Treasury floats giving ATO monthly PAYG determination power

In addition, the commissioner may determine that entities who have a history of demonstrated non-compliance with their obligations under a taxation law must become monthly payers.

Under the PAYG instalments system, entities with business or investment income must pay instalments towards their expected income tax liabilities during the income year. This helps them manage their cash flow by spreading expected tax payments across the income year, rather than requiring them to pay the full amount after the end of the income year.

Entities cannot currently opt in to paying PAYG instalments monthly unless they meet the criteria to be a monthly payer. This requires them to satisfy the monthly payer requirements test: their base assessment instalment income must be greater than $20 million.

“Allowing entities to opt in to monthly payments will provide for their PAYG instalments to adjust more dynamically to real-time business conditions,” the explanatory material said.  

The proposed new law would allow entities that have chosen PAYG monthly instalments to later choose to pay PAYG instalments quarterly (or annually if they meet the requirements) from the start of their next income year.

The current law also does not allow the commissioner to require entities with a history of non-compliance to pay more frequently.

“Providing the commissioner with a power to make entities pay instalments monthly will assist the commissioner in ensuring entities comply with their obligations,” Treasury said.

“Where the commissioner decides to make a determination, they must give the entity written notice of that decision as soon as practicable after making the decision. The notice must include the reasons for making the determination and the date the determination takes effect.”

The commissioner would be required to revoke a determination on request unless they are satisfied the entity has a history of non-compliance should the proposal become law. If the revocation is made before the determination takes effect, the revocation takes effect immediately, meaning the determination never takes effect.  

Once revoked, an entity will generally become a quarterly payer under the existing quarterly payer provisions by satisfying the test for being a quarterly payer at the end of the starting instalment quarter in an income year.

Entities may object to a determination requiring them to pay monthly under Part IVC of the Taxation Administration Act 1953 or to a decision not to revoke such a determination on request.

Furthermore, it said the commissioner’s determination is not a legislative instrument as it is of administrative rather than legislative character and declaratory of the law.

A monthly payer that is subject to a determination but is also an opt-in or compulsory monthly payer (or both) would be considered to be a monthly payer only because of the determination while it is in effect.

The explanatory material stressed that a monthly payer cannot override the determination and stop being one simply by satisfying the provisions to stop being a monthly payer (this applies to both opt-in and compulsory monthly payers).

They would remain a monthly payer until the determination is revoked.