Private ruling: PAYG Withholding
Date of advice: 30 August 2016
Published: October 2016
Ruling period: Year ended 30 June 2017 | Year ended 30 June 2018 | Year ended 30 June 2019 | Year ended 30 June 2020 | Year ended 30 June 2021
Date scheme commenced: 1 June 2016

Ruling: Q1: Is the organisation required to withhold an amount from weekly compensation payments (except for certain specified insurance policies)? | A1: Yes. | Q2: If the answer to Question 1 is yes, is the organisation required to issue PAYG payment summaries to claimants in receipt of weekly compensation payments? | A2: Yes. | Q3: Where a claimant's obligation to repay an overpayment is waived by the organisation, is the forgiven amount a 'withholding payment' under section 10-5 of Schedule 1 of the Taxation Administration Act 1953 (Sch 1 TAA)? | A3: No. | Q4: If the answer to Question 3 is yes, is the organisation required to issue an amended PAYG payment summary at the time the overpayment is forgiven to include the amount as income? | A4: Not applicable. | Q5: Where a claimant is overpaid an amount in relation to non-weekly benefits for certain expenses and the claimant's obligation to repay the amount is subsequently waived, is the overpayment considered to be a 'withholding payment' under section 10-5 Sch 1 TAA? | A5: No

Relevant facts and circumstances: The private ruling application forms part of, and is to be read with, this description. The organisation operates as an independent commercial enterprise and is self-funded. Since its formation, the organisation has been a provider of insurance. The organisation derives the majority of its income from premiums received from certain entities and returns from investment activities. Weekly Compensation The type of compensation generally payable includes: • Weekly compensation (for lost wages) • Medical, surgical and hospital expenses and medicines • Rehabilitation treatment and equipment or services • Travelling expenses; and • Death benefits and funeral expenses. This private ruling application refers specifically to the weekly compensation payments made to an injured worker to compensate them for the loss of salary and wages. Claimant Overpayments A claimant debt arises where a claimant has been overpaid. Where there is a claimant overpayment which is required to be repaid, the organisation issues a letter and makes contact with the claimant advising of how and why they were overpaid. Should the claimant fail to repay a debt within 14 days set by the letter, the overpayment debt is created to the claimant's financial account. A relevant debt may be waived or written off as a bad debt by the organisation.

Relevant legislative provisions: Section 10-5 of Schedule 1 to the Taxation Administration Act 1953 | Section 12-120 of Schedule 1 to the Taxation Administration Act 1953 | Section 16-155 of Schedule 1 to the Taxation Administration Act 1953

Reasons for decision: Detailed Reasoning - Is the organisation required to withhold an amount from weekly compensation payments (except for certain specified insurance policies)?: Yes. Weekly compensation payments made by the organisation are considered to be 'withholding payments' as mentioned in section 10-5 Sch 1 TAA, being 'compensation, sickness or accident payments' under section 12-120 Sch 1 TAA. They are payments calculated at a periodical rate and are made to compensate the claimant for salary and wages lost during their incapacity for work. Section 12-120 Sch 1 TAA states: An entity must withhold an amount from a payment of compensation, or of sickness or accident pay, it makes to an individual if the payment: (a) is made because of that or another individual's incapacity for work; and (b) is calculated at a periodical rate; and (c) is not a payment made under an insurance policy to the policy owner. We agree with your submission that the weekly compensation payments made by the organisation are made because of claimants' incapacity for work, are calculated at a periodical rate and are not payments made under an insurance policy to the policy owner. Therefore, the organisation is required to withhold an amount from weekly compensation payments. (except for certain specified insurance policies). | Detailed Reasoning - Is the organisation required to issue PAYG payment summaries to claimants in receipt of weekly compensation payments?: Yes. A payer is required to give a recipient a payment summary within 14 days of the end of the financial year, if during the year, the payer made one or more withholding payments to the recipient (Section 16-155(1) Sch 1 TAA). The Commissioner of Taxation has discretion under section 16-180 Sch 1 TAA to exempt an entity from the payment summary obligation. However, we agree with your submission that this exemption does not apply to the organisation's circumstances. Therefore, as outlined in section 16-155 Sch 1 TAA, the organisation is required to issue a PAYG payment summary to injured workers in receipt of weekly compensation payments within 14 days of the end of the financial year. Note : Where you find a mistake with a payment amount and/or tax withheld amount after issuing a PAYG payment summary, an amended PAYG payment summary should be issued as soon as the mistake is identified. | Detailed Reasoning - Question 3: Where a claimant's obligation to repay an overpayment is waived by the organisation, is the forgiven amount a 'withholding payment' under section 10-5 Sch 1 TAA?" No. You have stated that the amounts overpaid by the organisation to claimants are due to errors or mistakes. While the organisation is entitled to recover the overpayment from the claimant, the organisation sometimes waives or writes off these debts. The waiving or writing off of a debt by the organisation is not a 'payment' made by the organisation, and therefore it cannot be a 'withholding payment' under section 10-5 Sch 1 TAA or a 'payment of compensation, or of sickness or accident pay' under section 12-120 Sch 1 TAA. | Detailed Reasoning - Question 4: If the answer to Question 3 is yes, is the organisation required to issue an amended PAYG payment summary at the time the overpayment is forgiven to include the amount as income? Not applicable. | Detailed Reasoning - Question 5: Where a claimant is overpaid an amount in relation to non-weekly benefits for certain expenses and the claimant's obligation to repay the amount is subsequently waived, is the overpayment considered to be a "withholding payment"? No. Non-weekly benefits for the expenses are not considered to be payments to which section 12-120 Sch 1 TAA applies, as they are not calculated at a periodical rate but are compensation for a particular expense the claimant has incurred. As such, the benefits also do not come within the broader category of 'withholding payments' as mentioned in section 10-5 Sch 1 TAA. As noted above, the waiving or writing off of a debt by the organisation is not a 'payment' made by the organisation, and therefore it cannot be a 'withholding payment' under section 10-5 Sch 1 TAA or a 'payment of compensation, or of sickness or accident pay' under section 12-120 Sch 1 TAA. | Detailed Reasoning - If the answer to Question 5 is yes, is the organisation required to issue an amended PAYG payment summary to include the overpayment as income?: Not applicable.