INCOME TAX ASSESSMENT ACT 1997 - SECT 86.40 Salary payments shortly after an income year

INCOME TAX ASSESSMENT ACT 1997 - SECT 86.40

  (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, PAYG credits and PAYG withholding non - compliance tax (see Subdivisions   16 - C, 18 - A and 18 - D 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 - 87   Personal services entity cannot deduct net personal services income loss

86 - 90   Application of Divisions   28 and 900 to personal services entities