ATO Interpretative Decision
ATO ID 2010/115
Income Tax
Mining withholding tax: withholding from mining payment - GST inclusive basisFOI status: may be released
This ATOID provides you with the following level of protection:
If you reasonably apply this decision in good faith to your own circumstances (which are not materially different from those described in the decision), and the decision is later found to be incorrect you will not be liable to pay any penalty or interest. However, you will be required to pay any underpaid tax (or repay any over-claimed credit, grant or benefit), provided the time limits under the law allow it. If you do intend to apply this decision to your own circumstances, you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed. You may wish to obtain further advice from the Tax Office or from a professional adviser.
Issue
Is an entity required to calculate the amount to be withheld from the payment on a goods and services tax (GST) inclusive basis where the entity is required to withhold an amount from a mining payment in accordance with section 12-320 of Schedule 1 to the Taxation Administration Act 1953 (TAA), and the payment is given as consideration for a taxable supply for GST purposes?
Decision
Yes. The amount to be withheld from the mining payment in accordance with section 12-320 of Schedule 1 to the TAA should be calculated on a GST inclusive basis.
Facts
A mining company made payments to an Aboriginal Land Council (ALC) under an agreement in relation to the use of the aboriginal land for mining and exploration.
The payments under the agreement are mining payments within the meaning of the term in paragraph 128U(1)(b) of the Income Tax Assessment Act 1936 (ITAA 1936).
The ALC is a statutory authority formed under section 21 of the Aboriginal Land Rights (Northern Territory) Act 1976 and is exempt from all forms of taxation except fringe benefits tax and GST.
The ALC makes a taxable supply to the mining company for the use of the land in accordance with the A New Tax System (Goods and Services Tax) Act 1999. The mining payments are consideration for this taxable supply.
The agreement between the mining company and the ALC does not contain a clause that specifically refers to GST in relation to these payments.
The mining company calculates the mining withholding tax attributable to the payment and remits this to the Tax Office.
The mining company wishes to know the appropriate basis on which to calculate the amount to be withheld from the mining payment.
Reasons for Decision
An entity is required to withhold an amount from a mining payment that it makes to another entity: subsection 12-320(1) of Schedule 1 to the TAA.
The amount to be withheld from the mining payment is 4% of the amount of the payment: see regulation 43 of the Taxation Administration Regulations 1976.
The amount withheld under section 12-320 of Schedule 1 to the TAA is credited against the liability for income tax imposed under subsection 128V(1) of the ITAA 1936. Mining withholding tax is defined as income tax payable under section 128V of the ITAA 1936.
Mining payment is defined in subsection 128U(1) of the ITAA 1936. There is no provision which specifies whether this amount is GST inclusive or exclusive.
Payment is defined in The Macquarie Dictionary as '"that which is paid" compensation; recompense'.
In White v. Elmdene Estates Ltd [1960] 1 QB 1 at 16 it was stated that:
the word 'payment' in itself is one which, in an appropriate context, may cover many ways of discharging obligations.
In the context of a contract, a 'payment' discharges one party's contractual obligations to the other. Payment is consideration for the thing that is provided by the other party. Consideration for goods and services comprises everything that must be paid to the deliverer, regardless of its description, before the goods or services will be delivered.
On this basis, the mining payment in this context would include the entire amount of the payment made to the ALC including the GST component. In other words, the mining withholding tax would be calculated on the payment inclusive of GST.
Date of decision: 5 May 2010Year of income: Year ended 2009-10 and later income years
Legislative References:
Aboriginal Land Rights (Northern Territory) Act 1976
section 21
The Act Income Tax Assessment Act 1936
subsection 128U(1)
paragraph 128U(1)(b)
section 128V
subsection 128V(1) Taxation Administration Act 1953
section 12-320 of Schedule 1
subsection 12-320(1) of Schedule 1 Taxation Administration Regulations 1976
Regulation 43
Case References:
White v Elmdene Estates Ltd
[1960] 1 QB 1
[1959] 2 All ER 605
Related Public Rulings (including Determinations)
Taxation Ruling TR 2002/9
Taxation Ruling TR 2006/12
Other References:
The Macquarie Dictionary, [Multimedia], version 5.0.0, 1/10/01
Keywords
GST
Mining withholding tax
PAYG withholding
ISSN: 1445-2782