In this session we will consider the meaning of “payment” under s 12-35 TAA, particularly whether the use of one entity’s funds to discharge another’s wage obligations creates a PAYG withholding liability.
The reasoning in CLK Kitchens is clear: it is not the source of the funds, nor the contractual label, but the discharge of the obligation that determines who has made the payment. Where one entity authorises another to pay wages on its behalf, the paying entity may still be the one “making” the payment for tax purposes, especially where it uses its own credit or financial facilities. This runs counter to many long standing conceptions of payment.
This conclusion has consequences for service arrangements, intra-group payrolls, and labour-hire structures. A formal direction from an “employer” entity does not prevent PAYG withholding obligations from arising in the hands of the “paying” entity, indeed, it may confirm them.
Please see below link to case materials which is assumed reading in order to participate in the discussion:
CLK Kitchens & Joinery Pty Ltd v Commissioner of Taxation [2019] FCA 1086
Discussion led by Adrian Cartland.