Edited version of private advice

Authorisation Number: 1052147254657

Date of advice: 12 September 2023

Ruling

Subject: PAYG withholding

Question 1

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

Answer

No.

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 A 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?

Answer

No.

Question 3

Where a Committee A 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 Committee A member pursuant to section 16-155 of Schedule 1 to the TAA?

Answer

No.

This 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 commences on:

1 July 2022

Relevant facts and circumstances

You are part of a government organisation.

You make payments of remuneration to members of Committee A.

Committee A was established to inform government policy and strategy and is not a body established under legislation.

The Cabinet approves the appointments of nominated individuals to form Committee A.

The membership of Committee A comprises of individuals with relevant experience drawn from businesses, unions, employer associations and government agencies, with an independent Chairperson. There are 14 parties that comprise the membership of Committee A plus an independent Chair.

The role of Committee A is to provide a forum for a high level dialogue between the State Government, employers, representative associations and unions on significant issues including safety, diversity, workforce management and associated issues relevant in the X section. The role is advisory only and Committee A does not have a role in any dispute resolution or formal adjudication processes established under X legislation.

Members of the committee will be remunerated in accordance with the amount determined by the Minister of Industrial Relations on the advice of the Public Sector Commissioner.

Some members pay the sitting fees they receive to their nominated employer as a requirement set by their employer.

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 paragraph 16-155(1)(a) of Schedule 1

Taxation Administration Act 1953 section 16-160 of Schedule 1

Reasons for decision

Question 1

Summary

Entity A is not subject to Pay As You Go (PAYG) withholding on sitting fees paid to members of Committee A 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 the paying entity to withhold an amount from salary, wages, commission, bonuses or allowances it pays to an individual as an office holder.

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. It is specified in relevant legislation or statutory instrument that there must be a specific Act or statutory instrument which identifies the creation of the position held.

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.

Paragraph 14 of TR 2002/21 states 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

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.

In the current circumstances, Committee A was established with the role of only being advisory and does not have a role in any dispute resolution or formal adjudication processes established under building industry legislation.

As noted above, in order to apply section 12-45 of Schedule 1 to the TAA, the sitting fees paid to members of Committee A needs to be a payment made to an office holder. Members of Committee A need to satisfy the criteria stated in paragraph 14 and 15 of TR 2002/21 to be considered an office holder.

Accordingly, it is necessary to consider whether the member holds, or performs the duties of, an appointment, office or position under the Constitution or an Australian law.

As per the Facts, Committee A is established in accordance with the Circular and approved by the Government's Cabinet process. The terms of reference of Committee A specifies that the membership is for a two year period. Committee A has not been established by an Act and its functions and powers of appointment of persons, and tenure of their appointment, has not been set out by an Act.

Additionally, the members of Committee A are not appointed under a specific Act that provide details of the constitution of the committee or their specific duties or functions.

On this basis, members of Committee A 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 2

Summary

Entity A is not required under section 12-45 of Schedule 1 to the TAA to withhold an amount from sitting fees paid to Committee A 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

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. As stated in the response to Question 1, Entity A does not have PAYG withholding obligations in respect of sitting fees paid to members of Committee A as they are not considered to be office holders.

In circumstances where a member of Committee A provides documentation stating that the payment of sitting fees is to be paid to their nominated employer, Entity A also has no PAYG withholding obligation under section 12-45 of Schedule 1 to the TAA.

Question 3

Summary

Where a Committee A 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, Entity A is not required to include these amounts in an annual PAYG payment summary issued in the name of Committee A member pursuant to section 16-155 of Schedule 1 to the TAA.

Detailed reasoning

Section 16-155 of Schedule 1 to the TAA outlines a payer's obligations in respect of an annual payment summary:

16-155(1)

Within 14 days after the end of a *financial year, an entity (the payer) must give a *payment summary (and a copy of it) to another entity (the recipient) if:

(a) during the year the payer made one or more *withholding payments (other than withholding payments covered by section 12-85, 12-175, 12-180, 12-190, 12-215, 12-250, 12-285, 12-317, 12-385 or 12-390 ) to the recipient; or

(b) during the year the payer received one or more withholding payments covered by section 12-215,12-250 or 12-285 and, in relation to each of them, the recipient is the foreign resident mentioned in the section; or

(baa) during the year the payer received one or more withholding payments covered by section 12-317 and, in relation to each of them, the recipient is the likely foreign recipient mentioned in the section; or

(ba) during the year the payer received one or more withholding payments covered by Division 13 and, in relation to each of them, an amount is included in the recipient ' s assessable income under Division 86 of the Income Tax Assessment Act 1997; or

(bb) because of section 86-40 of the Income Tax Assessment Act 1997, the payer is taken to have paid salary to the recipient on the last day of the year; or

(c) the recipient is an individual and has a *reportable fringe benefits amount, for the income year ending at the end of that financial year, in respect of his or her employment (within the meaning of the Fringe Benefits Tax Assessment Act 1986) by the payer; or

(d) the recipient is an individual and *reportable employer superannuation contributions have been made by the payer, in respect of the individual ' s employment, during the year.

Payments of sitting fees made to members of Committee A is not one of the withholding payments covered in subsection 16-155(1), particularly in paragraph 16-155(1)(a) of Schedule 1 to the TAA.

As provided in the response to Question 2, Entity A do not have a PAYG withholding obligation under section 12-45 of Schedule 1 to the TAA in circumstances where a Committee A member is required to pay 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.

As such, Entity A is not required under section 16-155 to issue payment summaries to members of Committee A who receive payments of sitting fees.