Commonwealth: A New Tax System (Pay As You Go) Act 1999 (Cth)

A New Tax System (Pay As You Go) Act 1999 Act No. 178 of 1999 as amended This compilation was prepared on 8 October 2010 taking into account amendments up to Act No. 75 of 2010 The text of any of those amendments not in force on that date is appended in the Notes section The operation of amendments that have been incorporated may be affected by application provisions that are set out in the Notes section Prepared by the Office of Legislative Drafting and Publishing, Attorney‑General's Department, Canberra Contents 1 Short title [see Note 1] 2 Commencement [see Note 1] 3 Schedule(s) Schedule 1—Pay as you go (PAYG) system of collecting income tax and other liabilities Part 1—Amendment of the Taxation Administration Act 1953 Part 2—Consequential amendment of Acts Income Tax Assessment Act 1997 Income Tax Assessment Act 1936 A New Tax System (Goods and Services Tax) Act 1999 A New Tax System (Goods and Services Tax Administration) Act 1999 A New Tax System (Australian Business Number) Act 1999 Fringe Benefits Tax Assessment Act 1986 Taxation Administration Act 1953 Schedule 2—Running balance accounts, general interest charge and related matters Part 1—Running balance accounts Division 1—Amendment of Part IIB of the Taxation Administration Act 1953 Division 2—Consequential amendments Income Tax Assessment Act 1936 Sales Tax Assessment Act 1992 Taxation (Interest on Overpayments and Early Payments) Act 1983 Division 3—Application and transitional Part 2—General interest charge Crimes (Taxation Offences) Act 1980 Income Tax Assessment Act 1936 Income Tax Assessment Act 1997 Sales Tax Assessment Act 1992 Taxation Administration Act 1953 Taxation (Interest on Overpayments and Early Payments) Act 1983 Taxation Laws Amendment Act (No. 3) 1999 Part 3—Fringe benefits tax Fringe Benefits Tax Assessment Act 1986 Schedule 3—Consequential amendment of Chapter 6 (the Dictionary) of the Income Tax Assessment Act 1997 Notes An Act to implement A New Tax System by amending the law about taxation, and for related purposes 1 Short title [see Note 1] This Act may be cited as the A New Tax System (Pay As You Go) Act 1999. 2 Commencement [see Note 1] (1) Subject to this section, this Act commences on the day on which it receives the Royal Assent. (1A) Items 6, 8 and 72 to 78 of Schedule 1 commence, or are taken to have commenced, on 1 July 2000. (2) Items 70 and 71 of Schedule 1 to this Act commence, or are taken to have commenced, immediately before the commencement of Schedule 1 to the A New Tax System (Goods and Services Tax Administration) Act 1999. 3 Schedule(s) Subject to section 2, each Act that is specified in a Schedule to this Act is amended or repealed as set out in the applicable items in the Schedule concerned, and any other item in a Schedule to this Act has effect according to its terms. Schedule 1—Pay as you go (PAYG) system of collecting income tax and other liabilities Part 1—Amendment of the Taxation Administration Act 1953 1 After section 3 Insert in Part I: 3AA Schedule 1 (1) Schedule 1 has effect. Application of interpretation provisions of Income Tax Assessment Act 1997 (2) An expression has the same meaning in Schedule 1 as in the Income Tax Assessment Act 1997. (3) Division 950 of the Income Tax Assessment Act 1997 (which contains rules for interpreting that Act) applies to Schedule 1 to this Act as if the provisions in that Schedule were provisions of that Act. Application of provisions of Income Tax Assessment Act 1936 (4) Section 264B of the Income Tax Assessment Act 1936 (about signature or electronic signature for notices etc. given to the Commissioner) applies to Schedule 1 to this Act as if the provisions in that Schedule were provisions of that Act. 2 At the end of the Act Add: Schedule 1—Collection and recovery of income tax and other liabilities Note: See section 3AA. Part 2‑1—Introduction to the Pay as you go (PAYG) system Division 6—Guide to Parts 2‑5 and 2‑10 6‑1 What Parts 2‑5 and 2‑10 are about To help taxpayers meet their annual income tax liability, they are required to pay amounts of their income at regular intervals as it is earned during the year. The system for collecting these amounts is called "Pay as you go". Amounts collected under this system also go towards meeting liability for Medicare levy and liability to repay contributions under the Higher Education Contribution Scheme (HECS). Table of sections 6‑5 The Pay as you go (PAYG) system 6‑10 How the amounts collected are dealt with 6‑5 The Pay as you go (PAYG) system (1) Parts 2‑5 and 2‑10 establish the PAYG system, which has 2 components: • PAYG withholding (Part 2‑5) • PAYG instalments (Part 2‑10). PAYG withholding (2) Under PAYG withholding, amounts are collected in respect of particular kinds of payments or transactions. Usually, someone who makes a payment to you is required to withhold an amount from the payment, and then to pay the amount to the Commissioner. For a list of the payments and other transactions to which PAYG withholding applies, see Division 10 PAYG instalments (3) You pay PAYG instalments directly to the Commissioner. These are usually based on your ordinary income for a past period, but excluding: • income subject to PAYG withholding (with certain exceptions) • exempt income, or income that is otherwise not assessable. An instalment is usually paid after each quarter, but some taxpayers are eligible to pay an annual instalment after the end of the income year. 6‑10 How the amounts collected are dealt with You are entitled to credits for the amounts of your income that are collected under the PAYG system. The credits are applied under Division 3 of Part IIB against your tax debts, and any excess is refunded to you. Part 2‑5—Pay as you go (PAYG) withholding Division 10—Guide to Part 2‑5 10‑1 What this Part is about Under PAYG withholding, amounts are collected in respect of particular kinds of payments or transactions. Usually, someone who makes a payment to you is required to withhold an amount from the payment, and then to pay the amount to the Commissioner. If a non‑cash benefit is provided instead of a payment, the provider must first pay to the Commissioner the amount that would have been withheld from the payment. This Part also contains provisions about the obligations and rights of payers and recipients. 10‑5 Summary of withholding payments The payments and other transactions covered by PAYG withholding are called withholding payments. They are summarised in the table. Note: The obligation to pay an amount to the Commissioner is imposed on the entity making the withholding payment (except for items 17, 19 and 22). Summary of withholding payments Item Withholding payment Section 1 A payment of salary etc. to an employee 12‑35 1 A payment of remuneration to the director of a company 12‑40 2 A payment of salary etc. to an office holder (e.g. a member of the Defence Force) 12‑45 3 A return to work payment to an individual 12‑50 4 A payment that is covered by a voluntary agreement 12‑55 5 A payment under a labour hire arrangement or a payment specified by regulations 12‑60 6 A payment of pension or annuity 12‑80 7 An eligible termination payment 12‑85 8 A payment for unused leave on an individual's retirement or termination of employment 12‑90 9 A social security or similar payment (e.g. old age pension) 12‑110 10 A Commonwealth education or training payment 12‑115 11 A compensation, sickness or accident payment 12‑120 12 A payment arising from an investment where the recipient does not quote its tax file number, or in some cases, its ABN 12‑140 13 Investor becoming presently entitled to income of a unit trust 12‑145 14 A payment for a supply where the recipient of the payment does not quote its ABN 12‑190 15 A dividend payment to an overseas person 12‑210 16 A dividend payment received for a foreign resident 12‑215 17 An interest payment to an overseas person 12‑245 18 An interest payment received for a foreign resident 12‑250 19 An interest payment derived by a lender in carrying on business through overseas permanent establishment 12‑255 20 A royalty payment to an overseas person 12‑280 21 A royalty payment received for a foreign resident 12‑285 22 A mining payment 12‑320 23 A natural resource payment 12‑325 Division 11—Preliminary matters Table of sections 11‑1 Object of this Part 11‑5 Constructive payment 11‑1 Object of this Part The object of this Part is to ensure the efficient collection of: (a) income tax; and (b) Medicare levy; and (c) amounts of liabilities to the Commonwealth under Chapter 5A of the Higher Education Funding Act 1988; and (d) *withholding tax; and (e) *mining withholding tax. 11‑5 Constructive payment (1) In working out whether an entity has paid an amount to another entity, and when the payment is made, the amount is taken to have been paid to the other entity when the first entity applies or deals with the amount in any way on the other's behalf or as the other directs. (2) An amount is taken to be payable by an entity to another entity if the first entity is required to apply or deal with it in any way on the other's behalf or as the other directs. Division 12—Payments from which amounts must be withheld Table of Subdivisions 12‑A General rules 12‑B Payments for work and services 12‑C Retirement payments, eligible termination payments and annuities 12‑D Benefit and compensation payments 12‑E Payments where TFN or ABN not quoted 12‑F Dividend, interest and royalty payments 12‑G Payments in respect of mining on Aboriginal land, and natural resources Subdivision 12‑A—General rules Table of sections 12‑1 General exceptions 12‑5 What to do if more than one provision requires a withholding 12‑10 Division does not apply to non‑cash benefits 12‑15 Amounts to be expressed in Australian currency 12‑1 General exceptions Exempt income of recipient (1) An entity need not withhold an amount under section 12‑35, 12‑40, 12‑45, 12‑50, 12‑55, 12‑60, 12‑80, 12‑90, 12‑120 or 12‑190 from a payment if the whole of the payment is *exempt income of the entity receiving the payment. Living‑away‑from‑home allowance benefit (2) In working out how much to withhold under section 12‑35, 12‑40, 12‑45, 12‑115 or 12‑120 from a payment, disregard so much of the payment as is a living‑away‑from‑home allowance benefit as defined by section 136 of the Fringe Benefits Tax Assessment Act 1986. Expense payment benefit (3) In working out how much to withhold under section 12‑35, 12‑40, 12‑45, 12‑115 or 12‑120 from a payment, disregard so much of the payment as: (a) is an expense payment benefit as defined by section 136 of the Fringe Benefits Tax Assessment Act 1986; and (b) is not an exempt benefit under section 22 of that Act (about reimbursement of car expenses on the basis of distance travelled). 12‑5 What to do if more than one provision requires a withholding (1) If more than one provision in this Division covers a payment, only one amount is to be withheld from the payment. (2) The provision to apply is the one that is most specific to the circumstances of the payment. However, this general rule is subject to the specific rules in the table. Specific rules for determining priority among withholding provisions Item Apply: Which is about: In priority to: 1 section 12‑35, 12‑40, 12‑45 or 12‑50 a payment for work or services section 12‑60 (payment under a labour hire arrangement or specified by regulations); or section 12‑190 (payment for a supply where recipient does not quote its ABN) 2 section 12‑80, 12‑85 or 12‑90 a retirement payment, an eligible termination payment or an annuity section 12‑60 (payment under a labour hire arrangement or specified by regulations); or section 12‑190 (payment for a supply where recipient does not quote its ABN) 3 section 12‑110, 12‑115 or 12‑120 a payment of benefit or compensation section 12‑60 (payment under a labour hire arrangement or specified by regulations); or section 12‑190 (payment for a supply where recipient does not quote its ABN) 4 section 12‑60 a payment under a labour hire arrangement or specified by regulations section 12‑190 (payment for a supply where recipient does not quote its ABN) 5 section 12‑140 or 12‑145 a payment arising from investment where the recipient does not quote tax file number section 12‑210, 12‑215, 12‑245, 12‑250 or 12‑255 (payment of a dividend or interest) 6 section 12‑280 or 12‑285 a payment of royalty section 12‑325 (natural resource payment) Note: Some provisions of this Division clearly do not cover a payment covered by some other provisions. For example: * Section 12‑55 (about voluntary agreements) covers a payment only if no other provision requires the payer to withhold an amount from the payment. 12‑10 Division does not apply to non‑cash benefits This Division does not apply to a payment in so far as it consists of providing a *non‑cash benefit. Note: If a non‑cash benefit is provided in circumstances where a payment would give rise to a withholding obligation, the provider must pay an amount to the Commissioner: see Division 14. 12‑15 Amounts to be expressed in Australian currency The amount that this Division requires to be withheld from a payment made in foreign currency: (a) is to be expressed in Australian currency; and (b) is to be worked out on the basis of the exchange rate applicable when the amount is required to be withheld under this Division. Subdivision 12‑B—Payments for work and services Table of sections 12‑35 Payment to employee 12‑40 Payment to company director 12‑45 Payment to office holder 12‑50 Return to work payment 12‑55 Voluntary agreement to withhold 12‑60 Payment under labour hire arrangement, or specified by regulations 12‑35 Payment to employee An entity must withhold an amount from salary, wages, commission, bonuses or allowances it pays to an individual as an employee (whether of that or another entity). For exceptions, see section 12‑1. 12‑40 Payment to company director A company must withhold an amount from a payment of remuneration it makes to an individual: (a) if the company is incorporated—as a director of the company, or as a person who performs the duties of a director of the company; or (b) if the company is not incorporated—as a member of the committee of management of the company, or as a person who performs the duties of such a member. For exceptions, see section 12‑1. 12‑45 Payment to office holder (1) An entity must 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 to which subsection (3) applies. For exceptions, see subsection (2) and section 12‑1. (2) This section does not require an amount to be withheld from a payment to an individual as a member of a local governing body established by or under a *State law or *Territory law unless subsection (3) applies to the body. (3) This subsection applies to a local governing body established by or under a *State law or *Territory law if: (a) the body has unanimously resolved that it be treated as an eligible local governing body for the purposes of Division 2 of Part VI of the Income Tax Assessment Act 1936, or of this Division; and (b) that body has not unanimously resolved to cancel the resolution. For rules about such resolutions, see section 221B of the Income Tax Assessment Act 1936. 12‑50 Return to work payment An entity must withhold an amount from a payment it makes to an individual if the payment is included in the individual's assessable income under section 15‑3 of the Income Tax Assessment Act 1997 (return to work payments). For exceptions, see section 12‑1. 12‑55 Voluntary agreement to withhold (1) An entity must withhold an amount from a payment it makes to an individual if: (a) the payment is made under an *arrangement the performance of which, in whole or in part, involves the performance of work or services (whether or not by the individual); and (b) no other provision of this Division requires the entity to withhold an amount from the payment; and (c) the entity and the individual are parties to an agreement (the voluntary agreement) that is in the *approved form and states that this section covers payments under the arrangement mentioned in paragraph (a), or under a series of such arrangements that includes that arrangement; and (d) the individual has an *ABN that is in force and is *quoted in that agreement. For exceptions, see section 12‑1. (2) Each party must keep a copy of the voluntary agreement from when it is made until 5 years after the making of the last payment covered by the agreement. Penalty: 30 penalty units. Note: See section 4AA of the Crimes Act 1914 for the current value of a penalty unit. (3) A party to the voluntary agreement may terminate it at any time by notifying the other party in writing. 12‑60 Payment under labour hire arrangement, or specified by regulations An entity that carries on an *enterprise must withhold an amount from a payment that it makes to an individual in the course or furtherance of the enterprise if: (a) the payment is made under an *arrangement the performance of which, in whole or in part, involves the performance of work or services by the individual for a client of the entity; or (b) the payment is, in whole or in part, for work or services and is of a kind prescribed by the regulations. For exceptions, see section 12‑1. Subdivision 12‑C—Retirement payments, eligible termination payments and annuities Table of sections 12‑80 Payment of pension or annuity 12‑85 Eligible termination payment 12‑90 Payment for unused leave 12‑80 Payment of pension or annuity An entity must withhold an amount from a payment it makes to an individual if the payment is: (a) a pension within the meaning of the Superannuation Industry (Supervision) Act 1993 or the Retirement Savings Account Act 1997; or (b) an annuity within the meaning of the Superannuation Industry (Supervision) Act 1993. For exceptions, see section 12‑1. 12‑85 Eligible termination payment An entity must withhold an amount from an *eligible termination payment it makes to an individual. 12‑90 Payment for unused leave An entity must withhold an amount from a payment it makes to an individual if the payment is included in the individual's assessable income under: (a) section 26AC (payment for unused annual leave); or (b) section 26AD (payment for unused long service leave); of the Income Tax Assessment Act 1936. For exceptions, see section 12‑1. Subdivision 12‑D—Benefit and compensation payments Table of sections 12‑110 Social Security or other benefit payment 12‑115 Commonwealth education or training payment 12‑120 Compensation, sickness or accident payment 12‑110 Social Security or other benefit payment (1) An entity must withhold an amount from a payment it makes to an individual if the payment is specified in: (a) an item of the table in section 52‑10 of the Income Tax Assessment Act 1997 (Social Security payments); or (b) an item of the table in section 52‑65 of that Act (Veterans' Affairs payments); or (c) section 52‑105, 53‑10, 55‑5 or 55‑10 of that Act. Note: Payments specified in those provisions of the Income Tax Assessment Act 1997 are made under various Commonwealth laws. (2) In working out the amount to be withheld, disregard so much of the payment as is *exempt income of the individual. 12‑115 Commonwealth education or training payment (1) An entity must withhold an amount from a *Commonwealth education or training payment it makes to an individual. For exceptions, see subsection (2) and section 12‑1. (2) In working out the amount to be withheld, disregard so much of the payment as is *exempt income of the individual. 12‑120 Compensation, sickness or accident payment An entity must withhold an amount from a payment of compensation, or of sickness or accident pay, it makes to an individual if the payment: (a) is made because of that or another individual's incapacity for work; and (b) is calculated at a periodical rate; and (c) is not a payment made under an insurance policy to the policy owner. For exceptions, see section 12‑1. Subdivision 12‑E—Payments where TFN or ABN not quoted Table of sections Payment in respect of investment 12‑140 Recipient does not quote tax file number 12‑145 Investor becoming presently entitled to income of a unit trust 12‑150 Limited application of section 12‑140 to payment under eligible deferred interest investment 12‑155 When investor may quote ABN as alternative 12‑160 Investment body unaware that exemption from quoting TFN has stopped applying 12‑165 Exception for fully franked dividend 12‑170 Exception for payments below thresholds set by regulations Payment for a supply 12‑190 Recipient does not quote ABN Payment in respect of investment 12‑140 Recipient does not quote tax file number (1) An *investment body must withhold an amount from a payment it makes to another entity in respect of a *Part VA investment if: (a) all or some of the payment is *ordinary income or *statutory income of the other entity; and (b) if the investment is non‑transferable—the other entity did not *quote its *tax file number in connection with the investment before the time when the payment became payable; and (c) if the investment is transferable—the other entity did not quote its tax file number in connection with the investment before the time when the other entity had to be registered with the investment body as the *investor to be entitled to the payment. Payment in respect of units in a trust or investment‑related betting chance (2) If a *Part VA investment consists of: (a) units in a unit trust (as defined in section 202A of the Income Tax Assessment Act 1936); or (b) an investment‑related betting chance; an entity (including the *investment body) must withhold an amount from a payment it makes to another entity in respect of the investment if the conditions in subsection (1) of this section are met. For exceptions to the rules in this section, see sections 12‑155 to 12‑170. 12‑145 Investor becoming presently entitled to income of a unit trust (1) This section applies if: (a) a *Part VA investment consists of units in a unit trust (as defined in section 202A of the Income Tax Assessment Act 1936); and (b) the *investor becomes presently entitled, for the purposes of Division 6 of Part III of the Income Tax Assessment Act 1936, to a share of income of the trust at a time (the entitlement time) before any of that share is paid to the investor. (2) The entity (including the *investment body) that would have to pay that share to the *investor if the share were due and payable at the entitlement time must withhold from the share, at that time, the amount (if any) that subsection 12‑140(2) would have required it to withhold if it had paid the share to the investor at that time. For exceptions to the rules in this section, see sections 12‑155 to 12‑170. (3) This Part (except section 12‑140 and this section) applies as if that entity had paid that share to the *investor at the entitlement time. (4) If that entity withholds an amount from that share as required by subsection (2), subsection 12‑140(2) does not require an amount to be withheld from a payment of all or part of that share to the *investor. 12‑150 Limited application of section 12‑140 to payment under eligible deferred interest investment Section 12‑140 applies to a payment in respect of an eligible deferred interest investment (as defined in subsection 221YHZA(1) of the Income Tax Assessment Act 1936) only to the extent that is covered by one or both of these paragraphs: (a) so much of the payment as consists of a periodic interest payment (within the meaning of Division 16E of Part III of that Act); (b) if the payment became payable at the end of the term (within the meaning of Division 16E of Part III of that Act) of the investment—so much of the payment as does not exceed what section 159GQ of that Act would include in the *investor's assessable income for the income year in which that term ended if the adoption (under section 18 of that Act) of an accounting period ending on a day other than 30 June were disregarded for the purposes of this paragraph and that Division. Note: To the extent that section 12‑140 does not apply to the payment, TFN withholding tax may be payable on it. See Subdivision C of Division 3B of Part VI of the Income Tax Assessment Act 1936. 12‑155 When investor may quote ABN as alternative Section 12‑140 or 12‑145 does not require an amount to be withheld if: (a) the other entity made the investment in the course or furtherance of an *enterprise carried on by it; and (b) the other entity has an *ABN, and has *quoted it to the investment body, by the time referred to in paragraph 12‑140(1)(b) or (c). 12‑160 Investment body unaware that exemption from quoting TFN has stopped applying Section 12‑140 or 12‑145 does not require an amount to be withheld if: (a) a provision of Division 5 of Part VA of the Income Tax Assessment Act 1936 has applied to the other entity in relation to the investment, but no longer applies when the payment is made; and (b) when the payment is made, the *investment body has not been informed of anything that resulted in the provision no longer applying. Note: Division 5 of Part VA of that Act provides, in certain cases, that even though an entity has not quoted its tax file number it is taken to have done so. 12‑165 Exception for fully franked dividend Section 12‑140 does not require an amount to be withheld if: (a) the investment consists of *shares in a public company (as defined in section 202A of the Income Tax Assessment Act 1936); and (b) the payment is a *dividend that has been franked in accordance with section 160AQF of the Income Tax Assessment Act 1936; and (c) the franking percentage (within the meaning of section 160APA of that Act) for the dividend is 100%. 12‑170 Exception for payments below thresholds set by regulations (1) Section 12‑140 or 12‑145 does not require an amount to be withheld if the payment is less than the amount worked out under the regulations. (2) Regulations made for the purposes of this section may deal differently with different payments. Payment for a supply 12‑190 Recipient does not quote ABN (1) 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. ABN correctly quoted (2) The payer need not withhold an amount under this section if, when the payment is made: (a) the other entity has given the payer an *invoice that relates to the supply and *quotes the other entity's *ABN; or (b) the payer has some other document relating to the supply on which the other entity's ABN is *quoted. Payer has no reason to believe that ABN has been incorrectly quoted (3) The payer also need not withhold an amount under this section if, when the payment is made: (a) the other entity has given the payer an *invoice that relates to the supply and purports to *quote the other entity's *ABN, or the payer has some other document that relates to the supply and purports to *quote the other entity's ABN; and (b) the other entity does not have an ABN, or the invoice or other document does not in fact quote the other entity's ABN; and (c) the payer has no reasonable grounds to believe that the other entity does not have an ABN, or that the invoice or other document does not quote the other entity's ABN. No need to quote ABN (4) The payer need not withhold an amount under this section if: (a) the payer is an individual and the payment is, for the payer, wholly of a private or domestic nature; or (b) the payment does not exceed $50 or such higher amount as is specified in regulations in force for the purposes of subsection 29‑80(1) of the *GST Act; or (c) the supply is made in the course or furtherance of an activity, or series of activities, done as a member of a local governing body established by or under a *State law or *Territory law. (5) The payer need not withhold an amount under this section if the payment: (a) is covered by section 12‑140 or 12‑145 (about not quoting *tax file number in respect of an investment in respect of which the payment is made); or (b) would be covered by section 12‑140 or 12‑145 if the other entity had not quoted as mentioned in subsection 12‑140(1) or section 12‑155; or (c) would be covered by section 12‑140 or 12‑145 apart from section 12‑160, 12‑165 or 12‑170 (which are exceptions to sections 12‑140 and 12‑145). (6) The payer need not withhold an amount under this section if, when the payment is made: (a) the other entity is an individual and has given the payer a written statement to the effect that: (i) the supply is made in the course or furtherance of an activity, or series of activities, done as a private recreational pursuit or hobby; or (ii) the supply is, for the other entity, wholly of a private or domestic nature; and (b) the payer has no reasonable grounds to believe that the statement is false or misleading in a material particular. Subdivision 12‑F—Dividend, interest and royalty payments Table of sections Dividends 12‑210 Dividend payment to overseas person 12‑215 Dividend payment received for foreign resident 12‑220 Application to part of a dividend 12‑225 Application to distribution by a liquidator or other person Interest 12‑245 Interest payment to overseas person 12‑250 Interest payment received for foreign resident 12‑255 Interest payment derived by lender in carrying on business through overseas permanent establishment 12‑260 Lender to notify borrower if interest derived through overseas permanent establishment Royalties 12‑280 Royalty payment to overseas person 12‑285 Royalty payment received for foreign resident General 12‑300 Limits on amount withheld under this Subdivision Dividends 12‑210 Dividend payment to overseas person A company that is an Australian resident must withhold an amount from a *dividend it pays if: (a) according to the register of the company's members, the entity, or any of the entities, holding the *shares on which the dividend is paid has an address outside Australia; or (b) that entity, or any of those entities, has authorised or directed the company to pay the dividend to an entity or entities at a place outside Australia. For limits on the amount to be withheld, see section 12‑300. 12‑215 Dividend payment received for foreign resident Immediately after receiving a payment of a *dividend of a company that is an Australian resident, an entity must withhold an amount from the dividend if: (a) the entity is a person in Australia or an *Australian government agency; and (b) a foreign resident is entitled: (i) to receive the dividend or part of it from the entity, or to receive the amount of the dividend or of part of it from the entity; or (ii) to have the entity credit to the foreign resident, or otherwise deal with on the foreign resident's behalf or as the foreign resident directs, the dividend or part of it, or the amount of the dividend or of part of it. For limits on the amount to be withheld, see section 12‑300. 12‑220 Application to part of a dividend This Part applies to a part of a *dividend in the same way as to a dividend. 12‑225 Application to distribution by a liquidator or other person This Part applies to a distribution that section 47 of the Income Tax Assessment Act 1936 treats as a *dividend paid by a company, in the same way as this Part applies to a dividend paid by the company, and as if the liquidator or other person making the distribution were the company. Interest 12‑245 Interest payment to overseas person An entity must withhold an amount from interest (within the meaning of Division 11A of Part III of the Income Tax Assessment Act 1936) it pays to an entity, or to entities jointly, if: (a) the recipient or any of the recipients has an address outside Australia according to any record that is in the payer's possession, or is kept or maintained on the payer's behalf, about the transaction to which the interest relates; or (b) the payer is authorised to pay the interest at a place outside Australia (whether to the recipient or any of the recipients or to anyone else). For limits on the amount to be withheld, see section 12‑300. 12‑250 Interest payment received for foreign resident Immediately after receiving a payment of interest (within the meaning of Division 11A of Part III of the Income Tax Assessment Act 1936), an entity must withhold an amount from the payment if: (a) the entity is a person in Australia or an *Australian government agency; and (b) a foreign resident is entitled: (i) to receive the interest or part of it from the entity, or to receive the amount of the interest or of part of it from the entity; or (ii) to have the entity credit to the foreign resident, or otherwise deal with on the foreign resident's behalf or as the foreign resident directs, the interest or part of it, or the amount of the interest or of part of it. For limits on the amount to be withheld, see section 12‑300. 12‑255 Interest payment derived by lender in carrying on business through overseas permanent establishment An entity must withhold an amount from interest (within the meaning of Division 11A of Part III of the Income Tax Assessment Act 1936) it pays if it has been notified: (a) under section 12‑260 of this Act that this section applies to the interest; or (b) under subsection 221YL(2E) of the Income Tax Assessment Act 1936 that that subsection applies to the interest. For limits on the amount to be withheld, see section 12‑300. 12‑260 Lender to notify borrower if interest derived through overseas permanent establishment (1) If: (a) interest (within the meaning of Division 11A of Part III of the Income Tax Assessment Act 1936) is payable to: (i) an entity that is, or entities at least one of whom is, an Australian resident; or (ii) an *Australian government agency; and (b) the entity liable to pay the interest is authorised to pay it at a place in Australia (whether to any of those entities or the agency, or to anyone else); and (c) the interest is or will be *derived by any of those entities or the agency in carrying on business in a country outside Australia at or through a *permanent establishment it has in that country; those entities, or the agency, must notify the entity liable to pay the interest that section 12‑255 applies to the interest. (2) The notice must be given in writing, before the entities, or the agency, enter into the transaction in relation to which the interest is payable, or within one month afterwards. (3) Immediately after giving the notice, those entities, or the agency, must notify the Commissioner of: (a) the particulars of the transaction (including the dates on which interest is payable under it); and (b) the day when the notice was given to the entity liable to pay the interest. Failure to comply with this section may contravene section 8C of this Act. Royalties 12‑280 Royalty payment to overseas person An entity must withhold an amount from a *royalty it pays to an entity, or to entities jointly, if: (a) the recipient or any of the recipients has an address outside Australia according to any record that is in the payer's possession, or is kept or maintained on the payer's behalf, about the transaction to which the royalty relates; or (b) the payer is authorised to pay the royalty at a place outside Australia (whether to the recipient or any of the recipients or to anyone else). For limits on the amount to be withheld, see section 12‑300. 12‑285 Royalty payment received for foreign resident Immediately after receiving a payment of a *royalty, an entity must withhold an amount from the royalty if: (a) the entity is a person in Australia or an *Australian government agency; and (b) a foreign resident is entitled: (i) to receive the royalty or part of it from the entity, or to receive the amount of the royalty or of part of it from the entity; or (ii) to have the entity credit to the foreign resident, or otherwise deal with on the foreign resident's behalf or as the foreign resident directs, the royalty or part of it, or the amount of the royalty or of part of it. For limits on the amount to be withheld, see section 12‑300. General 12‑300 Limits on amount withheld under this Subdivision This Subdivision does not require an entity: (a) to withhold an amount from a *dividend, from interest (within the meaning of Division 11A of Part III of the Income Tax Assessment Act 1936) or from a *royalty if no *withholding tax is payable in respect of the dividend, interest or royalty; or (b) to withhold from a dividend, from interest (within the meaning of that Division) or from a royalty more than the withholding tax payable in respect of the dividend, interest or royalty (reduced by each amount already withheld from it under this Subdivision). Note: Section 128B of the Income Tax Assessment Act 1936 deals with withholding tax liability. Subdivision 12‑G—Payments in respect of mining on Aboriginal land, and natural resources Table of sections Mining on Aboriginal land 12‑320 Mining payment Natural resources 12‑325 Natural resource payment 12‑330 Payer must ask Commissioner how much to withhold 12‑335 Commissioner may exempt from section 12‑330, subject to conditions Mining on Aboriginal land 12‑320 Mining payment (1) An entity must withhold an amount from a *mining payment that: (a) it makes to another entity; or (b) it applies for the benefit of another entity. (2) Subsection (1) does not require the entity: (a) to withhold an amount if no *mining withholding tax is payable in respect of the *mining payment; or (b) to withhold more than the mining withholding tax payable in respect of the mining payment. Note: Section 128V of the Income Tax Assessment Act 1936 deals with mining withholding tax liability. Natural resources 12‑325 Natural resource payment (1) An entity must withhold an amount from a payment it makes to a foreign resident, or to 2 or more entities at least one of which is a foreign resident, if the payment is worked out wholly or partly by reference to the value or quantity of *natural resources produced or recovered in Australia. (2) The amount to be withheld is: (a) the amount notified by the Commissioner under section 12‑330; or (b) the amount worked out under a certificate in force under section 12‑335 that covers the payment; as appropriate. Exception (3) Subsection (1) does not apply if: (a) the Commissioner has notified the entity under section 12‑330 that the entity does not need to withhold an amount from the payment; or (b) a certificate in force under section 12‑335 covers the payment and does not require the entity to withhold an amount from it. 12‑330 Payer must ask Commissioner how much to withhold (1) An entity must not, intentionally or recklessly, make a payment from which section 12‑325 requires it to withhold an amount, unless: (a) the entity has notified the Commissioner in writing of the amount of the proposed payment; and (b) the Commissioner has later notified the entity in writing of the amount (if any) that the entity must withhold from the payment in respect of tax that is or may become payable by a foreign resident to whom the payment is made; or the payment is covered by a certificate in force under section 12‑335. Penalty: 20 penalty units. Note: See section 4AA of the Crimes Act 1914 for the current value of a penalty unit. Failure to notify not an offence against section 8C (2) An entity that fails to notify the Commissioner as required by subsection (1) does not commit an offence against section 8C. 12‑335 Commissioner may exempt from section 12‑330, subject to conditions (1) The Commissioner may give an entity a written certificate exempting the entity from complying with section 12‑330 for specified payments. (2) A certificate is subject to: (a) a condition that the entity must withhold from a payment covered by the certificate the amount (if any) worked out in accordance with the certificate in respect of tax that is or may become payable by a foreign resident to whom the payment is made; and (b) such other conditions as the certificate specifies. However, the entity does not contravene subsection 12‑330(1) because it contravenes a condition. (3) The Commissioner may, by written notice given to the entity: (a) revoke a certificate, whether or not a condition of it has been contravened; or (b) vary a certificate by revoking, changing or adding to its conditions. Note: A person who is dissatisfied with a decision under this section may object against the decision in the manner set out in Part IVC. [The next Division is Division 14.] Division 14—Non‑cash benefits for which amounts must be paid to the Commissioner Table of sections 14‑1 Object of this Division 14‑5 Provider of non‑cash benefit must pay amount to the Commissioner if payment would be subject to withholding 14‑10 Dividend, interest or royalty received, for a foreign resident, in the form of a non‑cash benefit 14‑15 Payer can recover amount paid to the Commissioner 14‑1 Object of this Division The object of this Division is: (a) to put entities that provide *non‑cash benefits, and entities that receive them, in a position similar to their position under Division 12 if payments of money had been made instead of the non‑cash benefits being provided; and (b) in that way, to prevent entities from avoiding their obligations under Division 12 by providing non‑cash benefits. 14‑5 Provider of non‑cash benefit must pay amount to the Commissioner if payment would be subject to withholding (1) An entity (the payer) must pay an amount to the Commissioner before providing a *non‑cash benefit to another entity (the recipient) if Division 12 would require the payer to withhold an amount (the notionally withheld amount) if, instead of providing the benefit to the recipient, the payer made a payment to the recipient in money equal to the *market value of the benefit when the benefit is provided. (2) The amount to be paid to the Commissioner is equal to the notionally withheld amount. Example: Nick is a building contractor who has entered into a voluntary agreement with Mike for the purposes of section 12‑55. Nick proposes to give Mike his old utility van (whose market value is $1,000) as payment for work Mike has done for him over a fortnight. If Nick were instead to pay Mike $1,000, Nick would have had to withhold $203 under Division 12 (in accordance with withholding rates current at the time). This section requires Nick to pay $203 to the Commissioner before giving the van to Mike. (3) This section does not apply to providing: (a) a *fringe benefit; or (b) a benefit that is an exempt benefit under the Fringe Benefits Tax Assessment Act 1986; or (c) a benefit that would be an exempt benefit under that Act if paragraphs (d) and (e) of the definition of employer in subsection 136(1) of that Act were omitted; or (d) a benefit constituted by the acquisition of a share or right under an employee share scheme (within the meaning of Division 13A of Part III of the Income Tax Assessment Act 1936). 14‑10 Dividend, interest or royalty received, for a foreign resident, in the form of a non‑cash benefit If: (a) an entity (the payer) receives in the form of a *non‑cash benefit: (i) a *dividend of a company; or (ii) interest (within the meaning of Division 11A of Part III of the Income Tax Assessment Act 1936); or (iii) a *royalty; and (b) section 12‑215, 12‑250 or 12‑285 would have required the payer to withhold an amount if the dividend, interest or royalty had been a payment in money; the payer must pay that amount to the Commissioner before providing the benefit (or part of it) to another entity. 14‑15 Payer can recover amount paid to the Commissioner (1) The payer may recover from the recipient as a debt an amount that the payer has paid to the Commissioner under section 14‑5. (2) If the payer has paid an amount to the Commissioner under section 14‑10, the payer may: (a) if the payer has provided all of the benefit to another entity— recover the amount from that other entity as a debt; or (b) if the payer has provided a part of the benefit to another entity—recover from that other entity as a debt the corresponding proportion of the amount paid to the Commissioner. (3) If the payer can recover an amount from another entity under this section, the payer is entitled to set the amount off against debts due by the payer to the other entity. [The next Division is Division 16.] Division 16—Payer's obligations and rights Table of Subdivisions Guide to Division 16 16‑A To withhold 16‑B To pay withheld amounts to the Commissioner 16‑C To provide information 16‑D Additional rights and obligations of entity that makes a dividend, interest or royalty payment Guide to Division 16 16‑1 What this Division is about This Division sets out the obligations and rights of an entity required to withhold an amount under Division 12, or to pay an amount to the Commissioner under Division 14. Note: The entity may also have obligations under other legislation. See, for example, the obligation to keep records under section 262A of the Income Tax Assessment Act 1936. Subdivision 16‑A—To withhold Table of sections When and how much to withhold 16‑5 When to withhold an amount 16‑10 How much to withhold 16‑15 Variation of amounts required to be withheld 16‑20 Payer discharged from liability to recipient for amount withheld Penalties for not withholding 16‑25 Failure to withhold: offence 16‑30 Failure to withhold: civil penalty for entity other than exempt Australian government agency 16‑35 Failure to withhold: civil penalty for exempt Australian government agency in relation to payment other than dividend, interest or royalty 16‑40 Failure to withhold: civil penalty for exempt Australian government agency in relation to dividend, interest or royalty payment 16‑45 Remission of penalty under section 16‑30, 16‑35 or 16‑40 16‑50 General interest charge on unpaid penalty When and how much to withhold 16‑5 When to withhold an amount If Division 12 requires an entity to withhold an amount from a payment, the entity must do so when making the payment. Note 1: An entity is required to withhold an amount under section 12‑145 when an investor becomes presently entitled to income of a unit trust. Note 2: If section 12‑215, 12‑250 or 12‑285 requires an entity to withhold an amount from a payment received by the entity, the entity must do so immediately after receiving the payment. 16‑10 How much to withhold (1) The amount that Division 12 requires to be withheld from a payment (except one covered by section 12‑325) is to be worked out under the regulations. (2) Regulations made for the purposes of this section may deal differently with different payments. Note: The Commissioner may vary an amount required to be withheld. See section 16‑15. 16‑15 Variation of amounts required to be withheld (1) The Commissioner may, for the purposes of meeting the special circumstances of a particular case or class of cases, vary the *amount required to be withheld by an entity from a *withholding payment (except a withholding payment covered by section 12‑140 or 12‑145). If the Commissioner does so, the amount is varied accordingly. Note: Section 12‑140 is about a payment arising from an investment where the recipient does not quote its tax file number (or, in some cases, its ABN). Section 12‑145 is about an investor becoming presently entitled to income of a unit trust. (2) The Commissioner's power to vary an amount includes the power to reduce the amount to nil. (3) A variation must be made by a written notice: (a) if it applies to a particular entity— that is given to that entity; or (b) if it applies to a class of entities—that is given to each of the entities, or a copy of which is published in the Gazette. 16‑20 Payer discharged from liability to recipient for amount withheld An entity that: (a) withholds an amount as required by Division 12; or (b) pays to the Commissioner an amount as required by Division 14; is discharged from all liability to pay or account for that amount to any entity except the Commissioner. Note: The entity may be required to refund the amount in some circumstances. See Subdivision 18‑B. Penalties for not withholding 16‑25 Failure to withhold: offence (1) An entity must not fail to withhold an amount as required by Division 12. Penalty: 10 penalty units. Note 1: See section 4AA of the Crimes Act 1914 for the current value of a penalty unit. Note 2: See sections 16‑30, 16‑35 and 16‑40 for an alternative civil penalty. (2) An entity must not fail to pay to the Commissioner an amount as required by Division 14. Penalty: 10 penalty units. Note 1: See section 4AA of the Crimes Act 1914 for the current value of a penalty unit. Note 2: See sections 16‑30, 16‑35 and 16‑40 for an alternative civil penalty. (3) An offence against subsection (1) or (2) is a strict liability offence. (4) If a person is convicted of an offence in relation to: (a) a failure by that person or someone else to withhold an amount as required by Division 12; or (b) a failure by that person or someone else to pay to the Commissioner an amount as required by Division 14; the court may order the convicted person to pay to the Commissioner an amount up to the *amount required to be withheld. The court may so order in addition to imposing a penalty on the convicted person. 16‑30 Failure to withhold: civil penalty for entity other than exempt Australian government agency (1) An entity (except an *exempt Australian government agency) that: (a) fails to withhold an amount as required by Division 12; or (b) fails to pay an amount to the Commissioner as required by Division 14; is liable to pay to the Commissioner a penalty (the penalty amount) equal to that amount. (2) The penalty amount is due at the time when the entity would have had to pay to the Commissioner the amount referred to in subsection (1). Note: An entity may become liable under this section in respect of a payment it made or received that is taken to have been subject to withholding tax as a result of a Commissioner's determination under subsection 177F(2A) of the Income Tax Assessment Act 1936 (see also subsection 177F(2F) of that Act). 16‑35 Failure to withhold: civil penalty for exempt Australian government agency in relation to payment other than dividend, interest or royalty (1) An *exempt Australian government agency that: (a) fails to withhold an amount as required by Division 12; or (b) fails to pay to the Commissioner an amount as required by Division 14; is liable to pay to the Commissioner a penalty of 20 penalty units. Note: See section 4AA of the Crimes Act 1914 for the current value of a penalty unit. (2) The Commissioner must give written notice to the agency about its liability under this section. The notice may be included in any other notice the Commissioner gives to the agency. (3) The penalty becomes due for payment on the day specified in the notice, which must be at least 14 days after the notice is given to the agency. Exception (4) This section does not apply in relation to an *amount required to be withheld from a *withholding payment covered by Subdivision 12‑F (about dividend, interest or royalty payment). 16‑40 Failure to withhold: civil penalty for exempt Australian government agency in relation to dividend, interest or royalty payment (1) An *exempt Australian government agency that: (a) fails to withhold an amount as required by Division 12 from a *withholding payment covered by Subdivision 12‑F (about dividend, interest or royalty payment); or (b) fails to pay to the Commissioner an amount as required by Division 14 in respect of a withholding payment covered by that Subdivision; is liable to pay to the Commissioner a penalty (the penalty amount) equal to that amount. (2) The penalty amount is due at the time when the entity would have had to pay to the Commissioner the *amount required to be withheld. Note: An entity may become liable under this section in respect of a payment it made or received that is taken to have been subject to withholding tax as a result of a Commissioner's determination under subsection 177F(2A) of the Income Tax Assessment Act 1936 (see also subsection 177F(2F) of that Act). 16‑45 Remission of penalty under section 16‑30, 16‑35 or 16‑40 (1) The Commissioner may remit all or a part of a penalty under section 16‑30, 16‑35 or 16‑40. (2) If the Commissioner decides: (a) to remit only part of a penalty; or (b) not to remit any part of a penalty; the Commissioner must give written notice of the decision to the entity liable to pay the penalty. Note: A person who is dissatisfied with a decision under this section may object against the decision in the manner set out in Part IVC. 16‑50 General interest charge on unpaid penalty If a penalty under section 16‑30, 16‑35 or 16‑40 remains unpaid after it is due, the entity liable to pay the penalty amount is liable to pay *general interest charge on the unpaid amount for each day in the period that: (a) started at the beginning of the day by which the penalty amount was due to be paid; and (b) finishes at the end of the last day, at the end of which, any of the following remains unpaid: (i) the penalty amount; (ii) general interest charge on any of the penalty amount. Subdivision 16‑B—To pay withheld amounts to the Commissioner Table of sections When and how to pay amounts to the Commissioner 16‑70 Entity to pay amounts to Commissioner 16‑75 When amounts must be paid to Commissioner 16‑80 Penalty for failure to pay within time 16‑85 How amounts are to be paid 16‑90 Large withholder—penalty for non‑electronic payment Who is a large, medium or small withholder 16‑95 Meaning of large withholder 16‑100 Meaning of medium withholder 16‑105 Meaning of small withholder 16‑110 Commissioner may vary withholder's status downwards 16‑115 Commissioner may vary withholder's status upwards Special rules for 2000‑01 16‑120 When certain amounts must be paid to the Commissioner 16‑125 Meaning of large withholder 16‑130 When and how some large withholders must pay amounts for July and August 2000 16‑135 Meaning of medium withholder When and how to pay amounts to the Commissioner 16‑70 Entity to pay amounts to Commissioner (1) An entity that withholds an amount under Division 12 must pay the amount to the Commissioner in accordance with this Subdivision. (2) An entity required to pay an amount to the Commissioner under Division 14 must pay that amount to the Commissioner in accordance with this Subdivision (except sections 16‑75 and 16‑80). 16‑75 When amounts must be paid to Commissioner Large withholder (1) A *large withholder must pay to the Commissioner as shown in the table an amount it withholds under Division 12 during a month. Payments by large withholders Item If the amount is withheld on this day of week: It must be paid to the Commissioner on or before: 1 Saturday or Sunday The second Monday after that day 2 Monday or Tuesday The first Monday after that day 3 Wednesday The second Thursday after that day 4 Thursday or Friday The first Thursday after that day Note: A different rule applies for certain kinds of amounts withheld during 2000‑01. See section 16‑120. Medium withholders (2) A *medium withholder must pay to the Commissioner an amount that it withholds during a month under Division 12 by the end of the 21st day of the next month. Small withholders (3) If a *small withholder withholds an amount under Division 12 during a month in a *quarter, it must pay the amount to the Commissioner by the end of the 21st day of the month after the end of that quarter. Note: A different rule applies for certain kinds of amounts withheld during 2000‑01. See section 16‑120. 16‑80 Penalty for failure to pay within time If an amount that an entity must pay to the Commissioner under subsection 16‑70(1) remains unpaid after the time by which it is due to be paid, the entity is liable to pay *general interest charge on the unpaid amount for each day in the period that: (a) started at the beginning of the day by which the unpaid amount was due to be paid; and (b) finishes at the end of the last day, at the end of which, any of the following remains unpaid: (i) the unpaid amount; (ii) general interest charge on any of the unpaid amount. 16‑85 How amounts are to be paid Large withholder (1) A *large withholder must pay to the Commissioner by a means of *electronic payment: (a) an amount that it withholds under Division 12; and (b) an amount that it pays to the Commissioner under Division 14. Note: A different rule applies for some large withholders for July and August 2000. See section 16‑130. Medium or small withholder (2) A *medium withholder or *small withholder must pay to the Commissioner: (a) any amount that it withholds under Division 12; and (b) any amount that it pays to the Commissioner under Division 14; by a means of *electronic payment, or any other means approved in writing by the Commissioner. Commissioner may vary payment method (3) The Commissioner may, with an entity's agreement, vary the means by which the withholder pays amounts to the Commissioner under this Subdivision. The variation must be by written notice given to the entity. 16‑90 Large withholder: penalty for non‑electronic payment (1) A *large withholder that pays an amount by a means that does not comply with this Division is liable to a penalty of 5 penalty units. Note: See section 4AA of the Crimes Act 1914 for the current value of a penalty unit. Remission (2) However, the Commissioner may remit all or a part of the penalty amount. (3) If the Commissioner decides: (a) to remit only part of a penalty amount; or (b) not to remit any part of a penalty amount; the Commissioner must give written notice of the decision to the entity liable to pay the penalty amount. Note: A person who is dissatisfied with a decision under this section may object against the decision in the manner set out in Part IVC. (4) The Commissioner must give written notice to the *large withholder about its liability under this section. The notice may be included in any other notice the Commissioner gives to the large withholder. (5) The penalty becomes due for payment on the day specified in the notice, which must be at least 14 days after the notice is given to the *large withholder. General interest charge (6) If any of the penalty remains unpaid after it is due, the *large withholder is liable to pay the *general interest charge on the unpaid penalty amount for each day in the period that: (a) started at the beginning of the day by which the penalty amount was due to be paid; and (b) finishes at the end of the last day, at the end of which, any of the following remains unpaid: (i) the penalty amount; (ii) general interest charge on any of the penalty amount. Exception (7) This section does not apply if: (a) the *large withholder is an *exempt Australian government agency; or (b) the Commissioner has varied under section 16‑85 the means by which the large withholder pays amounts to the Commissioner. Who is a large, medium or small withholder 16‑95 Meaning of large withholder (1) An entity is a large withholder for a particular month (the current month) in a *financi