Private ruling: PAYG Withholding
Date of advice: 16 November 2017
Published: April 2018
Ruling period: Year ended 30 June 2018
Date scheme commenced: 1 July 2017

Ruling: Q1: Is the entity required to withhold PAYG withholding amounts under section 12-35 of Schedule 1 to the Taxation Administration Act 1953 (TAA) from a discretionary ex-gratia payment made to current and former employees? | A1: Yes.

Relevant facts and circumstances: A fund has been established, to enable discretionary payments to be made to some workers whose long service leave has been brought into line with other workers . There will be no access to adjusted leave in lieu payments. Any person believing that they had an entitlement could apply.

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

Reasons for decision: Summary: Section 12-35 of Schedule 1 to the TAA provides that you must withhold an amount from a payment of salary, wages, commission, bonuses or allowances you pay to an individual as an employee. Paragraph 14 of Taxation Ruling TR 2005/16 states for the provision (Section 12-35 of Sch 1) to apply, there must be an employee, a payment of salary, wages etc. to an employee as a consequence of his/her employment and finally the payment must be made by an entity. You will make ex-gratia payments to people who are either current or former employees of the entity. In order to receive the payment, the payee must have been an employee. In conclusion, the payments paid to employees are paid as a consequence of the employee’s employment. The discretionary payments are considered to be a part of salary and wages paid to an individual as an employee, and therefore there is an obligation to withhold from the discretionary payments under section 12-35 of Schedule 1 of the TAA.