Private ruling: PAYG withholding and fringe benefits tax
Published: October 2012
Ruling period: Year ended 30 June 2013 | Year ended 30 June 2014 | Year ended 30 June 2015
Date scheme commenced: On or after 1 January 2012

Ruling: Q1: Does Part 2-5 of Schedule 1 to the Taxation Administration Act 1953 (TAA) require the Taxpayer to withhold an amount from the Payments? | A1: No.

Relevant facts and circumstances: Introduction and Background The Applicant requests that the Commissioner rule on the tax consequences for the Taxpayer (an educational institution), of making an amount of annual Payments to certain Students in future years. The Taxpayer offered a number of Students a place in a course of education (the Course). The Course was due to commence in relevant year. However, the Taxpayer was unable to allow the Students to commence their Course at this time due to capacity constraints. Instead it offered the Students a place in the subsequent intake, together with the Payments. On a date in 20XX the Taxpayer sent letters (the Offer) to each Student advising them of its decision, and detailing the arrangement the Taxpayer has described in the application for a private ruling. The letter also requested that the Students confirm their satisfaction with the arrangement by another date in 20XX. All of the Students provided this confirmation by this date.

Relevant legislative provisions: Taxation Administration Act 1953 10-5(1), | Taxation Administration Act 1953 12-35, | Taxation Administration Act 1953 12-120 and | Fringe Benefits Tax Assessment Act 1986 136(1).

Reasons for decision: Summary: While these reasons are not part of the private ruling, we provide them to help you to understand how we reached our decision. | Summary: The Payments are not withholding payments for the purposes of Part 2-5 of Schedule 1 to the TAA. Therefore, the Taxpayer is not required to withhold an amount. | Detailed Reasoning - Detailed reasoning: In general terms, there is an obligation on a payer to withhold under Part 2-5 of Schedule 1 to the TAA when a withholding payment is made. A summary of withholding payments is listed in a table at subsection 10-5(1) of TAA 1953. As relevant to the arrangement described in the relevant facts above, we need only consider 2 of the 26 withholding payments listed. These are: item 1 A payment of salary etc to an employer (section12-35) item 12 A compensation, sickness or accident payment (section12-120). We agree with the applicant that item 15 in the table at subsection 10-5(1) [about a payment for a supply where the recipient of the payment does not quote its ABN] does not apply to the arrangement. We also agree with the Applicant's conclusion that the Taxpayer is therefore not obliged to withhold any amount under section 12-l90 of the TAA. The Payments by the Taxpayer to the Students are NOT: · payments to an employee under section 12-35 · compensation payments of the type included in section 12-120 Consequently, the Taxpayer is NOT required to withhold any amounts from the Payments under Part 2-5 of Schedule 1 to the TAA. | Summary: The Payment is not made in respect of the employment of an employee and therefore does not constitute a fringe benefit. | Detailed Reasoning - Detailed reasoning: For a fringe benefit to arise, a benefit must be provided in respect of the employment of an employee. To be in respect of employment requires that there be an employment relationship and that employment relationship needs to be causal to the provision of the payment to the Student and not merely incidental. Under the arrangement described in the relevant facts above the students are NOT: · employees of the Taxpayer · associates of employees of the Taxpayer. The Payments to the Students cannot therefore be fringe benefits as defined in subsection 136(1) of the FBTAA as they are not paid in respect of the employment of an employee.

Please check this edited version to be sure that there are no details remaining that you think may allow you to be identified. If you have any concerns about this ruling you wish to discuss, you will find our contact details in the fact sheet. | Question 1: Are the Payments a fringe benefit as defined in subsection 136(1) of the Fringe Benefits Tax Assessment Act 1986 (FBTAA)?