Explanatory Memorandum
(Circulated by the authority of the Treasurer, the Hon Wayne Swan MP)Chapter 4 Amendment of payment summary provisions
Outline of chapter
8.1 Part 2 of Schedule 3 to this Bill amends Schedule 1 to the Taxation Administration Act 1953 (TAA 1953) to provide the mechanism for reporting of 'reportable employer superannuation contributions' (RESC).
8.2 This chapter details how 'payers', for the purposes of the payment summary provisions in the TAA 1953, will be required to include RESC amounts in annual withholding reports and in annual and part-year payment summaries.
Context of amendments
8.3 Schedule 1 to the TAA 1953 contains the pay as you go (PAYG) withholding arrangements that require 'payers' to withhold amounts from 'withholding payments' made to recipients to assist the recipient meet their ultimate income tax liability. Withheld amounts must be paid to the Commissioner of Taxation (Commissioner).
8.4 'Withholding payment' is defined in section 995-1 of the Income Tax Assessment Act 1997 and includes payments identified in Divisions 12, 13 and 14 of Schedule 1 to the TAA 1953. Examples are payments for work and services; superannuation payments; benefit and compensation payments; non-cash benefits (other than fringe benefits); and particular alienated personal services payments.
8.5 Payers that withhold amounts from particular 'withholding payments' must provide a payment summary to the recipient within 14 days after the end of the financial year. A payment summary must also be provided if the recipient has a reportable fringe benefits amount in respect of his or her 'employment' (as defined in the Fringe Benefits Tax Assessment Act 1986 ) by the payer.
8.6 The payment summary must be in the 'approved form' and must satisfy other content requirements in section 16-170 of Schedule 1 to the TAA 1953. In particular, it must include total amounts withheld and the total income to which the withheld amounts relate. Where applicable, the payment summary must also specify the reportable fringe benefit amount it covers and the income year to which the amount relates.
8.7 Schedule 1 to the TAA 1953 provides for part-year payment summaries, which must be given to a recipient (on request) where the recipient made their request more than 21 days before the end of the financial year. Part-year payment summaries must generally be provided to the recipient 14 days after the payer receives the request unless the recipient has a reportable fringe benefits amount in respect of their employment with the payer for the income year.
8.8 The penalty for failing to meet the requirements in Schedule 1 to the TAA 1953 in respect of an annual or part-year payment summary is 20 penalty units and the offence is an offence of strict liability. Having regard to the circumstances of a particular case, the Commissioner may exempt an entity from the need to provide a payment summary or specified requirements of the payment summary provisions under section 16-180 of Schedule 1 to the TAA 1953.
8.9 For example, on 16 May 2008, the Australian Taxation Office (ATO) issued a legislative instrument (ID: 2008/MEI001) pursuant to subsection 16-180(1). The instrument exempts payers from the requirement to provide recipients with a copy of the payment summary under sections 16-155, 16-160 and 16-167 of Schedule 1 to the TAA 1953.
8.10 Schedule 1 to the TAA 1953 also provides for an annual withholding report that must be prepared by payers. If an entity has withheld amounts in an income year, or a person has a reportable fringe benefits amount at the end of the year in respect of their employment with the entity, the entity must give a report to the Commissioner under subsection 16-153(2) of Schedule 1 to the TAA 1953. This report must meet content requirements and must be provided no later than 14 August after the end of the financial year.
8.11 For some withholding payments, prescribed in subsection 16-153(1) of Schedule 1 to the TAA 1953, the annual report may be provided after 14 August but no later than 31 October after the financial year in which the withholding payment was made.
Summary of new law
8.12 Part 2 of Schedule 3 amends Schedule 1 to the TAA 1953 to require payers to disclose RESC made on behalf of an employee during a financial year, or part of a financial year, on part-year payment summaries and the annual payment summary provided to that employee for the financial year.
8.13 Part 2 of Schedule 3 also amends Schedule 1 to the TAA 1953 to require payers to provide an annual withholding report to the Commissioner where they have made RESC during the financial year. Payers will need to provide this annual withholding report to the Commissioner, no later than 14 August after the end of the financial year in which the RESC were made.
Comparison of key features of new law and current law
| New law | Current law |
| Payers must disclose RESC on part-year and annual payment summaries. | Payers do not disclose RESC on part-year and annual payment summaries. |
| Payers must disclose RESC on the annual withholding report provided to the Commissioner. | Payers do not disclose RESC on the annual withholding report provided to the Commissioner. |
Detailed explanation of new law
Amendment to the annual report content requirements
8.14 The amendments in Part 2 of Schedule 3 amend subsection 16-153(2) of Schedule 1 to the TAA 1953 so that entities that have made RESC during a financial year will need to provide an annual withholding report to the Commissioner no later than 14 August after the end of the financial year in which the RESC were made. [Schedule 3, Part 2, item 12]
8.15 Under the current law, this report may be in the 'approved form' (as defined in section 388-50 of Schedule 1 to the TAA 1953) or the report may consist of copies of a payment summary or payment summaries that the entity provided in respect of withholding payments and reportable fringe benefits, plus an accompanying statement in the approved form.
8.16 The amendments revise subparagraph 16-153(3)(b)(ii) to include RESC. This means that entities may provide the Commissioner with a payment summary or payment summaries they have issued in respect of RESC made during the financial year as an alternative to providing the approved form. The entity needs to provide an accompanying statement in the approved form as well. [Schedule 3, Part 2, item 13]
8.17 Because the annual report will deal with RESC as well as withholding payments and reportable fringe benefit amounts, the heading to section 16-153 is revised to omit the words 'about withholding payments and reporting fringe benefits'. [Schedule 3, Part 2, item 12 (note)]
Amendment to the payment summary provisions
8.18 The amendments in Part 2 of Schedule 3 also revise the requirements for annual and part-year payment summaries.
8.19 A new paragraph (d) is inserted in subsection 16-155(1) so that payers will need to provide an annual payment summary to an individual where they have made RESC for that individual during the year in respect of the individual's employment. [Schedule 3, Part 2, item 14]
8.20 The amendments also insert a new paragraph (c) in subsection 16-155(2) so that an annual payment summary will need to cover the total RESC made by the payer during the financial year, with the exception of any contributions reported on a previous part-year payment summary that was provided to the recipient. [Schedule 3, Part 2, item 15]
8.21 As a result of the legislative instrument issued by the ATO on 16 May 2008 exempting entities from the need to provide a copy of the payment summary, new paragraph (c) does not include the words '(and a copy of it)' like the other paragraphs in subsection 16-155(2). This is because, from 1 July 2008, entities have been relieved from the requirement to provide a copy of the payment summary.
8.22 There is also an amendment to subsection 16-170(1), which deals with the form and content of a payment summary, to require payment summaries to specify the RESC they cover (if any) and the income year to which the contribution(s) relate. [Schedule 3, Part 3, item 18]
8.23 These amendments in respect of RESC and payment summaries ensure that payers have the same reporting obligations for RESC on payment summaries as currently apply for other employment benefits such as salary or wages and reportable fringe benefit amounts.
8.24 The amendments also alter the part-year payment summary provisions in section 16-160 to include RESC. As a result, payers will need to provide a part-year payment summary if a recipient asks for one covering any RESC made by the payer in respect of the recipient's employment during the financial year. [Schedule 3, Part 3, items 16 and 17]
8.25 Pursuant to subsection 16-170(2) of Schedule 1 to the TAA 1953, this part-year payment summary must be provided to the recipient no later than 14 days after the payer received the request.
Application and transitional provisions
8.26 These amendments will commence the day after Royal Assent.
8.27 These amendments apply to payment summaries, and annual withholding reports, that are issued in the 2009-10 income year and later income years.