commonwealth, a State or a Territory; or
(d) a person who is otherwise in the service of the Commonwealth, a State or a Territory; or
(e) a member of a local governing body where there is in effect, in accordance with section 446-5, a unanimous resolution by the body that the remuneration of members of the body be subject to withholding under this Part.
Councillors and Mayors are considered to be members of local governing bodies (local councils) and are excluded from the Pay As You Go (PAYG) withholding system unless a resolution was made by the relevant council pursuant to section 446-5 of Schedule 1 to the TAA.
Section 446-5 of Schedule 1 to the TAA provides the requirement for a unanimous resolution by local governing bodies. The Council has not made a unanimous resolution pursuant to section 446-5.
The issue for consideration is whether or not the Administrator, appointed in the absence of Councillors and Mayors, is considered to be a member of the Council.
The Office of Local Government Model Code of Conduct provides that Councillors or Administrator/s are the governing body of the Council. The Proclamation which governs the appointment of Administrators provides that the Administrator has the functions of the Council and the Mayor of the Council.
It can be seen that the Administrator in this position is there to fulfil the role of all Councillors and also the Mayor, until such time as new Councillors are elected in forthcoming elections. Until that time, the Administrator is the sole member of the Council.
Accordingly, the Commissioner accepts that the Administrator is a member of a local governing body for the purposes of section 12-45 of Schedule 1 to the TAA, and as no resolution has been made by the Council, there is no requirement to withhold tax on any remuneration paid to the Administrator.
Question 2
Provisions of the Fringe Benefits Tax Assessment Act 1986 will only come into effect for benefits provided to the Administrator where the Council makes a resolution pursuant to section 446-5 of Schedule 1 to the TAA.
As no such resolution has been made, benefits provided to the Administrator will not be subject to fringe benefits tax.