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Edited version of private advice
Authorisation Number: 1051533623052
Date of advice: 3 July 2019
Ruling
Subject: PAYG withholding
Question
Is the entity required to withhold PAYG withholding amounts under section 12-35 of Schedule 1 to the Taxation Administration Act 1953 from the payment to be made on compassionate grounds to the Australian resident deceased estate?
Answer
No.
After considering the facts, we accept that there is no obligation on the entity to withhold from the payment to the deceased estate as the deceased's employment never commenced so the payment is not made in their capacity as an employee. Further information on the Commissioner's view can be found in Taxation Ruling TR 2005/16 Income tax: Pay As You Go - withholding from payments to employees.
This ruling applies for the following periods:
Year ended 30 June 20XX
Year ending 30 June 20XX
The scheme commences on:
1 July 20XX
Relevant facts and circumstances
A worker, who was due to join you as an employee, passed away before they could commence employment.
The worker's contract stated that when they commenced employment they would receive a new hire payment to compensate them for the loss of unvested restricted shares, unvested options, deferred cash and/or loss or forfeiture of a bonus due to them leaving their previous employment in order to take up employment with you.
Notwithstanding the worker not commencing employment such that there was no contractual obligation to make the new hire payment, you would like to pay an equivalent amount to the deceased's estate in a lump sum as a gift on compassionate grounds.
Making of the payment is at your complete discretion.
Relevant legislative provisions
Taxation Administration Act 1953 section 12-35 to Schedule 1