Private ruling: Pay as you go withholding
Date of advice: 22 May 2026
Published: 3 August 2026
Ruling period: Income tax year ending 30 June 20XX | Income tax year ending 30 June 20XX | Income tax year ending 30 June 20XX | Income tax year ending 30 June 20XX
Date scheme commenced: 1 July 20XX

Ruling: Q1: Is the Administrator of the Fund required to withhold to the Commissioner of Taxation amounts under section 12-35 of the Taxation Administration Act 1953 (Cth) (The TAA) ? | A1: No. | Q2: Is the Administrator of the Fund required to withhold to the Commissioner of Taxation amounts under section 12-120 of Schedule 1 to the Taxation Administration Act 1953 (Cth) (The TAA) ? | A2: No. | Q3: Is the Administrator of the Fund required to pay superannuation payments under section 12 of the Superannuation Guarantee (Administration) Act 1992 (SGAA) ? | A3: No.

Relevant facts and circumstances: The Federal Court proceeding is a representative proceeding brought in the Federal Court of Australia under Part IVA of the Federal Court of Australia Act 1976 (Cth). The proceeding was commenced by the Applicant, on behalf of themself and other group members (together, the group members). The respondents include the related entities responsible for publishing certain material about the group members. The group members are all persons who, as of XX, had received, or were entitled to receive compensation pursuant to a settlement scheme. The related entities broadcast information depicting potentially discriminatory statements. The applicant alleges that the respondents contravened section 18C of the Racial Discrimination Act 1975 (Cth). During the XX calendar year, the parties engaged in confidential settlement conferences. For the purpose of these settlement negotiations, the Applicant provided the Respondents with draft-form copies of anonymised affidavits from a sample of Group Members, which solely spoke to the hurt feelings of those Group Members as a result of the Publications. After a period of litigation and mediation, the parties reached an agreement to resolve the claims. A confidential Deed of Settlement was signed on XX, conditional on approval by the Federal Court. A settlement approval hearing was held on DD MM 20YY before XXXX J, and approval was subsequently granted. The settlement became final upon the expiry of the appeal period on DD MM 20YY. The terms of the Settlement Scheme are as follows: The Respondents were required to pay a settlement sum of $XX to a court-appointed Administrator, to be held in trust and distributed according to the Funder, the Applicant and then to the Group Members in the manner set out in the Scheme; The Settlement Scheme provides for two categories of compensation. The Administrator, subject to the ATO's ruling, is in a position to shortly commence with distribution to Group Members.

Relevant legislative provisions: Taxation Administration Act 1953 section 16-70 | Taxation Administration Act 1953 subsection 12-1(1A) | Taxation Administration Act 1953 section 12-120 | Taxation Administration Act 1953 section 12-35 Taxation Ruling IT 2424 Income tax: compensation payments in respect of unlawful acts of discrimination | Taxation Ruling TR 2005/16 Income tax: Pay As You Go - withholding from payments to employees | Superannuation Guarantee (Administration) Act 1992 section 12 Superannuation Guarantee Ruling SGR 2005/1 Superannuation guarantee: who is an employee ?

Reasons for decision: Summary: No, the Administrator is not required to withhold under section 12 35. This is because the payments are not salary or wages-they are compensation for hurt, humiliation and distress arising from a court approved settlement. There is no employment relationship between the Administrator and the recipients, and the payments are not made in return for services. | Detailed Reasoning - Detailed reasoning: Section 12-35 of Schedule 1 to the Taxation Administration Act 1953 (Cth) requires an entity to withhold an amount from payments of salary, wages, commission, bonuses or allowances paid to an individual in their capacity as an employee¹. The provision is directed at payments that arise from, or are sufficiently connected with, an employment relationship. The Commissioner's view on the operation of this provision, including the meaning of "salary or wages", is set out in Taxation Ruling TR 2005/16 Income tax: Pay As You Go - withholding from payments to employees⁷. That Ruling explains that a PAYG withholding obligation will only arise where two essential elements are present: first, the payment must have the character of salary or wages, and secondly, the payment must be made in the context of an employment relationship or a relationship that is sufficiently analogous to employment. In the present circumstances, neither of these elements is satisfied. There is no employment relationship between the Administrator and the recipients. The payments are not made in respect of work performed or services rendered. Rather, they are made pursuant to a court approved settlement of a representative proceeding and arise from claims concerning alleged statutory contraventions. The amounts distributed represent compensation for personal hurt, humiliation and distress, being non-economic loss, rather than remuneration or reward for labour. Consistent with the principles articulated in TR 2005/16, payments of this nature do not take on the character of salary or wages because they are not consideration for services and do not arise out of an employment or analogous relationship. Accordingly, section 12-35 of Schedule 1 to the TAA has no application to these payments. | Summary: No, the Administrator is not required to withhold under section 12-120. This is because the payments are not made for the provision of labour or services and do not arise under any labour hire or similar arrangement. Instead, they are compensation payments from a court approved settlement, meaning they lack the necessary element of consideration for work required for section 12-120 to apply. | Detailed Reasoning - Detailed reasoning: Section 12-120 of Schedule 1 to the Taxation Administration Act 1953 (Cth) applies to payments made under arrangements involving the provision or supply of labour or services². The provision is typically engaged in circumstances where an entity pays another entity or individual for the performance of work, including under labour hire or similar arrangements. The Commissioner's interpretation of the PAYG withholding provisions, including those relating to labour hire arrangements, is set out in Taxation Ruling TR 2005/16 Income tax: Pay As You Go - withholding from payments to employees⁷. That Ruling emphasises that such provisions are directed at payments that are made in exchange for the supply of labour or services and therefore involve a form of consideration for work performed. In the present circumstances, the payments made to the recipients do not arise in connection with any provision of labour or services. The recipients are not engaged to perform work of any kind, and there is no arrangement under which their labour is supplied to the Administrator or any other entity. Furthermore, there is no labour hire arrangement or any analogous arrangement in place. Instead, the payments arise solely from the resolution of claims alleging contraventions of statute and represent compensation for non-economic loss, including hurt, humiliation and distress. Accordingly, the payments lack the essential characteristic identified in TR 2005/16 of being consideration for work or services. As such, they do not fall within the scope of section 12-120 of Schedule 1 to the TAA, and no withholding obligation arises under that provision. | Summary: No, the Administrator is not required to make superannuation contributions. This is because the payments are not salary or wages paid to an employee. The recipients do not perform work or services and are not in an employment or analogous relationship with the Administrator. Instead, the payments are compensation for non-economic loss, meaning the Superannuation Guarantee regime does not apply. | Detailed Reasoning - Detailed Reasoning: Section 12 of the Superannuation Guarantee (Administration) Act 1992 (Cth) defines the term "employee" for the purposes of the superannuation guarantee regime³. In addition to its ordinary meaning at common law, the definition extends to certain relationships that are sufficiently analogous to employment, including situations where a person is engaged wholly or principally for their labour. An obligation to provide superannuation support arises where an entity makes payments of salary or wages to an individual who falls within this definition. The Commissioner's interpretation of these provisions is set out in Superannuation Guarantee Ruling SGR 2005/1 Superannuation guarantee: who is an employee? This explains that the existence of an employment relationship requires, at its core, the performance of work or the provision of services by oneparty for another in return for remuneration. The Ruling further makes clear that, for payments to constitute "salary or wages" for superannuation purposes, they must be made as consideration for labour. In the present circumstances, the recipients do not perform any work or services. There is no engagement, arrangement, or relationship under which the recipients provide their labour in exchange for payment. Instead, the payments arise solely from a court approved settlement of claims involving alleged statutory contraventions. The amounts distributed are fixed lump sum payments representing compensation for non-economic loss, including hurt, humiliation and distress, and are not connected in any way to the performance of work or the provision of services. The Administrator's role is limited to holding and distributing the settlement funds in accordance with the Federal Court approved Settlement Scheme. In doing so, the Administrator does not assume the role of an employer, nor does the Administrator enter into any contractual or employment like relationship with the recipients. The payments therefore lack the essential character of remuneration for labour that is required for them to be treated as salary or wages under the SGAA. Accordingly, as there is no employment relationship, and the payments are not properly characterised as salary or wages, no superannuation guarantee obligation arises under section 12 of the Superannuation Guarantee (Administration) Act 1992 (Cth). | Detailed Reasoning - Conclusion: The payments made under the Settlement Scheme are properly characterised as compensation for non-economic loss and are not made in respect of employment or the provision of services. As a result, there is no obligation on the Administrator to withhold amounts under sections 12-35 or 12-120 of Schedule 1 to the Taxation Administration Act 1953 (Cth), and there is likewise no obligation to make superannuation contributions under the Superannuation Guarantee (Administration) Act 1992 (Cth).