Pay As You Earn

PAYE Bulletin 7

Payments of RPS, PAYE and PPS Deductions to the Commissioner by Large Remitters - Commissioner's Discretion to Extend the Due Date

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Date of Issue: 1 July 1999

Valid from 1 July 1999

About this bulletin

This bulletin sets out guidelines for the exercise of the Commissioner's discretion to extend the due date for payment of deductions of tax by a large remitter under the Reportable Payments System (RPS), the Pay As You Earn (PAYE) system and the Prescribed Payments System (PPS). The requirements for the payment of such deductions to the Commissioner are set out in Division 1AAA of Part VI of the Income Tax Assessment Act 1936 (ITAA). This Division applies to amounts deducted on or after 1 July 1998.

A large remitter is generally a person whose deductions under RPS, PAYE and PPS for any financial year ending on or after 30 June 1998 exceed $1 million. The provisions determining who is a large remitter are set out in sections 220AAB and 220AAC of the ITAA.

Subsection 220AAE(1) specifies when a large remitter must pay to the Commissioner the amount of any deductions made by the person during a month. These requirements are set out in the following table.

This means that if deductions are made on Saturday, Sunday, Monday or Tuesday the payment of those deductions to the Commissioner is to be made by the following Monday. Similarly, if deductions are made on Wednesday, Thursday or Friday the payment is to be made by the following Thursday.

Payments made to the Commissioner by large remitters must be paid by Electronic Funds Transfer - EFT - (section 220AAF). If payments to the Commissioner are not made by EFT, the large remitter will be liable for the General Interest Charge under section 220AAW. More information for large remitters can be found in PAYE Bulletin Number 10.

The Commissioner has a broad discretion under paragraph 220AAH(a) to extend the due date for payment. This Bulletin outlines how the Commissioner will exercise this discretion to allow:

• • small deductions of tax to be grossed up and remitted at the time the regular deductions are paid; and

• • alignment of payment dates within a company or a company group.

Small deductions of tax

The payment requirements of large remitters will depend on the day of the week that payments are made to staff and contractors. In many cases, such payments occur on a regular payment cycle, e.g. each week or month.

From time to time, a large remitter may make minor payments (outside of its regular payment cycle) from which deductions of tax are required to be made. Examples of such minor payments include eligible termination payments (ETPs), casual salary or wages, and ad-hoc contract payments. Generally, these payments are small, and consequently the deductions of tax required are also small. The date when such small amounts are required to be paid to the Commissioner may not correspond with the regular payment cycle due dates and a separate small payment to the Commissioner would be required.

Recognising the inconvenience that this may cause, the Commissioner will exercise his discretion under paragraph 220AAH(a) to approve arrangements so that small deductions under PAYE, PPS and RPS, which would otherwise be required to be paid outside the regular payment cycle, may be deferred until the next regular payment date.

When is a payment small?

Whether a payment is small depends on the size of the remittance of each large remitter. The Commissioner has determined that the amount of deductions required to be paid in respect of any payment period is small if it is less than a threshold amount based on the previous year's remittances. However, as the intention of the law is to bring forward payments from large remitters, the Commissioner has set a ceiling of $50,000 per payment period. That is, payment of amounts of $50,000 or more per payment period cannot be deferred unless the large remitter obtains written approval from the Commissioner. A payment period is either the period from Saturday to Tuesday, or from Wednesday to Friday inclusive.

The threshold amount for deferring payments without reference to the Commissioner is the lesser of:

• (i) 0.5% of the combined PAYE, PPS and RPS deductions made in the previous financial year by the payer; or

• (ii) $50,000.

If the total amount deducted in a payment period does not exceed the above threshold, then payment may be deferred until the next regular due date. If the total amount deducted exceeds the above threshold, the total amount must be paid to the Commissioner by the relevant due date (but see 'Requests to extend the due date for payment of amounts that exceed the threshold' below).

Commissioner's written notice to a large remitter

Section 220AAH requires the Commissioner to give written notice to a large remitter of any extension of the due date to pay granted under that section. Where the amount is below the threshold (as described above), this Bulletin represents written notice in accordance with section 220AAH. That is, if the amount sought to be deferred until the next regular due date is below the threshold, there is no need to apply to the Commissioner for approval.

Requests to extend the due date for payment of amounts that exceed the threshold

A large remitter who wishes to extend the due date for payment of an amount that exceeds the threshold may apply to the Commissioner in writing, stating the reasons why the discretion to allow the extension should be exercised.

The Commissioner will consider each request on its own merits. Such requests will only be granted if, by reference to the intention of the legislation (to bring forward due date for payment), costs of compliance and efficiency of administration, it would be fair and reasonable to do so. It is expected that extensions of the due date for payment of amounts that exceed the threshold will only be granted in rare circumstances.

Alignment of payment dates

Company Groups

The Commissioner may also exercise his discretion to align the payment dates of the companies in a group. Company groups may experience some administrative difficulties in complying with the payment requirements that apply from 1 July 1998. For example, some companies within a group may make payments to their employees or contractors on different days to those of other members of the group, and the payment of deductions to the Commissioner are made by one of the companies on behalf of the group.

Such a request should be made in writing to the Commissioner and should identify all of the companies in the group, their respective regular payroll cycle and state which payment dates are requested to be aligned.

Where the Commissioner gives written approval to a group to align its payment dates, the aligned dates will become the regular payment dates for each of the companies in the group.

Company Divisions

The Commissioner may exercise his discretion to treat divisions in a company the same way as companies in a company group, for alignment purposes. Some companies operate with separate autonomous 'divisions' within the same legal entity, usually in different locations. Each division is often separately registered for PAYE, PPS and/or RPS purposes and pays deductions of tax to the Commissioner independently of the other divisions.

Such a request should be made in writing to the Commissioner and identify all of the divisions in the company, their respective regular payroll cycle and state which payment dates are requested to be aligned.

Where the Commissioner gives written approval to a company to align its payment dates, the aligned dates will become the regular payment dates for each of the divisions of the company.

Examples

Payment due dates for July 1998 to September 1998

Scenario

ABC Ltd is a large remitter which pays its executive staff on a monthly basis and all other staff on a fortnightly basis. For the year ended 30 June 1998, a total of $2,300,000 in PAYE, PPS and RPS deductions was paid to the Commissioner. The following payments of salary were made during the period July to September 1998.

Case A [payment period 15-18 August 1998]

Assuming the above scenario, on Monday 17 August 1998 an employee retires after 5 years of service. An ETP is made to the employee and PAYE deductions of $8,000 are made from the payment. On Tuesday 18 August 1998, a car allowance is paid to another employee and PAYE deductions of $300 are made from the allowance.

Ordinarily, deductions made on 17 and 18 August 1998 are required to be paid to the Commissioner by the following Monday 24 August 1998, which falls in between ABC Ltd's regular payment dates of 20 August and 3 September 1998.

However, if the amount of $8,300 (i.e. $8,000 + $300) is less than the threshold for small payments, the amount may be paid to the Commissioner by the next regular payment date, (i.e. 3 September 1998). The threshold is the lesser of:

• (i) $11,500 (i.e. 0.5% of total deductions made in the previous financial year, 1997/98, of $2,300,000); or

• (ii) $50,000.

Therefore, the threshold is $11,500 . Payment of the amount of $8,300 , being less than $11,500, may be deferred until the next regular payment date, i.e. 3 September 1998 .

Case B [payment period 19-21 August 1998]

Assuming the same scenario as above, on Wednesday 19 August 1998 a further ETP is paid and an amount of $500 is deducted from the payment. This is the only amount deducted in the payment period from 19 to 21 August 1998.

Ordinarily, deductions made in that payment period are required to be paid to the Commissioner by Thursday 27 August 1998 .

However, payment of the amount of $500 being less than the threshold of $11,500 may also be deferred until the next regular payment date, i.e. 3 September 1998.

Case C [payment period 2-4 September 1998]

Assuming the same scenario as above, on Thursday 3 September 1998 a further ETP is paid with an amount of $10,000 deducted from the payment and on Friday 4 September 1998 a PPS payment is made with an amount of $4,000 deducted from the payment. These are the only amounts deducted in the payment period from 2 to 4 September 1998 and the due date for payment to the Commissioner is Thursday 10 September 1998.

As the amount of $14,000 (i.e. $10,000 + $4,000) is greater than the threshold of $11,500, the due date for payment will not be extended to the next regular payment date, Thursday 17 September 1998, i.e. payment must be made by Thursday 10 September 1998.

Do you need more information?

If you have any questions or need more information about the obligations of large remitters please contact your local Large Client Team.

The number for your team can be found on the inside cover of your PAYE or PPS Payment Book. Also, for your convenience, the contact numbers for each of the Large Client Teams are listed below.

Large Client Team telephone and facsimile numbers

New South Wales region

Victorian region

Other States

ATO references:
NO NAT 2708-7.99

Related Rulings/Determinations:
PAYE Bulletin 7 - Notice of Withdrawal