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Edited version of private advice
Authorisation Number: 1051637083161
Date of advice: 26 February 2020
Ruling
Subject: PAYG (withholding)
Question
Is there an obligation for you to withhold from payments made to contractors under section 12-35 of Schedule 1 of the Taxation Administration Act 1953 (TAA 1953)?
Answer
No
After considering your facts against the relevant indicators, we accept that you have no obligation to withhold from payments made to workers as they are not employees. 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:
Financial year ending 30 June 20XX
Financial year ending 30 June 20XX
Financial year ending 30 June 20XX
The scheme commences on:
1 July 20XX
Relevant facts and circumstances
You operate a business that sells products primarily to the corporate market in Australia.
You developed the products and also sell the product directly to clients.
You have also engaged workers to assist in the selling of the products.
The services provided by each worker includes: sourcing sales contacts, contacting potential sales targets, to explain the products and to complete the sale of the products.
The workers are responsible for devising their own sales strategy.
The workers are engaged mainly through word of mouth.
The workers were first engaged in October 2019.
A copy of the contract template for the workers engagement with you was provided. The relevant terms of the engagement are as follows:
· The workers have their own ABN's which will be quoted on invoices.
· The workers work their own hours which suit their schedule.
· The workers use their own equipment.
· The workers set their own directions and work at locations that suit them.
· The workers are not required to perform services exclusively for your entity and are free to work for others.
· The workers will not represent themselves as your employees.
· The workers are free to delegate their role to someone else as long as that person has the necessary skills to undertake the work.
· The workers' right to delegate is unfettered and does not require your approval.
· The workers are responsible for paying the person to whom they have delegated to.
· The workers are paid for a result or outcome only.
· The workers are paid a commission based payment of 7.5% of the total fee that is charged to the client. The commission based payment is a once-off payment only and the workers are not entitled to any trailing commission in respect of any clients who renew their licenses.
· The workers are only entitled to raise an invoice once your entity informs them that a client has paid for the products.
· Either your entity or the workers can terminate the contract at any time for any reason whatsoever by providing three days' notice in writing.
Relevant legislative provisions
Taxation Administration Act 1953 Section 12-35 of Schedule 1.