Private ruling: PAYG withholding
Date of advice: 9 March 2020
Published: April 2020
Ruling period: Year ended 30 June 2020 | Year ended 30 June 2021 | Year ended 30 June 2022 | Year ended 30 June 2023 | Year ended 30 June 2024 | Year ended 30 June 2025
Date scheme commenced: 1 July 2019

Ruling: Q1: Is there an obligation to withhold from payments made to the workers under section 12-35 of Schedule 1 to the Taxation Administration Act 1953 (TAA)? | A1: No. After considering your facts against the relevant indicators, we accept that there is no obligation to withhold from payments made to the workers as they are not employees. Further information on the Commissioner's view can be found in Taxation Ruling TR 2005/16 Income tax: Pay As You Go - withholding from payments to employees . | Q2: Is there an obligation to withhold from payments made to the workers under section 12-60 of Schedule 1 to the TAA? | A2: No. You are not in the business of arranging persons to perform work or services directly for your clients and the payments to the workers are not made under an arrangement which involves the performance of work or services by the worker directly for a client. Therefore is no obligation to withhold on the payments. Further information on labour hire firms and their workers can be found by searching for 'QC 27074' on ato.gov.au

Relevant facts and circumstances: You are a local council (the council). The council receives government funding to deliver services for older people and the disabled. The council is required to provide the services according to the terms of each grant funding agreement. The role of the council is to facilitate and deliver individual services in accordance with the strict terms and conditions of the grant funding requirements. The council facilitates the Programs by providing the following: · Program co-ordination · Management of referrals · Management of grant funding requirements · Provision of venues for delivery of Program activities · Provision of specified materials in certain circumstances · Delivery of the services. Currently, the council engages workers to deliver some of these services. Each worker is engaged under a services agreement (Agreement) which fulfils the terms of the relevant head grant funding agreement. This type of arrangement was selected to provide the greatest flexibility in delivery of the services (time and service delivery) for cost effectiveness and because of the intermittent nature of the work provided. A key component of the Programs is the requirement to deliver the services within the available grant funding, at times and locations to meet individual consumer's needs and in line with the funding requirements. The workers provide services through the following entities: · Sole traders · Partnerships of individuals · Public companies · Private companies · Non-fixed trusts Each worker is engaged under the following key terms: · The Agreement is in writing and signed by both parties · The Agreement has a defined term with extension options · There is an acknowledgement in the Agreement that the parties do not intend to create a relationship of employer/employee · The council makes offers to engage the workers by issuing a referral (as is required under the Funding Requirements) (Referral) · The workers must provide the council with the services in the manner and at the times or within the timeframe specified in each Referral · The workers are not provided any guarantee that the council will engage them to provide services · The workers charge a fee for the services on a per hour basis · Invoices are required to be provided by the workers at the end of the week within which the services are provided. Invoices are paid within 14 days of receipt of an invoice · The worker must supply at its own expense all plant, equipment and facilities required for the performance of the services (unless a suitable facility is offered by the council) · The worker can employ staff to perform the services. Any such staff must be approved in writing by the council as the council must ensure that the worker's staff has the relevant, skills, knowledge and competency to be able to satisfy the requirements of services providers under the Program. · The worker is responsible for the performance of the services by the worker's staff and is responsible to remedy breaches of the Agreement. · Workers are required to hold public liability and workers compensation insurance. · Under the Agreement, workers provide an indemnity to the council against all claims and liabilities, except to the extent that such claims and liabilities are contributed to by the council · The worker must provide the services at their own risk and releases the council from any liability or claim arising from the performance of the services. · The worker may assign or subcontract its rights and obligations under the Agreement with the council's prior consent. This is so the council can ensure that any assignee satisfies the requirements of being a service provider. The worker can also employ persons to assist them carry out the duties. · All of the workers have the right to refuse to accept a Referral from the council. · Workers do not wear and are not required to wear uniforms identifying them as belonging to the council. Some workers wear their own uniforms. · Workers must provide an ABN and register for GST when required. · There is no provision for sick leave, annual leave or holidays under the Agreements. · Workers under all groups have the right to delegate under the Agreement. This extends both the right for the worker to employ persons to assist them and the right to subcontract their obligations under the Agreement. Where a worker wishes to delegate they are required to seek the consent in writing of the council. The council imposes this requirement as the council is subject to strict conditions under the Funding Requirements and must ensure that those persons attending the to the services have the same police clearances and the capacity to meet all service standards · Workers are required to perform the services only between the working hours advised verbally or set out in the Referral. This is because these are the hours that will have been specified by the customer when requesting the service be delivered. If the workers cannot attend during the specified hours, they have the right of refusal. The council operates on this basis to ensure that the Funding Requirements are met. · Workers are required to provide their own vehicle, tools and equipment in the provision of services where the nature of the services provided requires them. · Workers have full discretion and power to utilise their own methods, tools and products to provide the services. They can perform the services in whatever manner or order they choose to do, with no direction or interference from the council. The worker is contractually responsible for rectification of any defect works. There is a further term in the Agreement that the issue of a Referral by the council constitutes an agreement by the workers to provide the relevant services. Notwithstanding this term, the council operates on the basis that a Referral constitutes an offer to provide services and the workers have an uninhibited right to refuse to accept the Referral if they are unable to provide the relevant services in accordance with the requirements of the Referral. Each worker performs the services with no administrative support from the Council.

Relevant legislative provisions: Taxation Administration Act 1953 Section 12-35 of Schedule 1 | Taxation Administration Act 1953 Section 12-60 of Schedule 1