Edited version of private advice

Authorisation Number: 1051941630227

Date of advice: 1 November 2022

Ruling

Subject: PAYG withholding

Question 1

Are the Payments by Company M subject to Pay As You Go (PAYG) withholding under section 12-190 of Schedule 1 to the Taxation Administration Act 1953 (TAA) in respect of Entity A?

Answer

No.

Question 2

Are the Payments by Company M subject to PAYG withholding under section 12-190 of Schedule 1 to the TAA in respect of the Native Title Holders, collectively or individually?

Answer

No.

This ruling applies for the following periods:

Income year ending 30 June 20XX

Income year ending 30 June 20XX

Income year ending 30 June 20XX

Income year ending 30 June 20XX

Income year ending 30 June 20XX

The scheme commences on:

1 August 20XX

Relevant facts and circumstances

People Group A (collectively referred to as 'the People') are Native Title Holders. They are not registered for Goods and Services Tax (GST).

The Charitable Trust is registered with the Australian Charities and Not-for-Profits Commission (ACNC) as a charitable institution and public benevolent institution, and is a Benefits Management Structure (BMS) to which the People are the beneficiaries. The Charitable Trust is registered for GST.

Entity A is a body acting in its capacity as the Registered Native Title Body Corporate (RNTBC) holding Native Title on trust for the People. Entity A acts for and on behalf of the People. Entity A does not have an Australian Business Number (ABN) and is not registered for GST.

Company M is a XXXX and XXXX company and is registered for GST.

Entity A, the Charitable Trust and Company M have entered into an Agreement in relation to Company M's XXXX operations in relation to the People's Native Title in Location X.

Under the Agreement:

•         Entity A and the People do not lease, licence or otherwise grant any interest in property to Company M or any other entity.

•         Company M must pay the Payments into a BMS (the Charitable Trust), which structure is at all times comprised of the following elements:

(a)  an Eligible Trustee;

(b)  an Eligible Charitable Trust; and

(c)   is compliant with the requirements of the BMS Principles.

The purpose of the Charitable Trust as the BMS is to ensure appropriate governance and agreed use of the payments from Company M by the People. The Charitable Trust's promises and obligations under the Agreement are for the sake of governance and for the benefit of the People.

Under the Agreement, Company M is to make a range of Payments immediately and over time to the Charitable Trust.

The Payments that are the subject of this ruling are those paid by Company M to the Charitable Trust as the BMS.

Relevant legislative provisions

Taxation Administration Act 1953 Section 12-190 of Schedule 1

Reasons for decision

Question 1

Are the Payments by Company M subject to PAYG withholding under section 12-190 of Schedule 1 to theTAA in respect of Entity A?

Summary

The Payments by Company M will not be subject to PAYG withholding under section 12-190 of Schedule 1 to theTAA in respect of Entity A because Entity A will not be making a supply in relation to the Payments.

Detailed reasoning

Subsection 12-190(1) of Schedule 1 to the TAA relevantly provides that:

An entity (the payer) must withhold an amount from a payment it makes to another entity if:

(a) the payment is for a *supply that the other entity has made, or proposes to make, to the payer in the course or furtherance of an *enterprise *carried on in Australia by the other entity; and (b) none of the exceptions in this section applies.

The relevant issue for Entity A is whether it is making a supply to the payer, Company M. When an agent uses its authority to act for a principal, any act done on behalf of that principal is an act of the principal.

Under the Agreement, Entity A has warranted that the People have consented and authorised Entity A's actions under the Agreement, and that Entity A is acting on behalf of the People. That is, Entity A's role in relation to the Payments and obligations is only with the consent and authorisation of the People.

Without that consent and authorisation, Entity A would not be able to enter into the Agreement or undertake any obligations under them. Entity A must also provide information to the People about the Agreement and benefits.

Accordingly, the Agreement is consistent with Entity A acting as agent for the People, and there are no indicators of Entity A acting as principal.

The Commissioner considers that Entity A's role as agent of the People is clear and that, as a RNTBC, there is no conflict between Entity A as trustee and as agent.

The Commissioner is also of the view that Entity A will not be making a supply in relation to the Payments such that paragraph 12-190(1)(a) of Schedule 1 to the TAA would not be satisfied. As such, the Payments will not be subject to PAYG withholding in respect of Entity A.

Question 2

Are the Payments by Company M subject to PAYG withholding under section 12-190 of Schedule 1 to the TAA in respect of the People, collectively or individually?

Summary

The Payments by Company M will not be subject to PAYG withholding under section 12-190 of Schedule 1 to the TAA in respect of the People, collectively or individually. This is because the People, collectively or individually, will not be making a supply in the course or furtherance of an enterprise in entering into and performing any of the obligations under the Agreement.

Detailed reasoning

The requirements in subsection 12-190(1) of Schedule 1 to the TAA were outlined in the response to Question 1.

The relevant issue for the People collectively or individually is whether they are making a supply in the course or furtherance of carrying on an enterprise.

Paragraph 149 of MT 2006/1 provides that 'enterprise' is defined in section 41 of the A New Tax System (Australian Business Number) Act 1999 to have the meaning given by section 9-20 of the A New Tax System (Goods and Services Tax) Act 1999 (GST Act). 'Enterprise' is defined in section 9-20 of the GST Act to include, relevantly:

an activity, or series of activities, done:

(a)  in the form of a business; or

(b)  in the form of an adventure or concern in the nature of trade; or

(c)   on a regular or continuous basis, in the form of a lease, licence or other grant of an interest in property.

The Commissioner is of the view that the People, collectively or individually, will not be making a supply in the course or furtherance of an enterprise in entering into and performing any of the obligations under the Agreement such that paragraph 12-190(1)(a) of Schedule 1 to the TAA would not be satisfied. As such, the Payments will not be subject to PAYG withholding in respect of the People, collectively or individually.