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This is a Bill, not an Act. For current law, see the Acts databases.
1998-1999-2000
The Parliament
of the
Commonwealth of
Australia
HOUSE OF
REPRESENTATIVES
Presented and read a first
time
New Business
Tax System (Alienation of Personal Services Income) Bill
2000
No. ,
2000
(Treasury)
A Bill
for an Act to amend the law about taxation to implement the New Business Tax
System in relation to personal services income, and for related
purposes
ISBN: 0642 435103
Contents
Part 1—Amendment of the Income Tax Assessment Act
1997 3
Part 2—Amendment of the Taxation Administration Act
1953 39
Part 3—Amendment of other
Acts 49
Child Support (Registration and Collection) Act
1988 49
Fringe Benefits Tax Assessment Act
1986 49
Income Tax Assessment Act
1936 49
A Bill for an Act to amend the law about taxation to
implement the New Business Tax System in relation to personal services income,
and for related purposes
The Parliament of Australia enacts:
This Act may be cited as the New Business Tax System (Alienation of
Personal Services Income) Act 2000.
(1) Subject to this section, this Act commences on the day on which it
receives the Royal Assent.
(2) Part 3 of Schedule 1 (other than items 61, 62 and 72)
commences immediately after the commencement of item 2 of Schedule 5
to the A New Tax System (Tax Administration) Act 1999.
Subject to section 2, each Act that is specified in a Schedule to
this Act is amended or repealed as set out in the applicable items in the
Schedule concerned, and any other item in a Schedule to this Act has effect
according to its terms.
Part 1—Amendment
of the Income Tax Assessment Act 1997
1 Section 10-5 (after table item headed
“accrued leave transfer payments”)
Insert:
|
alienated personal services income 86-15 |
2 Section 12-5 (after table item headed
“penalties”)
Insert:
|
personal services income |
|
alienated personal services income Subdivision 86-B |
|
general Division 85 |
3 Section 70-120 (link
note)
Repeal the link note, substitute:
[The next Part is Part 2-42.]
This Part is about 2 issues relating to personal services income.
Division 85 limits the entitlements of individuals to deductions
relating to their personal services income.
Division 86 sets out the tax consequences of individuals’
personal services income being diverted to other entities (often called
alienation of the income).
These Divisions do not affect individuals or other entities that conduct
personal services businesses. Division 87 defines personal services
businesses.
Note: This Part may not apply until the 2002-03 income year
to participants in the prescribed payments system on 13 April 2000: see
item 26 of Schedule 1 to the New Business Tax System (Integrity
Measures) Act 2000.
[This is the end of the Guide.]
Table of sections
84-5 Meaning of personal services
income
84-10 This Part does not imply that individuals are
employees
(1) Your *ordinary income or
*statutory income, or the ordinary income or
statutory income of any other entity, is your personal services
income if the income is mainly a reward for your personal efforts or
skills (or would mainly be such a reward if it was your income).
Example 1: NewIT Pty. Ltd. provides computer programming
services, but Ron does all the work involved in providing those services. Ron
uses the clients’ equipment and software to do the work. NewIT’s
ordinary income from providing the services is Ron’s personal services
income because it is a reward for his personal efforts or
skills.
Example 2: Trux Pty. Ltd. owns one semi-trailer, and Tom is
the only person who drives it. Trux’s ordinary income from transporting
goods is not Tom’s personal services income because it is produced mainly
by use of the semi-trailer, and not mainly as a reward for Tom’s personal
efforts or skills.
Example 3: Jim works as an accountant for a large accounting
firm that employs many accountants. None of the firm’s ordinary income or
statutory income is Jim’s personal services income because it is produced
mainly by the firm’s business structure, and not mainly as a reward for
Jim’s personal efforts or skills.
(2) Only individuals can have personal services income.
(3) This section applies whether the income is for doing work or is for
producing a result.
(4) The fact that the income is payable under a contract does not stop the
income being mainly a reward for your personal efforts or skills.
The application of this Part to an individual does not imply, for the
purposes of any *Australian law or any
instrument made under an Australian law, that the individual is an
employee.
This Division sets out amounts, relating to personal services income, that
an individual cannot deduct. In particular, deductions that are unavailable to
an employee are similarly unavailable to an individual who has personal services
income and who is not an employee.
However, this Division does not apply if the individual is conducting a
personal services business or receives the income as an employee or office
holder.
Table of sections
85-5 Object of this Division
85-10 Deductions for non-employees relating to personal
services income
85-15 Deductions for rent, mortgage interest, rates and land
tax
85-20 Deductions for payments to associates
etc.
85-25 Deductions for superannuation for
associates
85-30 Exception: personal services
businesses
85-35 Exception: employees
85-40 Application of Subdivision 900-B to individuals
who are not employees
[This is the end of the Guide.]
The object of this Division is to ensure that individuals who are not
conducting *personal services businesses cannot
deduct certain amounts (such as amounts that employees cannot deduct).
Note: This Division also affects the extent to which a
personal services entity is entitled to deductions relating to gaining or
producing an individual’s personal services income: see
section 86-60.
(1) You cannot deduct under this Act an amount to the extent that it
relates to gaining or producing that part of your
*ordinary income or
*statutory income that is your
*personal services income if:
(a) the income is not payable to you as an employee; and
(b) you would not be able to deduct the amount under this Act if the
income were payable to you as an employee.
Example: Ruth is an architect who works as an independent
contractor for one firm. She is not conducting a personal services business. On
most days she travels from her home to the business premises of the firm, where
she does her work. She also has a home office, where she does some of her
work.
This section confirms that Ruth cannot deduct her expenses
of travelling between her home and the firm’s premises because she could
not deduct them if she were an employee.
(2) Subsection (1) does not stop you deducting an amount to the
extent that it relates to:
(a) gaining work; or
Examples: Advertising, tendering and quoting for
work.
(b) insuring against loss of your income or your income earning capacity;
or
Examples: Sickness, accident and disability
insurance.
(c) insuring against liability arising from your acts or omissions in the
course of earning income; or
Examples: Public liability insurance and professional
indemnity insurance.
(d) engaging an entity that is not your
*associate to perform work; or
(e) engaging your *associate to perform
work that forms part of the principal work for which you gain or produce your
*personal services income; or
(f) contributing to a fund in order to obtain superannuation benefits for
yourself or for your dependants in the event of your death; or
Note: For deductions for superannuation contributions: see
Subdivision AB of Division 3 of Part III of the Income Tax
Assessment Act 1936.
(g) meeting your obligations under a
*workers’ compensation law to pay
premiums, contributions or similar payments or to make payments to an employee
in respect of *compensable work-related trauma;
or
(h) meeting your obligations, or exercising your rights, under the
*GST law.
You cannot deduct under this Act an amount of rent, mortgage interest,
rates or land tax:
(a) for some or all of your residence; or
(b) for some or all of your
*associate’s residence;
to the extent that the amount relates to gaining or producing your
*personal services income.
(1) You cannot deduct under this Act:
(a) any payment you make to your
*associate; or
(b) any amount you incur arising from an obligation you have to your
associate;
to the extent that the payment or amount relates to gaining or producing
your *personal services income.
(2) Subsection (1) does not stop you deducting a payment or amount to
the extent that it relates to engaging your
*associate to perform work that forms part of
the principal work for which you gain or produce your
*personal services income.
(1) You cannot deduct under this Act a contribution you make to a fund or
an *RSA to provide for superannuation benefits
payable for your *associate, to the extent that
the associate’s work for you relates to gaining or producing your
*personal services income.
(2) Subsection (1) does not stop you deducting a contribution to the
extent that your *associate’s performance
of work forms part of the principal work for which you gain or produce your
*personal services income.
(3) However, if subsection (2) applies, your deduction cannot exceed
the amount you would have to contribute, for the benefit of the
*associate, to a
*complying superannuation fund or an
*RSA in order to ensure that you did not have
an *individual superannuation guarantee
shortfall in respect of the associate.
(4) To work out the amount you would have to contribute for the purposes
of subsection (3), the *associate’s
salary or wages, for the purposes of the Superannuation Guarantee
(Administration) Act 1992, are taken to be the amount that neither
section 85-10 nor 85-20 prevent you deducting for salary or wages you paid
to the associate.
Note: See paragraph 85-10(2)(e) for deductions relating to
employment of associates.
This Division does not apply to an amount, payment or contribution to the
extent that the amount, payment or contribution relates to income from you
conducting a *personal services
business.
This Division does not apply to an amount, payment or contribution to the
extent that the amount, payment or contribution relates to
*personal services income that you receive
as:
(a) an employee; or
(b) an individual referred to in paragraph 12-45(1)(a), (b), (c), (d) or
(e) (about payments to office holders) in Schedule 1 to the Taxation
Administration Act 1953.
This Division does not have the effect of applying Subdivision 900-B
(about substantiating work expenses) to an individual who is not an
employee.
Table of Subdivisions
Guide to Division 86
86-A General
86-B Entitlement to deductions
Income from the rendering of your personal services is treated as your
assessable income if it is the income of another entity and is not promptly paid
to you as salary.
However, this does not apply if the other entity is conducting a personal
services business.
There are limits to the other entity’s entitlement to deductions to
offset against the amount treated as your income.
(1) This diagram shows an example of a simple arrangement for the
alienation of personal services income.
Note 1: Solid lines indicate actual payments between the
parties. Dotted lines indicate other interactions between the
parties.
Note 2: This Division also applies to different and more
complex arrangements.
(2) This Division has the effect of attributing the personal services
entity’s income from the personal services to the individual who performed
them (unless the income is promptly paid to the individual as salary). Certain
deduction entitlements of the personal services entity can reduce the amount of
the attribution.
Table of sections
86-10 Object of this Division
86-15 Effect of obtaining personal services income through a
personal services entity
86-20 Offsetting the personal services entity’s
deductions against personal services income
86-25 Apportionment of entity maintenance deductions among
several individuals
86-30 Assessable income etc. of the personal services
entity
86-35 Later payments of, or entitlements to, personal
services income to be disregarded for income tax purposes
86-40 Salary payments shortly after an income
year
The object of this Division is to ensure that individuals cannot reduce
or defer their income tax (and other liabilities) by alienating their
*personal services income through companies,
partnerships or trusts that are not conducting
*personal services businesses.
Note: The general anti-avoidance provisions of Part IVA
of the Income Tax Assessment Act 1936 may still apply to cases of
alienation of personal services income that fall outside this
Division.
Amounts included in your assessable income
(1) Your assessable income includes an amount of
*ordinary income or
*statutory income of a
*personal services entity that is your
*personal services income.
Example: Continuing example 1 in section 84-5: Assume
that NewIT only provides services to one client. Ron’s assessable income
includes ordinary income of NewIT from providing the computer programming
services, because the income is Ron’s personal services
income.
Note: The amount included in your assessable income can be
reduced by certain deductions to which the personal services entity is entitled:
see section 86-20.
(2) A personal services entity is a company, partnership or
trust whose *ordinary income or
*statutory income includes the
*personal services income of one or more
individuals.
Exception: personal services businesses
(3) This section does not apply if that amount is income from the
*personal services entity conducting a
*personal services business.
Note: Even if the entity is conducting a personal services
business, it is possible that some of its income is not income from conducting
that business.
Exception: amounts promptly paid to you as salary or wages
(4) This section does not apply to the extent that:
(a) the *personal services entity pays
that amount to you, as an employee, as salary or wages; and
(b) the payment is made before the end of the 14th day after the
*PAYG payment period during which the amount
became *ordinary income or
*statutory income of the entity.
Note: The entity is obliged to withhold amounts from salary
or wages paid before the end of that day: see section 12-35 in
Schedule 1 to the Taxation Administration Act 1953.
Exception: exempt income etc.
(5) This section only applies to the extent that that amount would be
assessable income of the personal services entity if this Division did not
apply.
Example: If the entity’s income includes an amount
that is your personal services income for a service on which GST is payable, the
amount included in your assessable income will not include the GST, because the
GST is neither assessable income nor exempt income of the entity: see
section 17-5.
(1) The amount of your *personal services
income included in your assessable income under section 86-15 may be
reduced (but not below nil) by the amount of certain deductions to which the
*personal services entity is
entitled.
Note 1: Subdivision 86-B limits a personal services
entity’s entitlement to deductions.
Note 2: For a personal services entity that is a
partnership, if the amount of the deductions exceeds the amount of the personal
services income, the partners may be entitled to a deduction under subsection
92(2) of the Income Tax Assessment Act 1936.
(2) Use this method statement to work out whether, and by how much, the
amount is reduced:
Method statement
Step 1. Work out, for the income year, the amount of any deductions
(other than *entity maintenance
deductions) to which the
*personal services entity is entitled that are
deductions relating to your *personal services
income.
Step 2. Work out, for the income year, the amount of any
*entity maintenance deductions to which the
*personal services entity is
entitled.
Step 3. Work out the *personal
services entity’s assessable income for that income year, disregarding any
income it receives that is your *personal
services income or the personal services income of anyone else.
Step 4. Subtract the amount under step 3 from the amount under step
2.
Note 1: Step 4 ensures that, before entity maintenance
deductions can contribute to the reduction, they are first exhausted against any
income of the entity that is not personal services income.
Note 2: If the personal services entity receives another
individual’s personal services income, see
section 86-25.
Step 5. If the amount under step 4 is greater than zero, the amount
of the reduction under subsection (1) is the sum of the amounts under steps
1 and 4.
Step 6. If the amount under step 4 is not greater than zero, the
amount of the reduction under subsection (1) is the amount under step
1.
Example 1: Continuing example 1 in section 84-5: Assume
these additional facts:
• $120,000 of NewIT’s income is Ron’s
personal services income;
• NewIT has deductions (including superannuation
contributions) of $50,000 relating to Ron’s personal services income (step
1);
• NewIT has entity maintenance deductions of $8,000
(step 2);
• NewIT has investments that produce income.
NewIT’s assessable income, disregarding Ron’s or anyone else’s
personal services income, is $20,000 (step 3).
Because the step 4 amount is less than zero (-$12,000),
step 5 does not apply and, under step 6, the amount of the reduction is $50,000.
Therefore the amount included in Ron’s assessable income
is:
Example 2: Assume, as an alternative set of facts, that
NewIT’s assessable income under step 3 was only $2,000.
The step 4 amount would have been $6,000, and, under step
5, the amount of the reduction would have been $56,000 (adding the amounts under
steps 1 and 4). The amount included in Ron’s assessable income would then
have been:
Note: The personal services entity’s deductions that
do not relate to your personal services income and that are not entity
maintenance deductions cannot reduce the amount included in your assessable
income under section 86-15.
If, in the income year:
(a) the amount worked out under step 4 of the method statement in
section 86-20 is greater than zero; and
Note: This happens if the entity has entity maintenance
deductions that form some or all of the reduction under
section 86-20.
(b) the *ordinary income or
*statutory income of the
*personal services entity includes another
individual’s *personal services income
(as well as your personal services income); and
(c) the other individual’s personal services income is included in
the other individual’s assessable income under
section 86-15;
the amount worked out under step 4 is taken to be:
where:
original step 4 amount is the amount that would be the amount
worked out under step 4 if this section did not apply.
total personal services income is the sum of all the amounts
of personal services income (whether your personal services income or someone
else’s) that are included in the personal services entity’s ordinary
income or statutory income for the income year.
your personal services income is the sum of all the amounts
of your personal services income that are included in the personal services
entity’s ordinary income or statutory income for the income
year.
Example: Continuing example 2 in section 86-20: Assume
that Robyn, another computer consultant, joined NewIT, and NewIT’s
ordinary income from providing the services also includes Robyn’s personal
services income of $168,000.
Because NewIT now receives the personal services income of
someone else, Ron’s step 4 amount is reduced as
follows:
Under step 5 of the method statement in section 86-20,
the amount of the reduction under that section is therefore $52,500, and the
amount included in Ron’s assessable income is $67,500.
*Ordinary income or
*statutory income of the
*personal services entity is neither assessable
income nor *exempt income of the entity, to the
extent that it is *personal services income
included in your assessable income under section 86-15.
Note: Subsection 118-20(4) prevents this income being
treated as a capital gain.
(1) To the extent that a payment by the
*personal services entity, or by your
*associate, is a payment to you or any of your
associates of:
(a) *personal services income included in
your assessable income under section 86-15; or
(b) any other amount that is attributable to that income;
the payment:
(c) is neither assessable income nor
*exempt income of the entity receiving it;
and
Note: Subsection 118-20(4) prevents this income being
treated as a capital gain.
(d) is not an amount that the entity making it can deduct.
Note: Section 118-65 prevents this amount being treated
as a capital loss.
Example: Continuing example 2 in section 86-20: Assume
that NewIT had paid Jill, Ron’s wife, an amount for work that is not the
principal work of NewIT. The payment is made from money already included in
Ron’s assessable income under section 86-15.
The amount is neither assessable income nor exempt income
of Jill, and NewIT cannot deduct the amount.
(2) To the extent that you are entitled, or any of your
*associates are entitled, to a share of the net
income of the *personal services entity, or of
any of your associates, and that income is:
(a) *personal services income included in
your assessable income under section 86-15; or
(b) any other amount that is attributable to that income;
that share is neither assessable income nor
*exempt income of the entity receiving
it.
(1) If:
(a) before the end of 14 July in a particular income year, you
receive, as salary or wages, *personal services
income of yours from the *personal services
entity; and
(b) failure to make the payment before the end of 14 July would have
resulted in an amount of income being included in your assessable income under
section 86-15 for the preceding income year;
you are taken to have received the payment on 30 June of that
preceding income year.
Example: Continuing example 2 in section 86-20: Assume
that NewIT is a small withholder for PAYG withholding purposes, and its PAYG
payment period covering April 2001 to June 2001 is the quarter ending on
30 June 2001. NewIT’s income for that period (after taking into
account any reductions under sections 86-20 and 86-25) includes $20,000
that is Ron’s personal services income, and NewIT pays this to Ron on
12 July 2001.
The $20,000 that Ron receives is assessable income for the
income year ended on 30 June 2001.
(2) However, this section does not affect the time at which the
*personal services entity is treated as having
paid the salary or wages.
Note 1: Therefore neither the timing of the entity’s
deduction for the payment, nor the timing of the obligation to withhold amounts
under section 12-35 in Schedule 1 to the Taxation Administration
Act 1953, is affected.
Note 2: However, these payments are treated as relating to
the preceding income year for the purposes of the rules relating to payment
summaries and PAYG credits (see Subdivisions 16-C and 18-A in
Schedule 1 to the Taxation Administration Act
1953).
Table of sections
86-60 General rule for deduction entitlements of personal
services entities
86-65 Entity maintenance deductions
86-70 Car expenses
86-75 Superannuation
86-80 Salary or wages promptly paid
86-85 Deduction entitlements of personal services entities
for amounts included in an individual’s assessable income
86-90 Application of Divisions 28 and 900 to personal
services entities
A *personal services entity cannot
deduct under this Act an amount to the extent that it relates to gaining or
producing an individual’s *personal
services income, unless:
(a) the individual could have deducted the amount under this Act if the
circumstances giving rise to the entity’s entitlement to deduct the amount
had applied instead to the individual; or
Note: In particular, Division 85 specifies limits on an
individual’s entitlements to deductions relating to the individual’s
personal services income.
(b) the entity receives the individual’s
*personal services income in the course of
conducting a *personal services
business.
(1) Section 86-60 does not stop a
*personal services entity deducting an amount
to the extent that it is an *entity maintenance
deduction.
Note: See section 86-25 for how entity maintenance
deductions are offset against a personal services entity’s
income.
(2) Each of these is an entity maintenance
deduction:
(a) any fee or charge payable by the entity for opening, operating or
closing an account with an *ADI;
(b) any deduction under section 25-5 (about tax-related
expenses);
(c) any loss or outgoing incurred in relation to preparation or lodgment
of any document the entity is required to lodge under the Corporations
Law;
(d) any fee or charge payable by the entity to an
*Australian government agency for any licence,
permission, approval, authorisation, registration or certification (however
described) that is granted or given under an
*Australian law.
(3) However, paragraph (2)(c) does not include any payment that the
entity makes to an *associate.
Cars used solely for business
(1) Section 86-60 does not stop a
*personal services entity deducting a
*car expense for a
*car of which there is no
*private use.
Other cars
(2) Section 86-60 does not stop a
*personal services entity deducting:
(a) a *car expense; or
(b) an amount of tax payable under the Fringe Benefits Tax Assessment
Act 1986 for a *car fringe
benefit;
for a *car of which there is
*private use. However, there cannot be, at the
same time, more than one car for which such deductions can arise in relation to
gaining or producing the same individual’s
*personal services income.
(3) If there is more than one *car to
which subsection (2) could apply at the same time, the entity must choose
the car to which subsection (2) applies at that time. The choice remains in
effect until the entity ceases to *hold that
car.
Example: Continuing example 2 in section 86-20: Assume
that NewIT provides 3 cars to Ron. Car 1 is used solely for business purposes
and cars 2 and 3 are used for private purposes.
NewIT can deduct all the car expenses it incurs for car 1.
It can also deduct all the car expenses it incurs for its choice of either car 2
or car 3, as well as the fringe benefits tax it pays for that car. However, it
cannot deduct any car expenses or fringe benefits tax for the car that it does
not choose.
Note: If car expenses for a car are not deductible because
of section 86-60, the car benefit being provided is an exempt benefit for
the purposes of fringe benefits tax: see subsection 8(4) of the Fringe
Benefits Tax Assessment Act 1986.
(1) Section 86-60 does not stop a
*personal services entity deducting a
contribution the entity makes to a fund or an
*RSA for the purpose of making provision for
superannuation benefits payable for an individual whose
*personal services income is included in the
entity’s *ordinary income or
*statutory income.
For deductions for superannuation
contributions: see Subdivision AA of Division 3 of Part III of the
Income Tax Assessment Act 1936.
(2) However, if:
(a) the individual performs less than 20% (by market value) of the
entity’s principal work; and
(b) the individual is an *associate of
another individual whose *personal services
income is included in the entity’s
*ordinary income or
*statutory income;
the entity’s deduction cannot exceed the amount it would have to
contribute, for the benefit of the individual, to a
*complying superannuation fund or an
*RSA in order to ensure that it did not have an
*individual superannuation guarantee shortfall
in respect of the individual.
(3) To work out the amount the entity would have to contribute for the
purposes of subsection (2), the individual’s salary or wages, for the
purposes of the Superannuation Guarantee (Administration) Act 1992, are
taken to be the amount that section 86-60 does not prevent the entity
deducting for salary or wages it paid to the individual.
Note: Section 86-60 will apply the limitations under
sections 85-10 and 85-20 on an individual’s entitlement to deductions
(but see paragraph 85-10(2)(e) on employment of associates).
Section 86-60 does not stop a
*personal services entity deducting an amount
for salary or wages it pays to you before the end of the 14th day after the
*PAYG payment period during which the amount
became *ordinary income or
*statutory income of the entity.
The fact that a *personal services
entity:
(a) incurs an amount in gaining or producing an individual’s
assessable income; or
(b) uses a unit of *plant, or has it
installed ready for use, for the *purpose of
producing assessable income of an individual;
does not stop the entity deducting the loss or outgoing, or deducting an
amount for depreciation of the plant, under this Act if:
(c) the entity incurs the amount in gaining or producing, or uses or
installs the plant for the purpose of producing, its
*ordinary income or
*statutory income; and
(d) the income is included in the individual’s assessable income
under section 86-15.
This Division does not have the effect of applying Division 28
(about car expenses) or Division 900 (about substantiation rules) to a
*personal services entity.
Note: Divisions 28 and 900 can still apply to a
personal services entity that is a partnership: see subsections 28-10(2) and
900-5(2).
Table of Subdivisions
Guide to Division 87
87-A General
87-B Personal services business determinations
Divisions 85 and 86 do not apply to personal services income that is
income from conducting a personal services business.
There are 3 tests for what is a personal services business, but, if 80% or
more of your personal services income is from one source, the Commissioner must
have made a personal services business determination.
This diagram shows how this Division operates to ascertain whether
personal services income is income from conducting a personal services
business.
Table of sections
87-10 Object of this Division
87-15 What is a personal services business
87-20 The unrelated clients test for a personal services
business
87-25 The employment test for a personal services
business
87-30 The business premises test for a personal services
business
87-35 Personal services income from Australian government
agencies
The object of this Division is to define
*personal services businesses in a way that
ensures that it covers genuine businesses but not situations that are merely
arrangements for dealing with the *personal
services income of individuals.
(1) An individual or a *personal services
entity conducts a personal services business during an income year
if the individual or entity meets at least one of the 3
*personal services business tests.
(2) The 3 personal services business tests are:
(a) the unrelated clients test under section 87-20;
(b) the employment test under section 87-25;
(c) the business premises test under section 87-30.
(3) However, if 80% or more of an individual’s
*personal services income during the income
year is income from the same entity (or from the same entity and that
entity’s *associates), the
individual’s personal services income is not taken to be from
conducting a *personal services business
unless:
(a) when the personal services income is gained or produced, a
*personal services business determination is in
force relating to the individual’s personal services income; and
(b) if the determination was made on the application of a
*personal services entity—the
individual’s personal services income is income from the entity conducting
the personal services business.
Note: For personal services business determinations, see
Subdivision 87-B.
(1) An individual or a *personal services
entity meets the unrelated clients test in an income year if:
(a) during the year, the individual or personal services entity gains or
produces income from providing services to 2 or more entities that are not
*associates of each other, and are not
associates of the individual or of the personal services entity; and
(b) the services are provided as a direct result of the individual or
personal services entity making offers or invitations (for example, by
advertising), to the public at large or to a section of the public, to provide
the services.
(2) The individual or *personal services
entity is not treated, for the purposes of paragraph (1)(b), as
having made offers or invitations to provide services merely by being available
to provide the services through an entity that conducts a
*business of arranging for persons to provide
services directly for clients of the entity.
(1) An individual meets the employment test in an income year
if:
(a) the individual engages one or more entities to perform work;
and
(b) that entity performs, or those entities together perform, at least 20%
(by market value) of the individual’s principal work for that
year.
(2) A *personal services entity meets the
employment test in an income year if:
(a) the entity engages one or more other entities to perform work, other
than individuals whose *personal services
income is included in the entity’s
*ordinary income or
*statutory income; and
(b) that other entity performs, or those other entities together perform,
at least 20% (by market value) of the entity’s principal work for that
year.
(3) An individual or a *personal services
entity also meets the employment test in an income year if, for at least half
the income year, the individual or entity has one or more apprentices.
(1) An individual or a *personal services
entity meets the business premises test in an income year if, at all times
during the income year, the individual or entity maintains and uses business
premises:
(a) at which the individual or entity mainly conducts activities from
which *personal services income is gained or
produced; and
(b) of which the individual or entity has exclusive use; and
(c) that are physically separate from any premises that the individual or
entity, or any *associate of the individual or
entity, uses for private purposes; and
(d) that are physically separate from the premises of the entity to which
the individual or entity provides services and from the premises of any
associate of the entity to which the individual or entity provides
services.
(2) The individual or entity need not maintain and use the same business
premises throughout the income year.
(1) *Australian government agencies are
not treated as *associates of each other for
the purposes of subsection 87-15(3) and paragraph 87-20(1)(a).
Example: You receive 60% of your personal services income
from a Department of a State government and 40% of your personal services income
from a corporation in which that State has a majority
shareholding.
You are not treated as if 80% or more of your personal
services income is income from the same entity and that entity’s
associates, and therefore you will not need a personal services business
determination to satisfy subsection 87-15(3).
In addition, you satisfy the first limb (but not
necessarily the second limb) of the unrelated clients test in subsection
87-20(1), because you receive your personal services income from 2 entities that
are not treated as associates of each other.
(2) Each Agency within the meaning of the Public Service Act
1999:
(a) is treated as a separate entity; and
(b) is not treated as an *associate of
any other such Agency, or of any *Australian
government agency;
for the purposes of subsection 87-15(3) and paragraph
87-20(1)(a).
Example: You receive 70% of your personal services income
from the Commonwealth Department of Treasury and 30% of your personal services
income from the Australian Taxation Office (neither body has a legal identity
separate from the Commonwealth Government).
You are not treated as if 80% or more of your personal
services income is income from the same entity, or from the same entity and that
entity’s associates, and therefore you will not need a personal services
business determination to satisfy subsection 87-15(3).
In addition, you satisfy the first limb (but not
necessarily the second limb) of the unrelated clients test in subsection
87-20(1), because you receive your personal services income from 2 bodies that
are treated as separate entities and that are not treated as associates of each
other.
(3) Each part of the government of a State or Territory, and each part of
an authority of the State or Territory, that has, under a law of the State or
Territory, a status corresponding to an Agency within the meaning of the
Public Service Act 1999:
(a) is treated as a separate entity; and
(b) is not treated as an *associate of
any other part of such a government or authority, or of any
*Australian government agency;
for the purposes of subsection 87-15(3) and paragraph
87-20(1)(a).
Table of sections
87-55 Effect of personal services business
determinations
87-60 Personal services business determinations for
individuals
87-65 Personal services business determinations for personal
services entities
87-70 Applying etc. for personal services business
determinations
87-75 When personal services business determinations have
effect
87-80 Revoking personal services business
determinations
87-85 Review of decisions
(1) An individual conducts a personal services business
during an income year if a *personal services
business determination is in force relating to the individual.
(2) A *personal services entity conducts
a personal services business during an income year if a
*personal services business determination is in
force relating to an individual whose *personal
services income is included in the entity’s
*ordinary income or
*statutory income.
Making etc. personal services business determinations
(1) The Commissioner may, by giving written notice to an
individual:
(a) make a personal services business determination relating to the
individual; or
(b) vary such a determination.
(2) The Commissioner may, in the notice, specify:
(a) the day on which the determination or variation takes effect, or took
effect;
(b) the period for which the determination has effect;
(c) conditions to which the determination is subject.
Matters about which the Commissioner must be satisfied
(3) The Commissioner must not make the determination unless satisfied
that, in the income year during which the determination first has effect, or is
taken to have first had effect:
(a) the individual:
(i) could reasonably be expected to meet, or met, the employment test
under section 87-25 or the business premises test under section 87-30,
or both; or
(ii) but for unusual circumstances applying to the individual in that
year, could reasonably have been expected to meet, or would have met, at least
one of the 3 *personal services business tests;
and
(b) the individual’s *personal
services income could reasonably be expected to be, or was, from the individual
conducting activities that met:
(i) if subparagraph (a)(i) applies—the employment test under
section 87-25 or the business premises test under section 87-30, or
both; or
(ii) if subparagraph (a)(ii) applies—at least one of the 3
personal services business tests; and
(c) 80% or more of the individual’s personal services income could
reasonably be expected to be, or was, income from the same entity, or from the
same entity and that entity’s
*associates.
(4) For the purposes of subparagraph (3)(a)(ii) but without limiting
the scope of that subparagraph, unusual circumstances include providing services
to an insufficient number of entities to meet the unrelated clients test under
section 87-20 if:
(a) the individual starts a *business
during the income year, and can reasonably be expected to meet the test in
subsequent income years; or
(b) the individual provides services to only one entity during the income
year, but met the test in one or more preceding income years and can reasonably
be expected to meet the test in subsequent income years.
Further grounds for making the determination
(5) However, the Commissioner may make the determination if satisfied
that:
(a) the individual’s *personal
services income is for producing a result; and
(b) the individual is required to supply the
*plant and equipment, or tools of trade, needed
to perform the work from which the individual produces the result; and
(c) the individual is, or would be, liable for the cost of rectifying any
defect in the work performed.
(6) In determining whether the individual meets paragraph (5)(a), (b)
or (c), the Commissioner may have regard to whether it is the custom or
practice, when work of that kind is performed by an entity other than an
employee:
(a) for the personal services income from the work to be for producing a
result; and
(b) for the entity to be required to supply the plant and equipment, or
tools of trade, needed to perform the work; and
(c) for the entity to be liable for the cost of rectifying any defect in
the work performed;
as the case requires.
(7) Subsection (5) can apply whether or not the Commissioner is
satisfied that the individual meets the requirements of
subsection (3).
Making etc. personal services business determinations
(1) The Commissioner may, by giving written notice to a
*personal services entity whose
*ordinary income or
*statutory income includes some or all of an
individual’s *personal services
income:
(a) make a personal services business determination relating to the
individual’s personal services income included in the entity’s
ordinary income or statutory income; or
(b) vary such a determination.
(2) The Commissioner may, in the notice, specify:
(a) the day on which the determination or variation takes effect, or took
effect;
(b) the period for which the determination has effect;
(c) conditions to which the determination is subject.
Matters about which the Commissioner must be satisfied
(3) The Commissioner must not make the determination unless satisfied
that, in the income year during which the determination first has effect, or is
taken to have first had effect:
(a) the entity:
(i) could reasonably be expected to meet, or met, the employment test
under section 87-25 or the business premises test under section 87-30,
or both; or
(ii) but for unusual circumstances applying to the entity in that year,
could reasonably have been expected to meet, or would have met, at least one of
the 3 *personal services business tests;
and
(b) the individual’s *personal
services income included in the entity’s
*ordinary income or
*statutory income could reasonably be expected
to be, or was, from the entity conducting activities that met:
(i) if subparagraph (a)(i) applies—the employment test under
section 87-25 or the business premises test under section 87-30, or
both; or
(ii) if subparagraph (a)(ii) applies—at least one of the 3
personal services business tests; and
(c) 80% or more of the individual’s personal services income could
reasonably be expected to be, or was, income from the same entity, or from the
same entity and that entity's
*associates.
(4) For the purposes of subparagraph (3)(a)(ii) but without limiting
the scope of that subparagraph, unusual circumstances include providing services
to an insufficient number of entities to meet the unrelated clients test under
section 87-20 if:
(a) the*personal services entity starts a
*business during the income year, and can
reasonably be expected to meet that test in subsequent income years;
or
(b) the personal services entity provides services to only one entity
during the income year, but met the test in one or more preceding income years
and can reasonably be expected to meet the test in subsequent income
years.
Further grounds for making the determination
(5) However, the Commissioner may make the determination if satisfied
that:
(a) the *personal services entity’s
*personal services income is for producing a
result; and
(b) the personal services entity is required to supply the
*plant and equipment, or tools of trade, needed
to perform the work from which the personal services entity produces the result;
and
(c) the personal services entity is, or would be, liable for the cost of
rectifying any defect in the work performed.
(6) In determining whether the *personal
services entity meets paragraph (5)(a), (b) or (c), the Commissioner may
have regard to whether it is the custom or practice, when work of that kind is
performed by an entity other than an employee:
(a) for the personal services income from the work to be for producing a
result; and
(b) for the entity to be required to supply the plant and equipment, or
tools of trade, needed to perform the work; and
(c) for the entity to be liable for the cost of rectifying any defect in
the work performed;
as the case requires.
(7) Subsection (5) can apply whether or not the Commissioner is
satisfied that the*personal services entity and
the individual meets the requirements of subsection (3).
(1) An individual or a *personal services
entity may apply to the Commissioner, in the
*approved form:
(a) for a *personal services business
determination; or
(b) for a variation of a personal services business
determination.
(2) The Commissioner may request the applicant to give the Commissioner
specified information, or a specified document, that the Commissioner needs to
decide the application.
(3) If the Commissioner has not decided the application within 60 days
after it is made, the applicant may, at any time, give the Commissioner written
notice that the applicant wishes to treat the application as having been
refused.
(4) If the applicant gives notice under subsection (3), the
Commissioner is taken, for the purposes of section 87-85, to have refused
the application on the day on which the notice is given.
(5) For the purposes of measuring the 60 days mentioned in
subsection (3), disregard each period (if any):
(a) starting on the day when the Commissioner requests the applicant under
subsection (2) to give the Commissioner specified information or a
specified document; and
(b) ending at the end of the day the applicant gives the Commissioner the
specified information or document.
(1) The determination, or a variation of the determination, has effect, or
is taken to have had effect, on and from:
(a) the day specified in the notice as the day on which the determination
or variation takes effect, or took effect; or
(b) if a day is not specified—the day on which the notice is
given.
(2) The determination ceases to have effect at the end of the earliest day
on which one or more of these occurs:
(a) one or more conditions to which the determination is subject are not
met;
(b) the Commissioner revokes the determination;
(c) the period for which the determination has effect comes to an
end.
The Commissioner must, by giving written notice to the individual or
*personal services entity on whose application
a *personal services business determination was
made, revoke the determination if the Commissioner is no longer satisfied that
there are grounds on which the determination could be made.
A person who is dissatisfied with;
(a) a decision of the Commissioner to make, vary or revoke a
*personal services business determination;
or
(b) the Commissioner’s refusal of an application for a personal
services business determination or for a variation of a personal services
business determination;
may object against the decision in the manner set out in Part IVC of
the Taxation Administration Act 1953.
[The next Chapter is Chapter 3.]
4 At the end of
Subdivision 118-A
Add:
A *capital loss you make from a payment
is disregarded if it is a payment to any entity of:
(a) *personal services income included in
an individual’s assessable income under section 86-15; or
(b) any other amount that is attributable to that income.
5 At the end of
section 960-100
Add:
Note: Under section 87-35, certain parts of Australian
governments and authorities are treated as separate entities for the purposes of
ascertaining whether another entity is conducting a personal services
business.
6 Subsection 995-1(1)
Insert:
ADI (authorised deposit-taking institution) means a body
corporate that is an ADI for the purposes of the Banking Act
1959.
7 Subsection 995-1(1)
Insert:
alienated personal services payment has the meaning given by
section 13-10 in Schedule 1 to the Taxation Administration Act
1953.
8 Subsection 995-1(1) (after paragraph (a)
of the definition of amount required to be withheld)
Insert:
(aa) the amount that Division 13 in that Schedule requires the entity
to pay to the Commissioner in respect of the
*alienated personal services payment to which
the withholding payment relates; or
9 Subsection 995-1(1) (after paragraph (a)
of the definition of amount withheld)
Insert:
(aa) an amount that the entity paid to the Commissioner under
Division 13 in that Schedule in respect of the
*alienated personal services payment to which
the withholding payment relates; or
10 Subsection 995-1(1) (at the end of the
definition of associate)
Add:
Note: Under section 87-35, Australian government
agencies, and certain parts of Australian governments and authorities, are not
treated as associates for the purposes of ascertaining whether an entity is
conducting a personal services business.
11 Subsection 995-1(1)
Insert:
car fringe benefit has the meaning given by subsection 136(1)
of the Fringe Benefits Tax Assessment Act 1986.
12 Subsection 995-1(1)
Insert:
compensable work-related trauma has the meaning given by
subsection 136(1) of the Fringe Benefits Tax Assessment Act
1986.
13 Subsection 995-1(1)
Insert:
entity maintenance deduction has the meaning given by
subsection 86-65(2).
14 Subsection 995-1(1)
Insert:
individual superannuation guarantee shortfall has the meaning
given by section 19 of the Superannuation Guarantee (Administration) Act
1992.
15 Subsection 995-1(1)
Insert:
PAYG payment period means:
(a) for a *personal services entity that
is a *small withholder—any
*quarter; or
(b) for any other personal services entity—any month.
16 Subsection 995-1(1)
Insert:
personal services business has the meanings given by
subsection 87-15(1) and section 87-55.
17 Subsection 995-1(1)
Insert:
personal services business determination means a
determination under section 87-60 or 87-65.
18 Subsection 995-1(1)
Insert:
personal services business test has the meaning given by
subsection 87-15(2).
19 Subsection 995-1(1)
Insert:
personal services entity has the meaning given by subsection
86-15(2).
20 Subsection 995-1(1)
Insert:
personal services income has the meaning given by
section 84-5.
21 Subsection 995-1(1)
Insert:
personal services payment remitter has the meaning given by
section 13-15 in Schedule 1 to the Taxation Administration Act
1953.
22 Subsection 995-1(1)
Insert:
PPS entity: an entity is a PPS entity
if:
(a) on or before 13 April 2000, the entity was entitled to make, and
had made, a payee declaration to an eligible paying authority under
section 221YHB of the Income Tax Assessment Act 1936; and
(b) the Commissioner had received the payee declaration for the eligible
paying authority before the end of that day; and
(c) the declaration was in force at the end of that day.
In this definition, eligible paying authority and payee
declaration have the same meanings as in Division 3A of
Part VI of the Income Tax Assessment Act 1936.
23 Subsection 995-1(1)
Insert:
private use, of a *car, has
the meaning given by subsection 136(1) of the Fringe Benefits Tax Assessment
Act 1986.
24 Subsection 995-1(1) (definition of
withholding payment, first occurring)
Repeal the definition, substitute:
withholding payment means:
(a) a payment from which an amount must be withheld under Division 12
in Schedule 1 to the Taxation Administration Act 1953 (even if the
amount is not withheld); or
(b) an *alienated personal services
payment in respect of which Division 13 in that Schedule requires an amount
to be paid to the Commissioner; or
(c) a *non-cash benefit in respect of
which Division 14 in that Schedule requires an amount to be paid to the
Commissioner.
Note 1: A withholding payment that consists of a non-cash
benefit is made when the benefit is provided. The amount of the withholding
payment is taken to be the market value of the benefit at that
time.
Note 2: Divisions 12, 13 and 14 in Schedule 1 to
the Taxation Administration Act 1953 deal with collecting amounts on
account of income tax payable by the recipient of the payment, alienated
personal services payment or non-cash benefit.
25 Subsection 995-1(1)
Insert:
workers’ compensation law has the meaning given by
subsection 136(1) of the Fringe Benefits Tax Assessment Act
1986.
26 Application
(1) The amendments made by this Part of this Schedule apply to assessments
for the 2000-2001 income year and later income years.
(2) However, the Commissioner may, before 1 July 2000, declare in
writing that the amendments made by this Part of this Schedule apply to an
assessment that:
(a) is an assessment for the 2000-2001 income year or the 2001-2002 income
year; and
(b) relates to a PPS entity that is included in a class of entities
specified in the declaration;
as if the entity were conducting a personal services business and
subsection 87-15(3) of the Income Tax Assessment Act 1997 did not apply.
The declaration has effect accordingly.
(3) An entity is a PPS entity for the purposes of
paragraph (2)(b) if:
(a) on or before 13 April 2000, the entity was entitled to make, and
had made, a payee declaration to an eligible paying authority under
section 221YHB of the Income Tax Assessment Act 1936; and
(b) the Commissioner had received the payee declaration for the eligible
paying authority before the end of that day; and
(c) the declaration was in force at the end of that day.
(4) In subitem (3), eligible paying authority and
payee declaration have the same meanings as in Division 3A of
Part VI of the Income Tax Assessment Act 1936.
Part 2—Amendment
of the Taxation Administration Act 1953
25 Section 10-1 in
Schedule 1
After “Commissioner” (first occurring), insert:
If the payment is personal services income that is included in the
assessable income of someone else under Division 86 of the Income Tax
Assessment Act 1997, the payer must pay such an amount to the Commissioner
at a later date.
26 At the end of section 10-5 in
Schedule 1
Add:
(2) These can also be treated as withholding payments:
(a) alienated personal services payments (see Division 13);
(b) non-cash benefits (see Division 14).
Note: The obligation to pay an amount to the Commissioner is
imposed on the entity receiving the alienated personal services payment or
providing the non-cash benefit.
27 After section 12-5 in
Schedule 1
Insert:
This Division does not apply to a payment in so far as the
payment:
(a) is an *alienated personal services
payment; or
(b) was received, by the entity making the payment, as an
*alienated personal services payment.
Note: An entity that receives an alienated personal services
payment may be obliged to pay an amount to the Commissioner: see
Division 13.
28 After Division 12 in
Schedule 1
Insert:
Table of sections
13-1 Object of this Division
13-5 Payment to the Commissioner in respect of alienated
personal services payments
13-10 Alienated personal services payments
13-15 Personal services payment remitters
13-20 Time for payments to Commissioner for alienated
personal services payments made during 2000-01
The object of this Division is to ensure the efficient collection of
income tax (and other liabilities) on any
*personal services income included in an
individual’s assessable income under Division 86 of the Income Tax
Assessment Act 1997 by:
(a) putting *personal services entities
receiving *alienated personal services payments
in a position similar to their position if amounts were withheld from the
payments under Division 12; but
(b) doing so in a way that enables them to comply with their obligations
without having to withhold amounts separately from each payment.
Note: Under Division 86 of the Income Tax Assessment
Act 1997 (about alienation of personal services income), an
individual’s personal services income that is gained or produced by
another entity is in some cases included in the individual’s assessable
income. Payments of this income by the entity might not be caught by
Division 12.
Obligation to pay amounts
(1) A *personal services entity must pay
an amount of tax to the Commissioner if:
(a) it receives an *alienated personal
services payment that relates to an individual’s personal services income;
and
(b) it receives the payment during a
*PAYG payment period for which it is a
*personal services payment remitter.
Working out the amounts
(2) Use this method statement to work out the amount:
Method statement
Step 1. Identify the payments that the
*personal services entity makes to the
individual during the period mentioned in paragraph (1)(b) that are
*withholding payments covered by
section 12-35.
Step 2. Identify the amounts that:
(a) are included in the individual’s assessable income under
section 86-15 of the Income Tax Assessment Act 1997; and
(b) relate to *alienated personal
services payments the entity receives during that period.
Step 3. Work out the sum of all the amounts that Division 12
would require the entity to withhold in respect of that period if both of these
were taken into account:
(a) the payments identified in step 1; and
(b) the amounts identified in step 2, as if they were payments of salary
covered by section 12-35.
Step 4. Work out the sum of all the amounts withheld under
section 12-35 from the payments identified in step 1.
Step 5. Subtract the sum under step 4 from the sum under step
3.
Example: For the PAYG payment period of 1 April 2001 to
30 June 2001, NewIT Pty. Ltd. received amounts totalling $18,000 that were
Ron’s personal services income. NewIT does not conduct a personal services
business.
During the period, NewIT paid Ron $3,000 in salary. This is
a withholding payment covered by section 12-35 (step 1).
$15,000 of the amount NewIT received is included in
Ron’s assessable income under section 86-15 of the Income Tax
Assessment Act 1997 (step 2).
If NewIT had paid the $15,000 in salary to Ron within 14
days after the end of the PAYG payment period, the amount that NewIT would have
had to withhold under Division 12 on the total amount of $18,000 would have
been $4,000 (step 3).
NewIT withheld $500 from the salary payment of $3,000, as
required by section 12-35 (step 4).
On the basis of these facts, the amount NewIT must pay to
the Commissioner (step 5) is:
When to pay
(3) The *personal services entity must
pay the amount by the end of the 21st day after the end of the
*PAYG payment period.
Note: A different rule applies for alienated personal
services payments that large withholders and medium withholders make during
2000-01. See section 13-20.
An alienated personal services payment is a payment
(including a payment in the form of a *non-cash
benefit) that a *personal services entity
receives and that relates to an amount that:
(a) is included in an individual’s assessable income under
Division 86 of the Income Tax Assessment Act 1997; or
(b) would be so included but for the fact that the entity received the
income in the course of conducting a *personal
services business.
For valuation of non-cash benefits, see
sections 21 and 21A of the Income Tax Assessment Act
1936.
General
(1) A *personal services entity is a
personal services payment remitter for a
*PAYG payment period if, in the income year
preceding that period:
(a) the entity’s *ordinary income
or *statutory income included a person’s
*personal services income; and
(b) the entity was not conducting a
*personal services business.
Businesses not previously receiving personal services
income
(2) A *personal services entity is a
personal services payment remitter for a
*PAYG payment period if:
(a) the entity’s *ordinary income
or *statutory income did not include an
individual’s *personal services income in
any income year preceding that period; and
(b) it is reasonable to expect that, in the income year during which the
period occurs, the entity’s income will include a person’s
*personal services income that the entity will
not have received in the course of conducting a
*personal services business.
(3) It is not reasonable to expect that the
*personal services entity will receive a
person’s *personal services income in the
course of conducting a *personal services
business if it is reasonable to expect that the entity will receive at least 80%
of that income from one entity and that entity’s
*associates.
Personal services business determinations taking effect
(4) However, a *personal services entity
is not a personal services payment remitter for a
*PAYG payment period if, during that period or
an earlier PAYG payment period in the same income year, a
*personal services business determination
relating to the entity takes effect.
If:
(a) a *personal services entity must,
under section 13-5, pay an amount for
*alienated personal services payments it
received during a particular *PAYG payment
period; and
(b) the period ends in a *quarter in the
*financial year starting on 1 July
2000;
the payment must be paid to the Commissioner by the end of the 21st day
after the end of the quarter.
29 Subsection 15-25(1) in
Schedule 1
Omit all the words after “to be withheld”,
substitute:
by an entity:
(a) from a *withholding payment covered
by Subdivision 12-B, 12-C or 12-D; or
(b) an *alienated personal services
payment to which Division 13 applies.
30 Paragraph 15-50(1)(a) in
Schedule 1
After “12-D”, insert “, or an
*alienated personal services payment to which
Division 13 applies,”.
31 Section 16-1 in
Schedule 1
Omit “Division 14”, substitute “Division 13 or
14”.
32 Paragraph 16-20(b) in
Schedule 1
Omit “Division 14”, substitute “Division 13 or
14”.
33 Subsection 16-25(2) in
Schedule 1
Omit “Division 14”, substitute “Division 13 or
14”.
34 Paragraphs 16-25(4)(b) and 16-30(1)(b) in
Schedule 1
Omit “Division 14”, substitute “Division 13 or
14”.
35 Subsection 16-70(2) in
Schedule 1
Omit “Division 14”, substitute “Division 13 or
14”.
36 Paragraphs 16-85(1)(b) and (2)(b) in
Schedule 1
Omit “Division 14”, substitute “Division 13 or
14”.
37 After paragraph 16-140(1)(a) in
Schedule 1
Insert:
(aa) Division 13 (about payments in respect of alienated personal
services payments); or
38 Paragraph 16-140(2)(b) in
Schedule 1
Omit “Division 14”, substitute “Division 13 or
14”.
39 After paragraph 16-143(2)(a) in
Schedule 1
Insert:
(aa) all *alienated personal services
payments received through the branch, in respect of which Division 13
requires an amount to be paid to the Commissioner, were received by that
separate entity; and
40 After paragraph 16-150(1)(a) in
Schedule 1
Insert:
(aa) Division 13 (about payments in respect of alienated personal
services payments); or
41 After paragraph 16-153(2)(a) in
Schedule 1
Insert:
(aa) the entity received any *alienated
personal services payment in respect of which an amount was required to be paid
to the Commissioner under Division 13; or
42 Subparagraph 16-153(3)(b)(i) in
Schedule 1
After “*non-cash benefits”,
insert “, *alienated personal services
payments”.
43 After paragraph 16-155(1)(b) in
Schedule 1
Insert:
(ba) during the year the payer received one or more withholding payments
covered by Division 13 and, in relation to each of them, an amount is
included in the recipient’s assessable income under Division 86 of
the Income Tax Assessment Act 1997; or
(bb) because of section 86-40 of the Income Tax Assessment Act
1997, the payer is taken to have paid salary to the recipient on the last
day of the year; or
44 Paragraph 16-155(2)(a) in
Schedule 1
Omit “paragraph (1)(a) or (b)”, substitute
“paragraph (1)(a), (b) or (ba)”.
45 After paragraph 16-155(2)(a) in
Schedule 1
Insert:
(aa) if paragraph (1)(bb) applies—each of the withholding
payments constituted by the salary mentioned in that paragraph, except one
covered by a previous payment summary (and a copy of it) given by the payer to
the recipient under section 16-160; and
46 After paragraph 16-160(1)(b) in
Schedule 1
Insert:
or (c) one or more withholding payments covered by Division 13 that
the payer received during the year and that are included in the
recipient’s assessable income for the income year under section 86-15
of the Income Tax Assessment Act 1997;
47 After subsection 16-170(1) in
Schedule 1
Insert:
(1A) For any of the *withholding payments
to which paragraph 16-155(2)(aa) applies, paragraph (1)(d) is taken to
refer to the *financial year preceding the
financial year in which the withholding payments were received.
48 Section 18-10 in
Schedule 1
Omit “or section 12-320 (about mining payments)”,
substitute “, section 12-320 (about mining payments) or
Division 13 (about alienated personal services payments)”.
49 At the end of section 18-15 in
Schedule 1
Add:
(2) To the extent that the entitlement to a credit is in respect of an
*amount withheld from a
*withholding payment to which paragraph
16-155(2)(aa) applies, the entitlement is treated as arising for the income year
preceding the income year in which the withholding payment is made.
50 After section 18-25 in
Schedule 1
Insert:
A person is entitled to a credit equal to the total of the amounts paid
under Division 13 in respect of amounts included in the person’s
assessable income for an income year under section 86-15 of the Income
Tax Assessment Act 1997 if:
(a) an assessment has been made of the income tax payable by the person
for the income year; or
(b) the Commissioner is satisfied that no income tax is payable by the
person for the income year.
51 After subparagraph 18-65(1)(a)(i) in
Schedule 1
Insert:
(ia) paid the amount to the Commissioner purportedly under
Division 13 for an *alienated personal
services payment in relation to which an amount is included in the
recipient’s assessable income year under section 86-15 of the
Income Tax Assessment Act 1997; or
52 Paragraph 18-65(3)(d) in
Schedule 1
After “the payment”, insert “,
*alienated personal services
payment”.
53 Paragraphs 18-65(5)(a) and (6)(b) in
Schedule 1
Omit “subparagraph (1)(a)(ii)”, substitute
“subparagraph (1)(a)(ia) or (ii)”.
54 Paragraph 18-65(6)(c) in
Schedule 1
Omit “Division 14”, substitute “Division 13 or
14”.
55 After subparagraph 18-70(1)(a)(i) in
Schedule 1
Insert:
(ia) paid the amount to the Commissioner purportedly under
Division 13 for an *alienated personal
services payment in relation to which an amount is included in the
recipient’s assessable income year under section 86-15 of the
Income Tax Assessment Act 1997; or
56 Subsection 45-120(3) in
Schedule 1
Repeal the subsection, substitute:
Exclusion: amounts in respect of withholding payments
(3) Your instalment income for a period does not include
amounts in respect of:
(a) *withholding payments (except
*non-quotation withholding payments) made to
you during that period; and
(b) amounts included in your assessable income under section 86-15 of
the Income Tax Assessment Act 1997 for which there are
*amounts required to be paid under
Division 13.
57 Subsection 45-365(3) in
Schedule 1
Repeal the subsection, substitute:
(3) It is reduced (but not below nil) by the sum of:
(a) the total amount of the credits to which you are entitled for the
variation year under section 18-15 (for amounts withheld from withholding
payments made to you during the variation year); and
(b) the total amount of the credits to which you are entitled for the
variation year under section 18-27 (for amounts paid under Division 13
in respect of amounts included in your assessable income under
section 86-15 of the Income Tax Assessment Act 1997).
58 Application
The amendments made by this Part of this Schedule apply to an amount
received, or a non-cash benefit provided, on or after 1 July
2000.
Part 3—Amendment
of other Acts
Child Support
(Registration and Collection) Act 1988
59 Subsection 4(1) (definition of work and
income support related withholding payments)
After “or 12-D”, insert “or
Division 13”.
60 Subsection 4(1) (definition of work and
income support related withholding payments, note)
Omit “and payments specified by regulations”, substitute
“, payments specified by regulations and alienated personal services
payments”.
Fringe Benefits Tax
Assessment Act 1986
61 At the end of
section 8
Add:
(4) A car benefit is an exempt benefit in relation to a year of tax
if:
(a) the car benefit is provided in the year of tax in respect of the
employment of a current employee; and
(b) the person providing the benefit cannot deduct an amount under the
Income Tax Assessment Act 1997 for providing the benefit because of
section 86-60 of that Act.
Note: Section 86-60 of the Income Tax Assessment Act
1997 (read together with section 86-70 of that Act) limits the extent
to which personal service entities can deduct car expenses. Deductions are not
allowed for more than one car for private use.
Income Tax Assessment Act
1936
62 At the end of subsection
82AAC(1)
Add:
Note 1: A deduction may be denied by section 85-25 of
the Income Tax Assessment Act 1997 if the eligible employee is an
associate of the taxpayer.
Note 2: Section 86-60 of the Income Tax Assessment
Act 1997 (read together with section 86-75 of that Act) limits the
extent to which superannuation contributions by personal service entities are
allowable deductions.
63 Section 202A
Insert:
alienated personal services payment has the meaning given by
section 13-10 in Schedule 1 to the Taxation Administration Act
1953.
64 Section 202A (after paragraph (a)
of the definition of eligible PAYG payment)
Insert:
(aa) an alienated personal services payment in respect of which
Division 13 in Schedule 1 to the Taxation Administration Act
1953 requires an amount to be paid to the Commissioner; or
65 Subsection 221A(1) (after paragraph (a)
of the definition of work and income support related withholding payments and
benefits)
Insert:
(aa) amounts included in a person’s assessable income under
section 86-15 of the Income Tax Assessment Act 1997 in respect of
which an amount must be paid under Division 13 in Schedule 1 to the
Taxation Administration Act 1953 (even if the amount is not paid);
and
66 After paragraph
222AHE(4)(c)
Insert:
(ca) the sum of all amounts required to be paid under Division 13 in
Schedule 1 to the Taxation Administration Act 1953 during the
relevant period, or the fact that no amounts were so paid during the
period;
67 After paragraph
222AID(4)(c)
Insert:
(ca) the sum of all amounts required to be paid under Division 13 in
Schedule 1 to the Taxation Administration Act 1953 during the
relevant period, or the fact that no amounts were so paid during the
period;
68 After paragraph
222AIH(3)(c)
Insert:
(ca) the sum of all amounts required to be paid under Division 13 in
Schedule 1 to the Taxation Administration Act 1953 during the
relevant period, or the fact that no amounts were so paid during the
period;
69 After paragraph
222AOA(1)(b)
Insert:
(ba) received one or more alienated personal services payments on a
particular day in relation to which it is required to pay an amount to the
Commissioner under Division 13 in Schedule 1 to the Taxation
Administration Act 1953, and has not paid that amount or those
amounts.
70 Subsection 222AOA(2)
Omit “Division 14”, substitute “Division 13 or
14”.
71 At the end of
section 222AOA
Add:
(3) In this section, alienated personal services payment and
non-cash benefit have the meanings given by subsection 995-1(1) of
the Income Tax Assessment Act 1997.
72 Subsection 262A(2A)
Omit “Division 14”, substitute “Division 13 or
14”.