SENATE

Explanatory Memorandum

TO THE BILL AS INTRODUCED (Circulated by authority of the Treasurer,the Hon Ralph Willis, MP)

CHAPTER 4 - Reduction of PAYE early remitter threshold

Overview

4.1 Part 4 of Schedule 1 of the Bill amends the Income Tax Assessment Act 1936 (the Act) to lower, from $5 million to $1 million, the threshold at which a group employer is deemed to be an 'early remitter'. Consequently, the twice monthly remittance arrangements will affect group employers who have annual PAYE remittances in excess of $1 million per year.

4.2 Instalment deductions made by early remitters in the first 14 days of a month must be paid to the Commissioner by the 21st day of that month and deductions made in the balance of the month must be paid by the 7th day of the following month. This is in lieu of a single payment on the later date.

Summary of the amendments

Purpose of the amendments

4.3 To reduce from $5 million to $1 million the tax instalment threshold above which a group employer is required to remit tax instalments twice monthly instead of once.

Date of effect

4.4 The amendment applies to instalments deducted on or after 1 December 1995. [Item 43]

Background to the legislation

4.5 Broadly, section 221EC of the Act provides for a group employer to be an early remitter for a particular month where any one of three situations exist.

4.6 The first situation is when the total PAYE remittances of a group employer, for any income year ending on or after 30 June 1989 and before the deduction month, exceeded $5 million

4.7 The second situation is where a group employer was included in an eligible employer group at the end of any income year ending on or after 30 June 1989 but before the deduction month, and the total PAYE remittances of any such income year of the employers in that group exceeded $5 million. An eligible employer group consists of any collection of two or more companies each of which is a subsidiary of the other company or of the same company.

4.8 The third situation is where the Commissioner has determined a group employer to be an early remitter under subsection 221EC(5) of the Act, and has served a notice to that effect on the employer.

4.9 A group employer who comes within any one of the above three situations is an early remitter until the Commissioner determines, by notice in writing served on the group employer, that the group employer is not an early remitter for the particular month or months specified in the notice or for all months after and including the month so specified.

Explanation of the amendments

4.10 The Bill proposes that the references to $5 million in subsection 221EC(1) of the Act be omitted and substituted with $1 million. [Items 41 & 42]

4.11 This will result in all group employers (including those included in an eligible employer group) with tax instalment deductions exceeding $1 million being early remitters unless the Commissioner has determined otherwise. Previously, only those group employers with deductions exceeding $5 million were early remitters.

4.12 The early remitter obligation of those group employers, who become early remitters because of the lowering of the threshold, start in respect of deductions made on or after 1 December 1995. [Item 43]