As a local government entity, does council need to report payments (e.g. sitting fees and allowances) to council members in the taxable payments annual report (‘TPAR’)?
Government entities, whether federal, state, territory or local, are required to report the total payments they make to an entity for providing services (whether wholly or partly) on a TPAR. Government entities other than local government entities are also required to report grants paid to people and organisations with an ABN.
Services can include actions that:
- a business performs or are performed in the course of trade or commerce;
- may provide assistance to the government entity;
- may be performed in conjunction with the supply of goods; and
- are generally performed under a contract other than an employment contract.
In relation to payments to council members, the key question is whether the services provided to the council are performed under a contract that is an employment contract or treated as an employment contract for taxation purposes.
Generally, members of local governing bodies are not considered to be employees unless the local governing body makes a resolution to treat members as being subject to the PAYGW provisions. Accordingly:
- if the council has validly made such a resolution, then the council will be required to withhold PAYGW from payments to the members but will not be required to report the payments in its TPAR;
- if the council has not validly made such a resolution, then the council will not be required to withhold PAYGW from payments to the members but will be required to report the payments in its TPAR.
This is confirmed by the following example provided by the ATO:
Example: Councillor sitting fees and allowances
City Council, a local governing body, pays a councillor meeting attendance fees and allowances for services they provided to the council. City Council does not apply the PAYG withholding provisions to these payments.
Payments to the councillor are considered to be payments wholly or partly for services and need to be reported in City Council’s taxable payments annual report.
This material provides a general summary of the subject covered and cannot be relied upon in relation to any specific instance. It is not intended to be, nor should it be relied upon as, a substitute for professional advice. TaxEd Pty Ltd and any person connected with its production disclaim any liability in connection with any use.