Private ruling: PAYG withholding
Date of advice: 7 August 2018
Published: September 2018
Ruling period: Year ending 30 June 2019 | Year ending 30 June 2020 | Year ending 30 June 2021 | Year ending 30 June 2022 | Year ending 30 June 2023
Date scheme commenced: 1 July 2018

Ruling: Q1: Is there an obligation on the entity to withhold from payments made to individuals and entities 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 on you to withhold from payments made to individuals and entities 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.

Relevant facts and circumstances: The entity operates a business. The entity charges a fixed monthly fee to its clients for its services. The entity employs individuals to carry out the work for the clients. The Company also engages independent contractors to undertake cleans for the clients. The independent contractors engaged by the entity comprise a mixture of individuals, partnerships and companies. The entity seeks out prospective independent contractors through word of mouth and advertisements in newspapers. Prior to the engagement of a contractor, a senior manager has a meeting with the prospective contractor in which: (a) the entity and the contractor negotiate the price to be charged by the contractor; and (b) the entity explains the expectation of the quality of the services to be performed by the contractor. The entity and the contractor then enter into a formal written contract. The relevant terms and circumstances of the engagement of the contractor by the entity are as follows: (a) Upon agreement the entity is liable to pay the contractor in accordance with the contract; (b) The entity pays the contractor an agreed lump sum per job. This amount is paid whether the contractor takes longer or less time to finish the job; (c) The contractors’ fees are paid on a regular basis provided an invoice has been received and verified by the entity; (d) If a job is not completed in accordance with requirements of the contract between the entity and the contractor, which is usually brought to the attention of the entity by client dissatisfaction, the contractor must return to complete the job at no extra charge to the entity; (e) Contractors are entitled to sub-contract a job and this is done from time to time. Permission to sub-contract is not required from the entity as the contractor is ultimately responsible for the job and the contractor will not receive payment if the task is not completed in accordance with the agreement. The contractor is responsible for paying any sub-contractor who completes work for them; (f) Contractors are free to decline to undertake any work. There is no requirement for the contractor to give a notice of termination should they wish to not undertake work in the future; (g) The entity does not provide any uniforms or identification badges indicating that the contractors have an association with the entity; (h) All contractors must provide an ABN to the entity before payment is made by the entity to them; (i) Following the initial introduction by the entity, the contractor and the client will negotiate between themselves any adjustments to the time at which the work is to be conducted. (j) Contractors are to hold relevant public liability and worker’s compensation insurance policies to be given to the business prior to any work being undertaken by the contractor. Copies of renewed or updated policies are to be provided by the contractor as required; (k) The contractors supply all their own materials and equipment with no reimbursement or allowance paid by the entity for any expenses.

Relevant legislative provisions: Taxation Administration Act 1953 section 12-35 to Schedule 1