Private ruling: PAYG withholding
Published: November 2012
Ruling period: Year ended 30 June 2013 | Year ended 30 June 2014 | Year ended 30 June 2015 | Year ended 30 June 2016 | Year ended 30 June 2017
Date scheme commenced: 1 July 2012

Ruling: Q1: Are you required to deduct pay as you go (PAYG) withholding tax from the payments made to a secretary and treasurer? | A1: No.

Relevant facts and circumstances: You are a volunteer organisation. You will establish an administrative hub for secretarial and treasury services to service a number of sub-groups and the Group. The Group consists of one representative from each sub-group. The Group will have one secretary and one treasurer who will provide services to the sub-group and the Group. The Expression of interest for the secretary's position states: · their general duties include co-ordination of incoming and outgoing correspondence, maintenance of correspondence files, preparation and distribution of meeting minutes and agendas, maintaining membership registrations, facilitating elections and awards and other tasks as required · sub-groups may appoint minute secretaries and/or meet in clusters which will reduce the number of meetings the secretary is required to attend, and · a payment of a set amount per annum will be made to cover expenses associated with performing the role. The Expression of interest for the treasurer's position states: · their general duties include maintaining the financial records of the sub-groups and the Group, provide independent financial reports, manage the receipt and payment of monies, facilitate the transition to a single bank account and other tasks as required; · the treasurer will not be expected to attend all meetings but will be required to provide the appropriate reports and make themselves available to answer questions relating to the financial operations of the sub-groups/Group; and · a payment of a set amount per annum will be made to cover expenses associated with performing the role. The secretary and treasurer will be provided with the relevant IT equipment to carry out their duties. It is anticipated the secretary and treasurer will each spend several hours per week in carrying out their roles. Each will receive a set amount per annum which will be paid in instalments. The amounts of the payments were not determined with reference to any award or agreement or to the anticipated amount of hours to be worked. The payments are being made in recognition that the treasurer and secretary will incur expenses in travelling to other areas to attend meetings. Previously each sub-group had its own secretary and treasurer who were only required to attend the sub-group meetings in their local area. The positions of secretary and treasurer were not created under an Australian act or law.

Relevant legislative provisions: Taxation Administration Act 1953 Schedule 1 Section 12-35 | Taxation Administration Act 1953 Schedule 1 Section 12-45

Reasons for decision: Summary: As the group secretary and treasurer are not employees or office holders for the purposes of the PAYG withholding legislation, you are not required to deduct PAYG withholding from the payments made to them. Division 12 to Schedule 1 of the TAA also provides for other situations where PAYG withholding is required to be deducted from a payment. These situations do not apply to your circumstances. | Detailed Reasoning - Detailed reasoning: Division 12 in Schedule 1 of the TAA outlines the situations where a paying entity is obliged to withhold part of an amount paid to another entity. The withheld amount is referred to as PAYG withholding. PAYG withholding must be deducted where a payment of salary, wages, commission, bonuses or allowances is paid to an individual as an employee or office holder. To determine if you are required to withhold PAYG tax from payments made to the secretary or treasurer, we must first determine if they are employees or office holders. Are the secretary and treasurer employees? The term 'employee' is not defined in the taxation legislation. Whether a person is an employee of another is a question of fact to be determined by examining the terms and circumstances of the contract between them having regard to the key indicators expressed in the relevant case law. Defining the contractual relationship is often a process of examining a number of factors within the context of the relationship between the parties. No one indicator of itself is determinative of that relationship. Taxation Ruling TR 2005/16 states that the following factors should be considered in determining if an employment relationship exists between two parties: · the terms and conditions of the contract between the parties, whether express or implied, in light of the circumstances surrounding making the contract · the degree of control which one party can exercise over the other party in relation to the provision of services · does the worker operate on their own account or in the business of the payer · whether the contract is to achieve a specified result · whether the work can be delegated or subcontracted · the level of risk the worker bears of costs arising out of injury or defect or carrying out their work · the provision of tools and equipment and payment of business expenses, and · provision of benefits such as annual leave, sick and long service leave and other benefits prescribed under an award for employees. In your case, the treasurer and secretary are not considered to be employees as: · the rate of payment is a fixed rate determined without reference to the expected number of hours it would take them to perform the duties · the rate of payment is non-commercial · there is no provision for annual leave, sick leave or long service leave within the expression of interest · the payment is made to cover expenses associated with performing the duties, and · the secretarial duties can be delegated to a minute secretary. Are the secretary and treasurer office holders? Taxation Ruling TR 2002/21 discusses PAYG withholding from salary, wages, commissioners, bonuses or allowances paid to office holders. An office holder includes an individual who is a person who holds, or performs the duties of, an appointment, office or position under the Constitution or an Australian law. An individual is considered to be appointed or engaged under an Act where it can be identified that either: · the particular office, position or appointment; or · the constitution of the relevant body (such as a panel, board committee or tribunal) to which the individual has been appointed; is specified in relevant legislation or statutory instrument. That is, there must be a specific Act or statutory instrument which identifies the creation of the position held. In your case, the positions of group secretary and treasurer are not positions that are identifiable in specific legislation or a statutory instrument. Therefore, the secretary and treasurer are not considered to be office holders for the purposes of the PAYG withholding legislation.

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.