This Digest was prepared for debate. It reflects the legislation as
introduced and does not canvass subsequent amendments. This Digest
does not have any official legal status. Other sources should be
consulted to determine the subsequent official status of the
Contact Officer & Copyright Details
A New Tax System (Tax Administration)
Date Introduced: 2 September 1999
House: House of Representatives
Commencement: Generally after commencement of
other A New Tax System Acts or 1 July 2000.
The purpose of the A New Tax System (Tax
Administration) Bill 1999 (Bill) is to introduce, among other
things, a new oral rulings regime, an identification system to
improve compliance with taxation laws and a number of rules which
compliment or supplement certain measures associated with the A New
Tax System legislation.
- supplements rules which established the Pay As You Go (PAYG)
withholding system, particularly in respect of the new labour hire
withholding arrangements and certain administrative matters
including the amount of withholding, registration and annual
reporting to the Commissioner of Taxation (Commissioner)
- introduces standardised rules to enable the Commissioner to
collect and recover tax-related liabilities
- introduces the new oral rulings regime for simple tax inquiries
for taxpayers with simple tax affairs
- introduces a reporting, verification and identification system
to improve compliance with taxation laws purportedly in relation to
high risk compliance transactions
- introduces a shorter period of review for taxpayers with simple
tax affairs and at the same time reduces the time period in which
those taxpayers are generally able to lodge objections to
- will require charities and gift deductible entities (apart from
those specifically listed by name in the Income Tax Assessment
Act 1997) to obtain an Australian Business Number (ABN) and be
endorsed by the Commissioner by 1 July 2000 in order to be a
deductible gift recipient or income tax exempt
- introduces additional administrative provisions in respect of
the Business Activity Statement (BAS), which includes the
requirement for electronic lodgers to pay all tax debts
- provides for consequential amendments relating to PAYG
instalments, in particular, variation of GDP-adjusted notional tax
for quarterly instalment payers, and
- insures that the savings rebate which was abolished from the
1999-2000 income year is not taken into account in the calculation
of provisional tax for that year.
1. A New Tax System
On 13 August 1998 the Federal Government
released proposals for reform of the Australian tax system(1)
(ANTS) of which, a goods and services tax (GST) was the
The tax reform plan proposed to:
- introduce a GST which abolished sales tax and nine other
- change Commonwealth-State financial relations by providing
States and Territories with an independent revenue base
- implement significant changes to individual marginal tax
- implement a major rationalisation of family assistance
- introduce a new universal business number system
- move toward an entity taxation system which is directed toward
the elimination of tax advantages between different business
- simplify the imputation system and introduce refunds for excess
The tax reform plan also proposed to replace the
various existing taxation payment and reporting systems of company
tax, provisional tax, PAYE(2), PPS(3) and RPS(4) by one quarterly
tax payment system, PAYG.
The A New Tax System (Taxation Laws Amendment)
Bill (No.1) 1999 (PAYG Bill) introduced the PAYG system which
comprises two parts:
- a PAYG withholding system which will replace the
existing PAYE, PPS and RPS systems, as well as six other
withholding arrangements such as non-resident and TFN(5)
- a PAYG instalments system, which will replace the
current provisional tax and company tax instalment systems.
PAYG withholding occurs where amounts are
collected in respect of particular kinds of payments or
transactions (for example a payment of salary or a payment under a
labour hire agreement) and then paid to the Commissioner.
PAYG instalments are amounts paid directly to
the Commissioner usually on a quarterly basis.
Credits are created for the amounts of income
collected under PAYG and applied against tax debits. Any excess is
The PAYG Bill did not include recovery,
procedural and evidentiary provisions for PAYG.
The PAYG Bill is currently in the Senate and has
had a change of name to the A New Tax System (Pay As You Go) Bill
The Australian Business Number (ABN) is a
universal business number system.
The tax reform plan included provision for the
introduction of the ABN, one number to identify a business for all
Commonwealth purposes. The ABN will rationalise identification of
business across all regulatory bodies.
The Australian Taxation Office (ATO) will create
and maintain a register of Australian businesses for all
Commonwealth purposes. The number will not be a tax file number.
The system will be available to State, Territory and local
government regulatory bodies to reduce the multiplicity of
government registration and reporting.
'The introduction of the ABN was recommended by
the Bell Report as part of measures designed to:
- facilitate the introduction of a single tax compliance
- streamline business interaction with the Commonwealth
- provide a mechanism for collecting and distributing information
through a single entry point, and
- facilitate the development of a single entry point and
streamlined registration process.'(6)
The ABN scheme was introduced by the A New
Tax System (Australian Business Number) Act 1999 and the A
New Tax System (Australian Business Number Consequential
Amendments) Act 1999 which received Royal Assent on 8 July
2. Charities and gift deductible
2.1 Gift deductible entities
Every person, whether an individual, the trustee
of a trust estate or superannuation fund, a partnership or a
company, and whether a resident or a non-resident of Australia, is
entitled to a deduction from assessable income for individual gifts
of $2 or more made during the year to nominated funds, authorities,
institutions, bodies or specified persons.
There are two main categories of gift deductible
- those that fall within the approved general categories,
- those that are specifically identified in the Income Tax
Assessment Act 1997 (ITAA97).
Tables of gift deductible entities may be found
in Subdivision 30-B of the ITAA97. They are essentially classified
into 12 categories including health, education, research, welfare
and rights, environment, the family, sports and recreation,
philanthropic trusts and cultural organisations.
A charity that meets certain requirements will
generally be a tax exempt entity. That is, one whose total ordinary
and statutory income is exempt from income tax. Tables of exempt
entities may be found in Division 50 of the ITAA97, which includes
a category for charity, education, science and religion.
If a charitable organisation or fund is to be
exempt on income derived on or after 1 July 1997 it must either
have a physical presence in Australia and incur its expenditure and
pursue its objects principally here, be listed in one of the
deductible gift tables or be a prescribed institution either
located outside Australia and exempt in its country of residence or
with a physical presence in Australia but which incurs its
expenditure and pursues its objects principally outside
The Commissioner may make public and private
rulings that are binding on him. The public rulings system is
contained in the Taxation Administration Act 1953 (TAA
1953) in Part IVAAA (sections 14ZAAA to 14ZAAM) and the private
rulings system is contained in Part IVAA (sections 14ZAA to 14ZAZC)
of the TAA 1953.
Before the introduction of the public and
private rulings system, rulings, determinations and advance
opinions were not binding on the Commissioner.
Since 1 July 1992 public and private rulings are
binding on the Commissioner if they relate to arrangements that
began on or after that date and they deal with the application of a
law under which a person's liability to tax is determined. Rulings
and determinations on procedural, administrative or tax collection
matters are not binding on the Commissioner. Rulings made before 1
July 1992 and those relating to procedural and administrative
matters will be treated as administratively binding.
4. Review and objection
The Commissioner has power to amend an
assessment by making such additions or alterations, as he considers
There are various time limits on this power
depending on whether the original assessment relates to the 1989/90
or subsequent income year or whether it relates to an earlier
For those assessments relating to the 1989/90 or
later income years, where there has been tax avoidance involving
fraud or evasion, the Commissioner can amend an assessment at any
time. In any other case the Commissioner can amend the assessment
within four years from the date the tax became due and payable
under the assessment.
The Commissioner's power to amend assessments
for pre-1989/90 income years depends upon whether the taxpayer has
made a full and true disclosure of all material facts necessary for
the assessment. If full and true disclosure has been made, the
assessment may only be amended within three years from the date the
tax became due and payable under the assessment.
A taxpayer can effectively 'self-amend' an
assessment at any time within four years of the due date for
A taxpayer wishing to challenge an amended
assessment must lodge an objection within the prescribed time or
such further time as allowed by the Commissioner (generally within
4 years of service of the notice of assessment). If the objection
is disallowed the taxpayer may seek review by the Administrative
Appeals Tribunal or appeal to the Federal Court.(if any)
1.1 How much to withhold
Schedule 1 of the Bill amends
the Taxation Administration Act 1953 (TAA 1953) to insert
New Division 15 into Schedule 1.
New Division 15 concerns the
calculation of how much an entity must withhold from those payments
or transactions that are covered by PAYG and known as withholding
The types of withholding payments are summarised
in a table in Division 12 of the TAA 1953 and include:
- a payment of salary etc to an employee
- a payment of remuneration to a director of a company
- a return to work payment to an individual
- a payment under a labour hire arrangement
- a payment of pension or annuity
- a social security or similar payment
- a compensation, sickness or accident payment
- a payment arising from an investment where the recipient does
not quote a tax file number, or in some cases, its ABN, and
- a mining payment.
Basically the amount to be withheld is to be
calculated using withholding schedules made by the Commissioner
pursuant to new section 15-25. However, if the
regulations prescribe how the amount is to be worked out, then it
is to be worked out under the regulations. (New section
Pursuant to new section 15-30,
when making a withholding schedule, the Commissioner must have
regard to the rates of income tax, Medicare levy, HECS, the family
tax benefit and any prescribed tax offsets.
The Commissioner also has the power to vary the
amount to be withheld by an entity from a withholding payment. An
entity will need to take into account any TFN declaration or
declaration under new section 15-50 it may be
provided with, because the declaration may affect how to calculate
the amount to withhold.
These amendments apply to payments made on or
after 1 July 2000 and declarations in effect immediately before 1
July 2000 continue to have effect as if they were declarations
under new section 15-50.
1.2 Payment under new labour hire
Schedule 10 repeals existing
section 12-60 and substitutes new section 12-60 to
correct the unintended application of the previous section from
Former section 12-60 was extremely widely
drafted and was not restricted to applying to labour hire
As pointed out in the Bills Digest for the A New
Tax System (Taxation Laws Amendment) Bill (No.1) 1999 at page 17,
the obligation to withhold tax could have occurred in many
situations. This included where a solicitor engages a barrister on
behalf of a client or where a service trust or company pays an
individual for work or services to be performed for a professional
The Digest concluded that former section 12-60
was a widely drafted provision that would catch activities outside
the scope of labour hire arrangements. Indeed the provision
provided for further payments for work or services to be
specifically included by way of regulation.
The proposed amendments restrict the application
of the section to withholding by an entity from a payment it makes
to an individual if the entity carries on a labour hire
New section 12-60 states that
the entity must be carrying on an enterprise that is a 'business of
arranging for persons to perform work or services directly for
clients of the entity, or the enterprise includes a business of
that kind that is not merely incidental to the main activities of
The notes to the section specifically mention
that solicitors will not have to withhold payments made to
New subsection 12-60(2) retains
the ability to significantly expand the application of the section
by retaining the concept that 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 the
payment is, in whole or in part, for work or services and is of a
kind prescribed by the regulations.
1.3 PAYG withholding
Schedule 14 inserts new
Subdivision 16-BA, which imposes an obligation on
withholders to be registered.
Withholders must apply to be registered before
they are required to make the first withholding. (New
A branch of an entity may apply to be registered
and if the Commissioner is satisfied that the branch carries on an
independent system of accounting, the entity has an ABN and carries
on an enterprise through the branch it will be registered and known
as a PAYG withholding branch. (New section 16-142)
Thus a branch may be both a PAYG withholding branch and a GST
1.4 TFN Declarations and annual
Schedule 5 makes amendments to
Part VA of the Income Tax Assessment Act 1936 (ITAA36).
Part VA deals with Tax File Numbers (TFN) and its objects include
prevention of tax evasion and increasing the effectiveness and
efficiency of the matching of information contained in reports
given to the Commissioner with information disclosed in income tax
Division 3 of Part VA currently deals with
quotation of tax file numbers by employees and thus with employee
declarations. This is repealed and the concept of the quotation of
tax file numbers by recipients of eligible PAYG payments is
introduced in its place.
This is because the PAYG withholding applies to
withholding payments that include categories beyond salaries paid
Recipients may, therefore, under new
section 202C make a TFN declaration in
respect of a particular payer. The terms 'recipient' and 'payer'
replace the former 'employee' and 'employer'.
Payers will also be required under new
section 202CF to notify the Commissioner if a recipient
has not made a TFN declaration within 14 days of the commencement
of the relationship between the payer and the recipient under which
a PAYG payment will or will be likely to be made.
This represents a departure from the current TFN
provisions in respect of employee declarations. Tax must currently
be withheld at the top marginal rate plus Medicare levy, but there
is no requirement on an employer to advise the Commissioner of the
failure to provide an appropriate declaration.
Schedule 5 also introduces
obligations for annual reports concerning withholding payments and
reportable fringe benefits to be prepared and given to the
Commissioner. Generally these reports must be made before 31
October after the end of a financial year or, if any person
employed by the entity has a reportable fringe benefit amount, by
14 August after the end of the financial year.
PAYG replaces several existing reporting and
taxation payment systems and the requirements in new
section 16-153 for the provision of annual reports
replaces the existing provisions.
The provisions relating to annual reports apply
for financial years commencing on 1 July 2000.
An employment declaration that is effective
immediately before 1 July 2000 continues to have effect as if it
were a TFN declaration given on 1 July 2000.
1.6 PAYG instalments - GDP-adjusted
Individuals who are not registered for GST
purposes (and have tax payable greater than $8,000) may choose to
have the amount of the quarterly PAYG instalment worked out on the
basis of the previous year's income tax liability adjusted by a
factor which reflects annual movements in gross domestic product
and notified to them by the Commissioner. This is referred to as
quarterly instalments on the basis of GDP-adjusted notional
The amendments in Schedule 10
of the Bill replace existing mechanisms for those who choose to pay
quarterly instalments on a GDP-adjusted notional tax basis, to vary
the amount of the instalment.
1.7 PAYG instalments - consequential
Schedule 16 makes consequential
amendments to several Acts following the introduction of PAYG
instalments including the:
- Crimes (Taxation Offences) Act 1980 to ensure the
definition of income tax includes amounts payable under the PAYG
- Higher Education Funding Act 1988 to allow amounts
payable under HECS to be collected under the PAYG instalment
- Income Tax Assessment Act 1936 to replace the term
'instalment taxpayer' with 'full assessment taxpayer' because the
term will apply to instalments payable for the last time for the
1.8 PAYG withholding - consequential
Schedule 11 makes consequential
amendments to several Acts following the introduction of PAYG
withholding including the:
- Aboriginal Land Rights (Northern Territory) Act 1976
to ensure that the new law will operate in the same way as the
current law in relation to mining payments covered by the new PAYG
- Income Tax Assessment Act 1997, Bankruptcy Act
1966, Social Security Act 1991 and Veterans'
Entitlements Act 1986 to refer to the new summary document in
the PAYG withholding system called a 'payment summary' instead of
the present group certificate
- Child Support (Registration and Collection) Act 1988
to delete references to the obsolete terms of 'employee',
'employer' and 'salary or wages' and replace them with a reference
to 'work and income support related withholding payments' which is
defined to basically mean a withholding payment under the new PAYG
- Defence Act 1903, Higher Education Funding Act
1988 and Public Service Act 1922 to repeal references
to Division 2 of Part VI of the ITAA36 and substitute references to
the new PAYG system equivalents in Part 2-5 of Schedule 1 to the
TAA 1953(7), and
- Income Tax Assessment Act 1936 to update references to
provisions and concepts in the current Part VI of the ITAA36
(collection and recovery of taxes) to also refer to the new
provisions and concepts in the PAYG withholding system.
2. Collection and recovery
2.1 Standardised rules
Schedule 2 of the Bill
introduces new Part 4-15 into Schedule 1 of the
The aim is to standardise the rules and deal
with the methods by which the Commissioner may collect and recover
amounts of taxes and other liabilities.
The rules will apply from 1 July 2000 and the
aim is to remove the multiplicity of recovery provisions that
currently exist to replace them with one legislative provision.
2.2 Outline of new rules
New Part 4-15 includes:
- the general rules about collection and recovery, which
basically state that a tax-related liability is a pecuniary
liability to the Commonwealth and a tax-related liability that is
due and payable is a debt due to the Commonwealth and is payable to
the Commissioner (New Division 255)
- an index of each tax-related liability under the ITAA36 (such
as ultimate beneficiary non-disclosure tax, withholding tax on
dividend, interest or royalty and franking deficit tax), under
ITAA97 (such as franking additional tax, income tax and late
lodgment penalty) and tax-related liabilities under other
legislation (such as the net amount under the GST law, fringe
benefits tax and superannuation guarantee charge) (New
- the rules concerning recovery proceedings including procedural
and evidentiary matters relating to proceedings to recover an
amount of tax-related liability (New Subdivision
- the rules dealing with the collection and recovery of an amount
from a person who is not personally liable to pay that amount
including from a liquidator, receiver, an agent winding up a
business for a non-resident principal and from a deceased person's
estate (New Division 260), and
- the person's right to recover from another person an amount
paid in discharge of a tax-related liability if the person paid the
amount for or on behalf of another person. (New Subdivision
The TAA 1953 is also amended to insert
new Part 5-1 and in particular new
Division 353 which gives the Commissioner wide powers to
obtain information and evidence covering matters relevant to the
operation of Schedule 1 of the TAA 1953. Schedule 1 is the PAYG
system of collecting income tax and other liabilities.
2.3 Consequential and savings
Parts 2 and 3
of Schedule 2 contain provisions which either
repeal or modify the application of existing collection and
recovery rules and savings provisions so that those repealed
provisions continue to have effect in relation to an amount that
became due and payable before 1 July 2000. These include provisions
relating to fringe benefits, sales tax and the superannuation
3. Binding oral advice on income
Schedule 3 amends the TAA 1953
to insert new Part 5-5 in Schedule 1. New
Division 360 deals with oral rulings for individuals as
outlined in the tax reform plan.
Division 360 is basically
divided into sections covering the application for an oral ruling,
how the Commissioner is to deal with the application and when the
Commissioner must or can refuse the application.
An oral ruling is essentially, a ruling given to
an individual on the way in which, in the Commissioner's opinion,
an income tax law would apply to a taxpayer in relation to an oral
ruling arrangement, that is to an action, course of action or
conduct or a transaction that has been or is proposed to be engaged
in or carried out.
3.1 Basic concepts
The basic concepts are:
- an individual needs to follow the correct procedure in applying
for an oral ruling
- the Commissioner must be satisfied that an individual's tax
affairs meet certain tests, and
- there are matters that may prevent the Commissioner from making
a ruling including the fact that an individual may be carrying on a
business or made payments caught under the PAYG rules.
3.2 The Commissioner must make an oral
ruling if the application relates only to basic categories
Pursuant to new section 360-65
the Commissioner must make an oral ruling if the application
relates only to basic categories of income (excluding capital gains
tax), exempt income, deductions and tax offsets. These basic
categories are listed in new sections 360-70
(basic categories of assessable income), 360-75
(basic categories of exempt income), 360-80 (basic
categories of deductions) and 360-85 (basic
categories of tax offsets).
3.3 The Commissioner must make an oral
ruling if satisfied that the tax affairs and inquiry are simple
even if the application involves additional categories
Under section 360-100 the
Commissioner must make an oral ruling if requirements in respect of
the basic categories of income, deductions, exempt income and tax
offsets are met except that there may be capital gains or losses
involved which would be disregarded because they deal with motor
cars etc or the disposal of shares in a listed public company or
units in a listed widely held trust.
3.4 The Commissioner must or can refuse
Under new section 360-140 the
Commissioner must not comply with an application during the inquiry
- the individual is an Australian resident
- did not carry on a business
- was not a withholder, and
- their assessable income did not include an amount in respect of
a non-cash benefit.
There are other reasons under new
section 360-145 that prevent the Commissioner from
providing an oral ruling including where there is already an oral
ruling or private ruling in place or where the application is the
subject of a tax audit or an objection against assessment.
In addition, there is a catch-all allowing the
Commissioner not to rule where in his opinion the application is
frivolous or vexatious or where insufficient information has been
provided despite a request for more information.
Consequential amendments inserting new
sections 170BCA, 170BDA,
170BDB and 170BDC provide for
priority in the inevitable conflicts between public, private and
oral rulings. In addition, where a taxpayer receives an oral ruling
and the income tax law applies in a different way which is less
favourable to the taxpayer, the Commissioner will be bound by the
4. Payment, ABN and
identification verification system
Schedule 4 introduces a wide
compliance system by inserting Part 5-30 into
Schedule 1 of the TAA 1953.
The system has 4 components:
- transaction reporting by purchasers (new Division
- transaction reporting by suppliers (new Division
- verification of suppliers' ABNs by purchasers (new
Division 415), and
- verification of suppliers' identities by purchasers
(new Division 417).
Transaction reporting or verification of
identity will be required where payments are:
- made or required to be made, received or entitled to be
received, for supplies that are supplies specified in regulations,
- where a supplier has quoted his or her ABN.
The extent of the reporting that will be
required by the regulations is as yet unknown and no doubt will
change over time. Obviously it is a compliance tool that was
intended to provide identification checks etc in relation to high
risk compliance transactions(8) but the legislation provides no
such restriction or limitation. Any supply whatsoever may be
identified as being one that is to become the subject of intensive
5. Shorter period of review
Schedule 6 puts into effect
another proposal announced in the tax reform plan, the shorter
period of review for taxpayers with simple tax affairs.
Please refer to point 4 of the Background
section of this Bills Digest for information in relation to the
current review and objection system.
5.1 Reduction from 4 to 2 years for the
period of review by the Commissioner
In order to qualify for the shorter period of
review, that is the Commissioner may amend the assessment of a SPOR
taxpayer within 2 years after the day on which the tax is due and
payable, the taxpayer must satisfy three tests set out in
new section 6AD:
- the SPOR income test
- the SPOR deduction test, and
- the taxpayer must not be ineligible to be a SPOR taxpayer (for
example the taxpayer must be an Australian resident).
These tests aim to restrict the SPOR to those
taxpayers with simple tax affairs. A diagram explaining the
application of the tests may be found at page 89 of the Explanatory
Memorandum to the Bill.
If the Commissioner is of the opinion that the
avoidance of tax is due to fraud or evasion, the assessment may be
amended at any time. (New paragraph 170(2)(a))
5.2 Reduction from 4 to 2 years for the
period of objection by SPOR taxpayers
Part 2 of Schedule
6 of the Bill also makes consequential amendments to
reduce from 4 to 2 years the period within which SPOR taxpayers are
generally able to lodge objections to their assessments or private
binding rulings or to request amendments to their assessments or to
seek private binding rulings. (New paragraphs
14ZAN(f), 14ZW(1)(aa) and
sections 14ZW(1A) and
These amendments will apply from the 2000-2001
6. Endorsement of charities and
gift deductible entities
6.1 Endorsement of deductible gift
Schedule 7 inserts new
Subdivision 30-BA into the ITAA97, which provides for the
Commissioner to endorse as a deductible gift recipient an entity
that is, or operates, a fund, authority or institution.
The relevance is that generally, only gifts made
to a recipient that is endorsed (or specifically named in Division
30) will be deductible.
One of the main requirements for an entity to be
endorsed under new Subdivision 30-BA is that they
have an ABN. The ABN must appear on receipts issued by the entity.
New Subdivision 30-CA specifies the administrative
requirements relating to ABNs.
Where a deductible gift recipient has an ABN,
the Australian Business Register must show that the entity is a
deductible gift recipient for the specified period.
If an entity is specifically named in Division
30, the requirements for endorsement under Subdivision
30-BA do not apply.
The endorsement provisions apply to gifts made
on or after 1 July 2000.
6.2 Endorsing entities as exempt from
Schedule 8 introduces
amendments to Division 50 of the ITAA97, which deals with entities
whose ordinary and statutory income is exempt.
Specifically, it states that charities will not
be exempt unless the entity is endorsed as exempt from income tax
under new Subdivision 50-B.
The following entities must comply with the new
provisions before 1 July 2000:
- charitable institutions
- funds established for public charitable purposes by will before
1 July 1997
- testamentary trusts treated as two trusts for purposes of the 1
July 1997 time limit, and
- funds established in Australia for public charitable purposes
by will or instrument of trust.
Subdivision 50-B sets out the
rules concerning the endorsement of charitable institutions and
trust funds for charitable purposes as exempt from income tax.
Once again, one of the main requirements for
endorsement is that the entity must have an ABN.
New section 50-52, which states
that a charity is not exempt from income tax unless endorsed as
exempt under new Subdivision 50-B, has effect
despite all other sections of Division 50. Thus if an entity is
covered by any other item of Division 50 as being exempt, if it is
a charity it must meet the special conditions in new
Subdivision 50-B before it will be exempt from income
Schedule 9 to the Bill amends
the A New Tax System (Australian Business Number) Act 1999
to extend the concept of 'government entity'. An organisation,
established by the Commonwealth, a State or a Territory for a
public purpose or to carry on an enterprise that can be separately
identified by reference to the nature of the activities carried on
through the organisation can be allocated an ABN.
This enables, for example, a public school to be
endorsed as a deductible gift recipient in relation to its school
8. Administration of BAS
8.1 Summary of BAS
BAS means a business activity statement.
The tax reform plan indicated that under the new
arrangements all payment and remittance dates would be aligned with
the new quarterly GST and PAYG payment dates, ie 21 October, 21
January, 21 April and 21 July. Accordingly, most businesses would
be able to complete a single compliance statement once a quarter
and make one quarterly payment.
Generally, entities will report tax debts and
entitlements to credits in a BAS. The BAS will be an approved form
for notification of income tax withholding, income tax instalments,
fringe benefits tax instalments deferred company tax instalments
and GST, wine equalisation tax and luxury car tax.
8.2 Proposed amendments
Schedule 12 amends the TAA 1953
- require an entity to notify all BAS obligations for the same
period in the same manner by ensuring that an entity that chooses
or is required to lodge a GST return electronically must also
electronically notify the Commissioner of all other BAS amounts
electronically (new section 288-5)
- require an entity that either exceeds the GST electronic
lodgment threshold for a period (currently $20 million) or is a
large withholder under the PAYG system, to pay all debts
electronically (new section 288-15), and
- enable an entity to be entitled to interest where a refund of a
running balance account (RBA) surplus(9) that arises on or after 1
July 2000 (following allocation of a BAS amount to the RBA, a
request for remission of penalty or a request for a refund after a
voluntary payment) is not made within 14 days (new Part
Schedule 15 amends the A
New Tax System (Goods and Services Tax) Act 1999 and the A
New Tax System (Wine Equalisation Tax) Act 1999, to remove the
GST and wine equalisation tax refund rules to the extent that they
are covered by the new PAYG generic rules in Division 3 of Part IIB
of the TAA 1953. Division 3 was inserted by the A New Tax
System (Pay As You Go) Act 1999 and deals with the treatment
of payments, credits and RBA surpluses. For a summary of the
changes please refer to the Bills Digest for the A New Tax System
(Taxation Laws Amendment) Bill (No.1) 1999 at pages 14 and 15.
9. Savings rebate (technically
known as the savings tax offset)
The savings tax offset is available for resident
individuals (not companies, funds or trusts etc) in respect of
savings and investment income and undeducted superannuation
The offset was originally intended to apply at
the rate of 15% for 1999-2000 and subsequent income years, however,
legislation(10) was introduced which terminated the offset with
effect from and including, the 1999-2000 income year. Thus the
offset will only be available in the 1989-99 year and will be equal
to 7.5% of an individual's savings and investment income and
superannuation contribution up to a maximum of $3,000. Accordingly
the maximum offset that can be claimed is $225.00.
The legislation that terminated the offset
purported to ensure that the savings rebate was not taken into
account in calculating provisional tax in the 1999-2000 year. The
provisions were not entirely effective and so Schedule
17 of the Bill inserts a technical amendment into section
221YCAA(2) (paragraph (m) of the definition of qualifying
reductions) of the ITAA36 to rectify the deficiency.
1. Binding oral rulings system
While an oral rulings system seems sensible in
its endeavour to promote certainty and reliability of advice, it
may be that practical considerations limit the achievement of its
goals and usefulness.
Firstly, in restricting the oral rulings system
to 'simple tax affairs' the provisions have necessarily
incorporated tests in respect of income and deductions etc in order
to clarify those affairs upon which a ruling must be provided.
However, the mere existence and administration required in respect
of the qualifying tests and the explanation and communication of
them to taxpayers may unfortunately prove time consuming and
frustrating for taxpayers who fall outside the contemplation of the
The usefulness of the system may also be queried
given the very narrow spectrum of applications it will cover.
However, it would be problematic to suggest that the categories of
taxpayer to which the rulings system applies should be expanded,
and perhaps this itself speaks to the difficulties inherent in the
Further, there may be a legitimate concern that
the new measures may substantially impede the free flow of
information that currently exists between ATO advisers, taxpayers
and practitioners for fear of providing incorrect advice.
Ultimately, the result may be that increased pressure will be
placed on the private rulings system.
2. Payment, ABN and
identification verification system
The payment, ABN and identification verification
system is a compliance tool that was intended to provide
verification of ABNs and identification checks etc in relation to
high risk compliance transactions(11) but the Bill provides no such
restriction or limitation. Any supply whatsoever may be identified
by regulation, as being one that is to become the subject of
Not only does the Bill go further than was
intended, it has the potential to impose yet another compliance
burden, in terms of time and money, on business.
The Government has seemingly recognised that
business, and small business in particular, need respite from the
overwhelming 'paper war' it must wage in order to comply with the
myriad of regulations that are imposed upon business generally and
most particularly by the revenue laws. Industry may argue that it
is inconsistent with both the principle of simplification and the
objective of freeing up business to pursue its own objectives, to
introduce such a broad ranging compliance system that doesn't
impose restriction upon the Commissioner to limit compliance
activity to areas of proven high-risk.
- Treasurer, Tax Reform: not a new tax a new tax system;
Tax Reform Plan, 13 August 1998, Commonwealth of Australia.
- Pay As You Earn.
- Prescribed Payments System.
- Reportable Payments System.
- Tax File Number.
- Treasurer, Tax Reform: not a new tax a new tax system;
Tax Reform Plan, 13 August 1998, Commonwealth of Australia, pp 133
- Part 2-5 of the TAA 1953 contains the provisions relating to
the PAYG withholding system of payments. Part VI of the ITAA36
deals with the collection and recovery of taxes and Division 2 of
that Part concerns the collection by instalments of tax on persons
other than companies.
- Explanatory Memorandum to the A New Tax System (Tax
Administration) Bill 1999, p 5.
- RBAs were introduced, with effect from 1 July 1999, to account
for and administer debts under PAYE, PPS, RPS and sales tax. The
separate RBAs will continue only for account keeping purposes on
unpaid amounts arising before 1 July 2000. An RBA surplus arises
where the applied payments and credits are greater than the primary
tax debt allocated to the RBA.
- The A New Tax System (Income Tax Laws Amendment) Act
- Explanatory Memorandum to the A New Tax System (Tax
Administration) Bill 1999, p 5.
9 September 1999
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