Payroll Tax Rebate for apprentices and trainees (Qld)

The Queensland Government has announced that it will double the payroll tax rebate for employing apprentices or trainees from 25 per cent to 50 per cent for 12 months with effect from 1 July 2016. This rebate will be calculated automatically when an employer with apprentice or trainee wages in Queensland lodges their payroll tax return.

PAYG Withholding – Failure to Withhold Penalty (Cth)

In T T Lam and HT Ngo v Commissioner of Taxation [2016] AATA 552 the taxpayer appealed the imposition of a 50 per cent penalty by the Commissioner in respect of a failure to remit PAYG withholding to the ATO under a labour hire arrangement. The PAYG withholding underpayments were originally identified by the ATO under audit, however, as part of the audit process, the Commissioner had reduced the penalty to 75 per cent on the basis that the failure to withhold had resulted from an intentional disregard of the taxpayer's PAYG withholding obligations.

The taxpayer subsequently objected against this penalty and the objection was allowed in part by the Commissioner, further reducing the failure to withhold penalty down to 50 per cent of the PAYG withholding underpayment, having determined that the taxpayer was reckless with regard to its PAYG withholding obligations.

Ultimately, the Tribunal found that the taxpayer did not present any evidence which would allow the failure to withhold penalty to be further reduced.

This case serves as a reminder that the ATO will impose failure to withhold penalties where it is determined that a taxpayer has not complied with their PAYG withholding obligations. Where an employer has failed to meet its PAYG withholding obligations, it is important to take a pro-active approach with respect to disclosure in order minimise penalties imposed by the ATO.

Payroll Tax Exemption – Charitable bodies (WA)

In Association of Mining & Exploration Companies Inc v Commissioner of State Revenue [2016] WASCA 131 the taxpayer appealed to the Supreme Court of Western Australia against a decision by the State Administrative Tribunal that the Commissioner was allowed to limit the taxpayer's payroll tax exemption to a prospective period commencing on 1 July 2012.

In December 2012, the taxpayer applied to the Commissioner for an exemption from pay¬roll tax on the grounds that it was a 'charitable body or organisation'. In granting this exemption, the Commissioner specified that the exemption only came into operation on 1 July 2012. The taxpayer formally objected against this decision, on the grounds that the exemption should apply for a period of at least five years prior to the date the exemption was granted. This objection was disallowed in full by the Commissioner. The State Administrative Tribunal then dismissed the taxpayer's application for a review of the Commissioner's decision before the taxpayer appealed against this decision to the Supreme Court of Western Australia.

The taxpayer contended that the Commissioner was required to specify the operative date of the payroll tax exemption as 1 July 2007, on the basis that the taxpayer had been a charitable organisation throughout the period. In contrast, the Commissioner's view was that the power to specify a date before the exemption application was made was not required to be exercised solely because the taxpayer was a charitable organisation before that time.

In rejecting the arguments of both parties, the Court found that the Commissioner's discretionary powers neither required the Commissioner to specify 1 July 2007, nor prohibited the Commissioner from specifying that day, as the date on which the exemption came into operation. As such, the Court accepted the taxpayer's submissions that the Tribunal had erred in law by misinterpreting the nature and scope of the statutory discretionary power which the Commissioner was exercising and set aside the former decision by the Tribunal. The matter was sent back to the Tribunal for reconsideration.

Working holiday maker visa review

The Federal Government has commenced its review of a range of issues affecting the supply and taxation of labour performed by working holiday maker visa holders, including the 2015-16 Federal Budget proposal to increase the tax on people temporarily in Australia for a working holiday (‘backpacker tax’). The terms of reference and a summary of the review has been released. The Government plans to announce the review’s outcomes before 1 January 2017. Submissions can be made to the review by 2 September 2016.

Draft Taxation Determination on indeterminate rights and employee share schemes (ESS)

An ‘ESS interest’ in a company, as defined, includes a beneficial interest in a right to acquire a beneficial interest in a share in the company. The ATO has issued Draft Taxation Determination TD 2016/D3 which deals with the circumstances in which a contractual right, subject to the satisfaction of a condition, becomes a right to acquire a beneficial interest in a share under section 83A-340(1) of the Income Tax Assessment Act 1997. Comments are due by 16 September 2016.