NO.120
Joint media release with
The Hon Wayne Swan MP
Deputy Prime Minister
Treasurer
Today the Government is announcing a three year process to
reform the timing of company tax payments by large
companies, better aligning them with GST payments by large
businesses.
The total tax paid by companies will not change, but from
1 January 2014 companies with turnover of
$1 billion or more will be required to remit their Pay
As You Go (PAYG) company tax instalments monthly, not
quarterly. Companies with turnover of $100 million or
more will have a further one year period to prepare for
this change, with monthly payments to start on
1 January 2015. Companies with turnover of
$20 million or more will have over three years to
prepare for the change, with monthly payments to start on
1 January 2016.
This reform will make the tax system more responsive,
efficient, and consistent by better matching tax
collections with the economic conditions faced by business.
Affected companies will pay smaller tax instalments
immediately following months when business is down, and
larger instalments when business is strong. It will also
align company tax instalments with GST payments to
streamline companies' payment cycles.
Most companies are currently required to pay their income
tax in four quarterly PAYG company tax instalments, but
most large companies are generally required to pay GST in
monthly payments. Wage and salary earners have tax withheld
from their income as it is earned. Moving large companies
to monthly income tax instalments will go a long way to
addressing these inconsistencies.
The Government believes that if workers are required to pay
tax as they go, then it is reasonable and logical for large
companies to do the same. This change continues the reform
of the company tax instalment system that began in the late
1980s and complements other initiatives the Government has
announced to address timing disparities in the tax system,
such as 'loss carry-back', which allows businesses
to use losses more flexibly, as well as more timely access
to the Research and Development Refundable Tax Offset.
This measure will affect around 350 companies from
1 January 2014, around 2,500 companies from
1 January 2015 and around 10,500 companies from
1 January 2016.
The Government will consult with affected parties to ensure
that the reform can be implemented with minimal disruption
for businesses.
Taxpayers don't want to over-pay their tax, or be left
with an unwieldy tax debt at the end of the year. The
Government knows the timing of payments is only one part of
this story. Through consultation, the Government is open to
additional reforms to the calculation of PAYG instalments
that can complement this measure and ensure that total
instalments paid throughout the year match as closely as
possible to the final tax liability.
A consultation paper will be released by early next year.
22 October 2012
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