Submission No. 254 Back to full list of submissions
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April 16, 1999


The Secretary
Review of Business Taxation
Department of the Treasury
Parkes Place




(PARAGRAPHS 30.63 TO 30.72)

This is a submission by the Entertainment Industry Employers Association (EIEA) on the Ralph Report, Discussion Paper No. 2 - A Platform for Consultation, specifically addressing "The Collection of Tax on Income of Non-Residents" (Paragraphs 30.63 to 30.72).

The EIEA is the peak employer body in the arts and entertainment industry, registered in the Australian Industrial Relations Commission (AIRC) since 1917.

The EIEA’s Australia-wide membership includes commercial operators and government-assisted organisations. We cover all aspects of the industry including employers involved in theatre, opera, ballet and dance, festivals, rock and roll, multi-purpose and sporting venues and hirers, orchestras, comedy and variety, ticketing, events, promotion and production, cinema exhibition, crewing, sound and lighting, service supply and contracting, and exhibition.

Many members of the EIEA ‘import’ international performers and associated personnel into Australia, for the purposes of providing entertainment. The types of imports include acts for festivals, orchestras, unit companies, music shows (rock stars, etc), lead actors for roles in musicals and plays, performers who have played roles before, ethnic-based considerations, dancers, opera singers, musicians, and many others.

The premise on which the Report seeks to address and/or improve the current collection of taxes payable by non-residents who have no permanent presence in Australia, appears to rely on the concept that a withholding tax is more effective than any other type of taxing mechanism.

In fact, the single difference between the proposition of imposing a broader non-resident withholding tax and the system which currently operates pursuant to Section 255 of the Income Tax Assessment Act (as amended), is that under the present law any failure to retain the necessary tax as required by Section 255, does not carry with it a personal liability for the amount of tax which should have been withheld. As such, a simple amendment to the existing provisions of Section 255 would clearly achieve the result the Report appears to be seeking.

The current arrangements described by the Report are not entirely accurate, in that the tax administration, in order to secure a tax debt, does not have to identify and serve a notice on a resident who has the receipt or control of money belonging to a non-resident. The resident, by virtue of Section 255, has always had the responsibility and liability to retain the required tax from any assessable income payable to a non-resident. The fact that this responsibility has never carried with it a personal liability, has enabled residents to sometimes avoid retaining and/or paying the requisite tax. Therefore, the tax administration will be no better off by imposing a withholding tax, as opposed to the operation of the current system.

If the tax administration wishes to ensure that the proposed withholding tax is properly retained, it will still be required to identify the proper persons and, if necessary, serve a notice on them. However, a distinct improvement in the collection of taxes will be effected if the responsibility for the retention of taxes from income payable by residents to non-residents, has attached to it a personal liability.

With specific reference to the payments made to visiting entertainers, the operating of a withholding tax system relative to income payable to them by non-residents would not be objectionable, provided always that they are afforded the same alternatives available to them in every other country which conducts a similar taxing system, e.g. New Zealand, USA, United Kingdom, Japan, etc. - all of these countries have well established taxation treaties with Australia. The alternatives referred to recognise that the visiting artist incurs expenses specifically allocable and related to a tour of the country concerned.

The visiting artist is given the option of paying a final withholding tax on his/her GROSS INCOME (which is at a rate of 20% or lower) or, alternatively, filing an income tax return which includes all local assessable income earned and all relevant expenditure incurred in earning that income. Tax is then levied at the local country’s individual or corporate tax rates on the artists’ NET INCOME, which is usually at a rate higher than the withholding tax rate.

This alternate system has been operating very satisfactorily in New Zealand for many years, and would be acceptable in Australia by all sides of the entertainment industry because it would assist in highlighting Australia as a fair tax jurisdiction. This would facilitate our local promoters to attract and tour overseas artists which, in turn, would provide net employment benefit for Australia in related industries such as lighting/sound companies, caterers, venue personnel, local performers, advertising, travel, promotion, tourism, etc.

In summary, it is considered that:

  • Securing tax payable by a non-resident may simply be achieved by attaching to the existing tax provisions a personal liability for such tax on the person in control of the monies payable to the non-resident - a fact readily conceded by the Australian Taxation Office (ATO).

  • If the introduction of a withholding tax system is ultimately favoured, the principles of such a system must follow those which are currently in operation in those countries with which we currently have Double Taxation Treaty arrangements.

Yours sincerely,


Chief Executive