Edited version of private advice

Authorisation Number: 1052147164094

Date of advice: 12 September 2023

Ruling

Subject: PAYG withholding

Question 1

Is Entity A subject to Pay As You Go (PAYG) withholding sitting fees paid to members and acting members of Committee X and Committee Y pursuant to section 12-45 of Schedule 1 to the Taxation Administration Act 1953 (TAA)?

Answer

Yes.

Question 2

Is Entity A required under section 12-45 of Schedule 1 to the TAA to withhold an amount from sitting fees paid to Committee X and Committee Y members in circumstances where Entity A is provided with an excerpt of an employment contract or a written statement or letter from the member's nominated employer stating that the payment of sitting fees is to be paid to the member's nominated employer?

Answer

No.

Question 3

Where a Committee X or Committee Y member pays the sitting fee they received from Entity A to their nominated employer or directs Entity A to pay the sitting fee to their nominated employer, is Entity A required to include these amounts in an annual PAYG payment summary issued in the name of the Committee X or Committee Y member pursuant to section 16-155 of Schedule 1 to the TAA?

Answer

No.

Question 4

Are sitting fees paid by Entity A to members of the Advisory Committees in accordance with the relevant requirements of an Act subject to PAYG withholding pursuant to section 12-45 of Schedule 1 to the TAA?

Answer

No.

Question 5

Are sitting fees paid by Entity A to members of temporary Advisory Committees (otherwise referred to as 'working groups') subject to PAYG withholding pursuant to section 12-45 of Schedule 1 to the TAA?

Answer

No.

Question 6

Are sitting fees paid by Entity A to acting members of Committee X for their attendance at an Advisory Committee meeting in accordance with the relevant requirements of an Act subject to PAYG withholding pursuant to section 12-45 of Schedule 1 to the TAA?

Answer

Yes.

This private ruling applies for the following periods:

Income year ended 30 June 2023

Income year ending 30 June 2024

Income year ending 30 June 2025

Income year ending 30 June 2026

Income year ending 30 June 2027

Income year ending 30 June 2028

The scheme commenced on:

31 March 2022

Relevant facts and circumstances

You are part of a government organisation.

Legislation requires you to establish specific committees.

The membership composition, functions and activities of Committee X and Committee Y are specified in legislation.

Acting members of Committee X can be appointed by the Minister where the office of an appointed Committee X member becomes vacant, or an appointed Committee X member is unable to act for any reason. The acting member has the same functions and entitlements as that of an appointed member.

The legislation also allows you to establish advisory committees on an 'as needs' basis. These committees generally exist for a short time to assist in the performance of functions and for a specific purpose and operate until that purpose has been achieved. The legislation does not specify the membership composition, functions or activities of these committees.

Members of the various committees are entitled to be paid remuneration determined by the Minster on the recommendation of the Public Sector Commissioner. Some members pay the remuneration they receive to their nominated employer as it is a requirement as part of their employment contract.

Relevant legislative provisions

Taxation Administration Act 1953 section 12-45 of Schedule 1

Taxation Administration Act 1953 paragraph 12-45(1)(b) of Schedule 1

Taxation Administration Act 1953 section 16-155 of Schedule 1

Taxation Administration Act 1953 section 16-160 of Schedule 1

Reasons for decision

Question 1

Summary

Entity A is subject to Pay As You Go (PAYG) withholding on sitting fees paid to members and acting members of Committee X and Committee Y pursuant to section 12-45 of Schedule 1 to the Taxation Administration Act 1953 (TAA).

Detailed reasoning

Section 12-45 of Schedule 1 to the TAA requires an entity to withhold an amount from salary, wages, commission, bonuses or allowances it pays to an individual as:

(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.

The withheld amount is referred to as 'PAYG withholding'.

Taxation Ruling TR 2002/21 Income tax: Pay As You Go (PAYG) Withholding from salary, wages, commissions, bonuses or allowances paid to officers (TR 2002/21) discusses PAYG withholding from salary, wages, commissions, bonuses or allowances paid to office holders.

An office holder is a person who holds, or performs the duties of, an appointment, office or position under the Constitution or an Australian law.

Paragraph 14 of TR 2002/21 provides that an individual is considered to be appointed or engaged under an Act where it can be identified in the relevant legislation or statutory instrument that either:

•                     the particular office, position or appointment or

•                     the constitution of the relevant body (such as a panel, board committee or tribunal) to which the individual has been appointed

Further, paragraph 15 of TR 2002/21 states that the appointment, office or position must also exhibit the following characteristics of an office holder:

•                     independent existence: The office must exist regardless of the individual who occupies the office from time to time - that is, if the individual currently occupying the office vacates that office, the office must continue to exist to be filled by another individual

•                     duties, functions, responsibilities or powers: The office must have identifiable duties, functions, responsibilities or powers other than a mere advisory function. These features of the office (or of the panel, board, committee or tribunal to which the individual has been appointed) would usually be specified in the relevant legislation or statutory instrument

•                     the relevant duties, functions, responsibilities or powers must attach to the office itself, rather than the individual who occupies the office

As provided in paragraph 98 of TR 2002/21, where an Act provides that a Minister may appoint such persons as are necessary for the effective administration of the Act and states the functions and powers of appointment and sets out the tenure of their appointment, then remuneration of that individual would be considered to be covered by paragraph 12-45(1)(b) of Schedule 1 to the TAA.

That is, it is not necessary for the Act to specify a particular number of positions so long as there is an identified mode of appointment so that the positions are clearly identifiable, have an independent existence and have independent duties, functions or powers attached.

Application to members of Committee X

A member of Committee X who receives a sitting fee from Entity A is considered to be 'a person who holds, or performs the duties of, an appointment, office or position under the Constitution or an Australian law' on the basis that:

•                     their appointment is made under a specific Act

•                     the office exists independently of the person appointed to the position

•                     the Act outlines Committee X's functions, and

•                     the relevant duties, functions, responsibilities and powers are attached to the office and not the person holding them as section 380 of the Act permits the Minister to appoint an eligible person to act in the place of an appointed member where that member is unable to act.

The Macquarie Dictionary defines 'acting' as 'serving temporarily; substitute'. The acting member's position is only temporary however as provided by the Act, an acting member while acting in accordance with the terms of their appointment has all of the functions and entitlements of the appointed member. On this basis, an acting member of Committee X is still considered to be an office holder.

Application to members of Committee Y

A member of Committee Y who receives a sitting fee from Entity A is considered to be 'a person who holds, or performs the duties of, an appointment, office or position under the Constitution or an Australian law' on the basis that:

•                     Committee Y positions have been created under a specific Act

•                     the office exist independently of the person appointed to the position

•                     the Act specifies the number of positions on Committee Y, and there is an identified mode of appointment stated in the Act

•                     the Act outlines the functions of Committee Y and these are more than just advisory, and

•                     the relevant duties, functions, responsibilities and powers are attached to the office and not the person holding them as clause x of Schedule 1 to the Act permits the Ministers to alter or reconstitute Committee Y.

As members and acting members of Committee X and members of Committee Y are considered to be office holders, Entity A is required to withhold PAYG withholding amounts from sitting fees paid to those members and acting members pursuant to section 12-45 of Schedule 1 to the TAA.

Question 2

Summary

Entity A is required under section 12-45 of Schedule 1 to the TAA to withhold an amount from sitting fees paid to Committee X and Committee Y members in circumstances where Entity A is provided with an excerpt of an employment contract or a written statement or letter from the member's nominated employer stating that payment of sitting fees is to be paid to the member's nominated employer.

Detailed reasoning

As stated in the response to Question 1, Entity A has PAYG withholding obligations in respect of sitting fee payments made to members of Committee X and Committee Y as they are considered to be office holders. However, Entity A does not have PAYG withholding obligations when the conditions of the PAYG Withholding Variation: Company Directors and Office Holders Legislative Instrument (Legislative Instrument) are met.

The Legislative Instrument applies to payments by an entity that are covered by section 12-40 or section 12-45 of Schedule 1 to the TAA which are made to an individual who is a partner in a partnership, or a director or employee of another entity appointed as:

•                     a director

•                     a member of a committee of management of a company, or

•                     an office holder

who is required to pay those payments to the entity of which they are a partner, director or employee.

Where the conditions of the Legislative Instrument are met, the amount to be withheld from payments covered by the Legislative Instrument is varied to nil and the entity is exempted from the requirement to issue payment summaries under sections 16-155 and 16-160 of Schedule 1 to the TAA.

As members of Committee X and Committee Y are considered to be office holders and their sitting fees from Entity A are to be paid to their nominated employer, the conditions of the Legislative Instrument are met. As the Legislative Instrument takes effect in these circumstances, Entity A is not required to withhold an amount from such payments of sitting fees.

Question 3

Summary

Where a Committee X or Committee Y member pays the sitting fee they received from Entity A to their nominated employer or directs Entity A to pay the payment to their nominated employer, Entity A is not required to include these amounts in an annual PAYG payment summary issued in the name of the Committee X or Committee Y member pursuant to section 16-155 of Schedule 1 to the TAA.

Detailed reasoning

As stated in the response to Questions 1 and 2, Entity A has PAYG withholding obligations in respect of sitting fee payments made to members of Committee X and Committee Y as they are considered to be office holders. However, Entity A does not have PAYG withholding obligations when the conditions of the Legislative Instrument are met.

On this basis, Entity A is not required to withhold amounts from sitting fee payments made to members of Committee X and Committee Y and is exempted from the requirement to issue payment summaries under sections 16-155 and 16-160 of Schedule 1 to the TAA.

Question 4

Summary

Sitting fees paid by Entity A to members of the Advisory Committees in accordance with the relevant requirements of an Act is not subject to PAYG withholding pursuant to section 12-45 of Schedule 1 to the TAA.

Detailed reasoning

Section 12-45 of Schedule 1 to the TAA requires the paying entity to withhold an amount from salary, wages, commission, bonuses or allowances it pays to an individual as an office holder.

TR 2002/21 makes specific comment on whether Advisory Committee members are office holders under the Constitution or an Australian law.

Paragraphs 146 and 147 of TR 2002/21 state:

146. Advisory committees may be established, often through the exercise of a statutory power, by a person or statutory body to provide advice on matters referred to the committee. The positions, duties and functions of the committees are not covered by a statute, nor is there a relationship created with the Crown itself. They are at the discretion of the person or body that establishes the committee and would be covered by the contract with the committee members. As such, the positions do not have an independent existence and cannot have powers, duties or functions attached to the positions.

147. Therefore, members of these types of committees would not be statutory or common law office holders. Section 12-45 in Schedule 1 to the TAA does not apply to payments made to members of these ad hoc advisory committees.

The example in paragraphs 100 and 101 of TR 2002/21 explains why Advisory Committees are not in the nature of the functions or duties which would be exercisable by a statutory or common law office holder.

100. Section 20B of the Marketing of Potatoes Act 1946 (WA) states that: The corporation may establish consultative groups of persons for the purpose of considering and advising the Corporation on, any matter relating to the performance of the functions of the Corporation that is referred to them by the Corporation...

101. Persons appointed to those consultative groups would not be considered covered by paragraphs 12-45(1)(b) or (d) in Schedule 1 to the TAA. The Marketing of Potatoes Act 1946 does not specify actual positions which members of consultative groups can occupy, and the constitution of the group may vary from time to time as the members are appointed on an ad hoc basis without tenure of appointment. There are no duties, powers or functions which attach to the position itself. The positions, duties and functions are at the discretion of the Corporation and would be covered by the contract between the Corporation and the individual engaged on the advisory group. The individual's engagement will be governed by contract between the parties - that contract will either be a common law employment contract or an independent contract. The functions or duties which the consultative group performs - that is, an advisory function - are not in the nature of the functions or duties which would be exercisable by a statutory or common law office holder.

The Macquarie Dictionary defines 'ad hoc' as 'for this (special purpose); and ad hoc committee is one set up to deal with one subject only'. In the current circumstances, there are 2 Advisory Committees set up for legislative and construction industry safety.

As per the Facts, even though the committees are long standing and established by Committee X, they have not been established by an Act and the functions and powers of appointment of persons to these committees, and the tenure of their appointment, has not been set out by an Act.

The members of the Advisory Committees established under clause x of Schedule 1 to the Act do not satisfy the criteria to be office holders and are not appointed under a specific Act. They are not office holders for the purpose of the PAYG provisions as the Act does not provide details of the constitution of the committees or their specific duties or functions. Additionally, the committees are formed on an ad hoc basis and are temporary in nature.

On this basis, members of Advisory Committees are not considered to be office holders. Therefore, Entity A is not required to withhold amounts from payments of sitting fees made to those members pursuant to section 12-45 of Schedule 1 to the TAA.

Question 5

Summary

Sitting fees paid by Entity A to members of the temporary Advisory Committees (otherwise referred to as 'working groups') are not subject to PAYG withholding pursuant to section 12-45 of Schedule 1 to the TAA.

Detailed reasoning

As stated in response to Questions 1 and 4, an office holder is a person who holds, or performs the duties of, an appointment, office or position under the Constitution or an Australian law. There must be a specific Act or statutory instrument which identifies the creation of the position held. The appointment, office or position must also exhibit specific characteristics of an office holder.

In the current circumstances, members of temporary Advisory Committees (otherwise referred to as 'working groups') are not considered to be office holders as they do not satisfy the criteria to be office holders and are not appointed under a specific Act that provide details of the constitution of the committees or their specific duties or functions.

On the same basis as provided in the response to Question 4, temporary Advisory Committees are not considered to be office holders for the purpose of the PAYG provisions. Therefore, Entity A is not required to withhold amounts from payments of sitting fees made to these members pursuant to section 12-45 of Schedule 1 to the TAA.

Question 6

Summary

Sitting fees paid by Entity A to acting members of Committee X for their attendance at an Advisory Committee meeting in accordance with the relevant requirements of an Act is subject to PAYG withholding pursuant to section 12-45 of Schedule 1 to the TAA.

Detailed reasoning

As stated in response to Question 1, acting members of Committee X are still considered to be office holders and Entity A has PAYG withholding obligations in respect of payments made to those members pursuant to section 12-45 of Schedule 1 to the TAA.

Subsection 12-45(1)(b) requires an entity to withhold an amount from salary, wages, commission, bonuses or allowances it pays to an individual as:

(a)...

(b) a person who holds, or performs the duties of, an appointment, office or position under the Constitution or an Australian law; or

(c) ...

Further, paragraph 13 of TR 2002/21 states:

13. An entity must withhold an amount from salary, wages, commission, bonuses or allowances it pays to an individual as a person who holds, or performs the duties of an appointment, office or position under the Constitution or a statutory instrument of the Commonwealth, a State or a Territory.

In the current circumstances, even though an acting member of Committee X is for a short term, the member's role is not dissimilar to that of the appointed Committee X member. The acting member is still considered to be an office holder as they hold the title of office holder and have all of the functions and entitlements of the appointed Committee X member whilst acting in accordance with the terms of their appointment.

Additionally, acting members of Committee X receive a sitting fee for their attendance at an Advisory Committee meeting as an individual person who holds or performs the duties of an appointment, office or position under the Constitution or an Australian law - in other words, an office holder. Therefore, any payments of salary, wages, commission, bonuses or allowances made to an office holder results in a withholding obligation for the payer under paragraph 12-45(1)(b) of Schedule 1 to the TAA.

Thus, the sitting fee payments made by Entity A to acting members of Committee X for their attendance at an Advisory Committee meeting is subject to PAYG withholding pursuant to section 12-45 of Schedule 1 to the TAA.