Private ruling: PAYG withholding
Published: September 2013
Ruling period: Year ended 30 June 2013 | Year ending 30 June 2014 | Year ending 30 June 2015 | Year ending 30 June 2016 | Year ending 30 June 2017 | Year ending 30 June 2018
Date scheme commenced: 1 July 2012

Ruling: Q1: Are payments made to members of Committee X and Committee Y subject to pay-as-you-go (PAYG) withholding? | A1: Yes. | Q2: Are payments made to members of advisory committees established on an 'as needed' basis subject to PAYG withholding? | A2: No. | Q3: Where a member of Committee X or Committee Y directs you to deposit their payment into another entity's bank account, are these amounts included on a payment summary issued in the individual member's name? | A3: Yes.

Relevant facts and circumstances: You are part of a government organisation. Legislation requires you to establish various committees. The membership composition, functions and activities of Committee X and Committee Y are specified in legislation. The legislation also allows you to establish advisory committees on an 'as needs' basis. These committees generally exist for a short time and a specific reason. The legislation does not specify the membership composition, functions or activities of these committees. Members of the various committees receive payments for attending committee meetings. Some committee members choose to have the payments deposited into another entity's bank account.

Relevant legislative provisions: Income Tax Assessment Act 1997 Section 995-1 | Taxation Administration Act 1953 Schedule 1 Section 11-5 | Taxation Administration Act 1953 Schedule 1 Section 12-45 | Taxation Administration Act 1953 Schedule 1 Section 16-155 | Taxation Administration Act 1953 Schedule 1 Section 16-170

Reasons for decision: Summary: Payments made to members of Committee X and Committee Y in relation to the committee activities are subject to the PAYG withholding provisions as the members are considered to be office holders. Payments made to members of advisory committees established on an 'as needed' basis in relation to advisory committee activities are not subject to PAYG withholding as the members of these committees are not office holders for PAYG withholding purposes. Payment summaries are required to be issued in the name of the individual member and not the entity whose bank account payments are deposited into. | Detailed Reasoning - PAYG withholding: Section 12-45 in Schedule 1 to the Taxation Administration Act 1953 (TAA) imposes an obligation on the paying entity to withhold an amount from salary, wages, commission, bonuses or allowances it pays to an individual as an office holder. Taxation Ruling TR 2002/21 discusses PAYG withholding from salary, wages, commissions, bonuses or allowances paid to office holders. An office holder is a person who holds, or performs the duties of, an appointment, office or position under the Constitution or an Australian law. An individual is considered to be appointed or engaged in under an Act where it can be identified that either: · the particular office, position or appointment, or · the constitution of the relevant body (such as a panel, board, committee or tribunal) to which the individual has been appointed, is specified in relevant legislation or statutory instrument. That is, there must be a specific Act or statutory instrument which identifies the creation of the position held. The appointment, office or position must also exhibit the following characteristics of an office holder: · independent existence - the office must exist regardless of the individual who occupies the office from time to time - that is, if the individual currently occupying the office vacates that office, the office must continue to exist to be filled by another individual · duties, functions, responsibilities or powers - the office must have identifiable duties, functions, responsibilities or powers other than a mere advisory function. These features of the office (or of the panel, board, committee or tribunal to which the individual has been appointed) would usually be specified in the relevant legislation or statutory instrument; and · the relevant duties, functions, responsibilities or powers must attach to the office itself, rather than the individual who occupies the office. Where an Act provides that a Minister may appoint such persons as are necessary for the effective administration of the Act and then states the functions and powers of appointment and sets out the tenure of their appointment, then remuneration of that individual would be considered to be covered by section 12-45 in Schedule 1 to the TAA. That is, it is not necessary for the Act to specify a particular number of positions so long as there is an identified mode of appointment so that the positions are clearly identifiable, have an independent existence and have independent duties, function or powers attached. Where a statutory instruments provides for a body, for example, a government advisory committee, to advise the Minister on a specific matter, but is silent on the constitution of the committee such that the number of positions on the committee may vary from time to time, and appointments are to be on an ad hoc basis, the individual members of the committee are not the holders of an office, position or appointment under an Act. The constitution of the advisory committee is not revealed in the Act. The Act does not contain any specific duties or functions similar to those of a public office holder that the advisory committee can exercise. Its functions are merely advisory to assist the Minister in his or her duties as a public office holder. Payments of salary, wages, commissions, bonuses or allowances to members of such committees would not be within section 12-45 in Schedule 1 to the TAA. | Detailed Reasoning - Application to members of Committee X and Committee Y: The members of Committee X and Committee Y satisfy the criteria to be office holders for purposes of the PAYG withholding provisions as: · their appointments are made under specific legislation · the office exists independently of the person appointed to the position · the legislation outlines the Committee's functions, and · the relevant duties, functions, responsibilities and powers are attached to the office and not the person holding them. As the members of Committee X and Committee Y are considered to be office holders, you are required to deduct PAYG withholding tax from payments made to members in relation to carrying out their Committee related duties. | Detailed Reasoning - Application to members of advisory committees established on an 'as needed' basis: The members of advisory committees established on an 'as needed' basis are not office holders for the purposes of the PAYG withholding provisions as the relevant legislation does not provide details of the constitution of the committees or their specific duties or functions. Additionally the committees are formed on an ad hoc basis and are temporary in nature. As the members of these committees are not considered to be office holders, you are not required to deduct PAYG withholding tax from payments made to members in relation to carrying out their advisory committee related duties. | Detailed Reasoning - Payment summaries: Section 16-155 in Schedule 1 of the TAA requires an entity (the payer) to give a payment summary to another entity (the recipient) if during the year the payer made one or more withholding payments to the recipient. Withholding payments are defined in section 995-1 of the Income Tax Assessment Act 1997 as including a payment from which an amount must be withheld under section 12-45 in Schedule 1 to the TAA. Some members of the committees choose to have the committee related payments deposited into another entity's bank account. Taxation Ruling TR 2005/16 discusses PAYG withholding from payments made to employees. Paragraphs 59 and 60 of TR 2005/16 discuss the situations where payments are made to bank accounts of a third party: 59. A redirection occurs where for example a payment is made to a third party in discharge of the obligation to pay an amount of salary or wages to an employee. For example, where the payer pays an employee's salary into a bank account at the direction of the employee. 60. Also a payment to a third party is treated as a redirection of an employee's salary or wages (and hence a constructive payment of salary or wages to the employee) in circumstances where the payment to the third party is attributable to salary, wages etc for services rendered to the employee in the course of that employment. Whilst TR 2005/6 provides advice on payments made to employees, the principles contained within the ruling can be applied to payments made in relation to office holders. Payments are paid to individual members of the committees for their personal attendance at meetings. As the payments relate to actions the individual member performs - the attendance at the meeting - the individual member is considered to have 'earned' the payments for services rendered. The payments are considered to belong to the individual member and where the payments are deposited into another entity's bank account, a constructive payment has been made to the individual member. That is, it is the individual member who is considered to have received the payment and not the entity who is the owner of the bank account. Thus, the payment summary should be issued in the name of the individual member and will include the sum of those payments subject to PAYG withholding.