5.2.4 Employer obligations for collection from salary or wages
CSRC Act Part IV sets out an employer's obligations where an employer is required to make deductions and pay them to the Registrar. The part also provides for various penalties and offences where those obligations are not met.
An amount payable to the Registrar under Part IV is a debt to the Commonwealth (CSRC Act section 64).
On this page
- Employer obligations
- Protected earnings
- Public officer service on a company or trust
- Remission of penalties
- Employer obligations when more than one notice received
The Registrar may give written notice to an employer to deduct a specified amount from the wages or salary paid to an employee or contractor who is a payer of a deductible liability (CSRC Act section 45). See 5.2.3 for the meaning of deductible liability.
Employers are obliged to withhold money from salary and wages and to send it to the Registrar (CSRC Act sections 46 and 47).
Employers are also required to report to the Registrar on information about the deductions they make from their employees' pay for child support purposes. However, employers who voluntarily report their employees' child support deduction information to the Commissioner of Taxation under single touch payroll reporting, are not required to report those amounts to the Registrar (CSRC Act section 47(1B)) (see 6.8.1).
Employers are also obliged not to prejudice employees, not to disclose information, to keep records and to allow access.
Employers not to prejudice employees
It is an offence (CSRC Act section 57) for an employer to:
- refuse to pay or employ a person
- dismiss, or threaten to dismiss, a person
- terminate, or threaten to terminate, a person's employment
- prejudice, or threaten to prejudice, a person in their employment, or
- intimidate, coerce or penalise, a person,
because the person is the payer of a registrable maintenance liability (includes liabilities which could be registered under the CSRC Act), or any other deductible liability, or is an employee in relation to whom a notice has been given to an employer under CSRC Act section 45(1).
An offence under CSRC Act section 57 is treated very seriously as payers or potential payers of a registrable maintenance liability or any other deductible liability, may be subject to prejudice. Allegations of prejudice will be investigated as a matter of high priority. See 6.8.1 for more information on employer offences.
Employer not to disclose information
An employer (or their employee or contractor) has a duty not to disclose (either directly or indirectly) any information obtained in accordance with the employer's duties under Part IV, unless the information is divulged for the purposes of complying with their obligations to deduct and remit those deductions to the Registrar or in connection with carrying on the employer's affairs (CSRC Act section 58).
A breach of this duty is an offence and is treated seriously as it involves parents' privacy. See 6.8.1 for more information on employer offences.
An employer is obliged to keep records either written in English or readily convertible into English that explain all amounts deducted, or required to be deducted, under CSRC Act section 46 as well as any other acts required under CSRC Act Part IV (CSRC Act section 59). The employer must keep these records for 5 years unless the Registrar advises the employer otherwise, or the employer is a company which has gone into liquidation and has been dissolved.
See 6.8.1 for more information on offences for failing to keep records and incorrectly keeping records.
An employer is obliged to provide authorised Services Australia officers with free access to premises and documents at reasonable times so that the officer can inspect, examine, make copies of, or take extracts of, any document for the purposes of Part IV (CSRC Act section 61). The occupier of the premises must provide the officer with all reasonable facilities and assistance that the occupier is reasonably capable of providing.
Services Australia officers must produce an authority in writing, if requested, stating that they are authorised to exercise powers under section 61 (see 6.2.5 for more information on access to employer records).
An employer who refuses access or does not provide reasonable facilities or assistance is guilty of an offence. See 6.8.1 for more information on employer offences.
Employers should not deduct the full specified periodic deduction from a payer's salary or wages if that would leave the employee with less than the 'protected earnings amount' (CSRC Act section 46(4)).
The protected earnings rate is defined as a weekly rate prescribed by regulation (CSRC Act section 4(1)). The weekly rate is prescribed as 75% of the maximum fortnightly basic rate of newstart allowance payable on 1 January each year, to a person who has turned 21 years old and is partnered, with no dependent children (CSRC Regs section 9). The protected earnings rate is used to calculate the amount of the deductions for salary or wage payments made in each respective calendar year. The protected earnings amount for recent years is:
|2020||$378.53 per week|
|2019||$372.53 per week|
|2018||$364.88 per week|
|2017||$358.05 per week|
|2016||$354.45 per week|
|2015||$349.13 per week|
|2014||$339.23 per week|
|2013||$333.53 per week|
|2012||$329.55 per week|
|2011||$318.00 per week|
|2010||$308.63 per week|
|2009||$304.05 per week|
The amount of salary and wages is the amount payable after the deduction of income tax deductions (CSRC Act section 46(8)).
Example: In March 2019, Anna earns $425 a week and pays tax of $19.00 a week. Anna's employer is required to deduct child support of $50 a week. Anna is paid after-tax wages of $406 a week. The protected earnings rate at 1 January 2019 is $372.53. To deduct $50 in child support would leave Anna with less than the protected earnings rate. For that week, Anna's employer can only deduct $33.47 ($406 less $372.53).
Public officer service on a company or trust
An employer, which is a company or trust, is required by the Income Tax Assessment Act 1936 to have a public officer for the purposes of that Act. A public officer for tax purposes is also a public officer for the purposes of the CSRC Act (CSRC Act sections 62 and 63). Service on the public officer at the address for service is sufficient service on the company or trust for the purposes of the CSRC Act. Proceedings against the public officer are deemed to be proceedings against the company or trust.
The CSRC Act imposes administrative penalties on employers for failing to pay amounts deducted to the Registrar; failing to deduct from an employee's salary or wage; and unexplained remittances. Alternatively, the Registrar may take action in court to prosecute employers for breaching such duties and other duties (CSRC Act section 56) (see 6.8.1 and 6.8.7 for more information).
Failing to pay deducted amounts to the Registrar
Where an employer (apart from the Commonwealth) owes an amount under section 47 and the amount is not paid by the due date, the employer is liable to pay a penalty in addition to the amount owed (CSRC Act section 51).
The penalty applied is 20% of the amount and 20% per annum of the original amount and penalty that remains unpaid. Where the employer is a government body, a penalty of 20% per annum on the amount that is unpaid is applied (CSRC Act section 51(b)).
Failing to deduct from an employee's salary or wages
Where an employer (apart from the Commonwealth) fails or refuses to make deductions from the salary or wages of employees as required under CSRC Act section 46(1) the employer is liable to pay a penalty of 20% per annum of the amount that should have been paid. An employer, other than a government body, is also liable to pay an amount equal to the undeducted amount (CSRC Act section 52).
When an employer remits deductions to the Registrar, they must notify the Registrar of the details of the deductions, unless the employer is voluntarily reporting these details to the Commissioner of Taxation (see Employer obligations). If the employer remits less than the total expected amount to the Registrar and they are required to deduct amounts for more than one payer, the Registrar will transfer an amount from consolidated revenue to 'top up' the shortfall (CSRC Act section 78(3)(d)). The employer is liable to pay a penalty of an amount equal to the 'top up' amount (CSRC Act section 53).
Remission of penalties
The Registrar can remit penalties imposed for the late payment of deductions or the failure to make deductions or the failure to explain a shortfall in remittances (CSRC Act section 54). Remission of penalties involves consideration of:
- the circumstances that led to the employer's delay in payment or failure to make the deduction, and
- the employer's action to mitigate, or mitigate the effects of, those circumstances, and
- special circumstances in which it would be fair and reasonable to remit the penalty.
If the Registrar makes a decision to remit only part of a penalty, or not to remit any part of a penalty, the Registrar must serve written notice of the decision to the person who is liable to pay the penalty (CSRC Act section 54(3)). The notice must also include, or be accompanied by, a statement that the person can object to the decision (4.1.3) (CSRC Act paragraph 54(4)(a) and section 80) and apply for an AAT first review (4.2.3) of the objection decision if dissatisfied (CSRC Act paragraph 54(4)(b) and section 89).
Circumstances that led to the delay or failure - beyond the control of the employer
The employer must demonstrate that they could not make adequate provision to deduct a periodic amount or to remit the amount to the Registrar by the due date because of unpredictable factors beyond their control.
Sudden ill health of key personnel in a small business.
Unforeseen collapse of a major debtor.
Disruption caused by natural disasters such as bushfires, floods, droughts or hailstorms.
Exceptional circumstances which lead to a temporary reduction in the employer's cash flow.
'Adverse business conditions affecting the industry', 'general economic downturn', or 'fluctuation of currency rates' will not be sufficient unless the employer can show a more specific event or effect on cash flow.
An employer must also demonstrate that they have taken reasonable steps to mitigate the circumstances that contributed to the failure to deduct or the late payment.
A budget reorganisation to counteract the reduction in cash flow.
Attempts to raise additional funds from financial institutions.
Application for government assistance for disaster relief.
Action by the employer to protect their position where money is owed to them.
It will not be sufficient for an employer to claim that they did not understand the requirement to deduct. Employers are routinely required to make certain deductions from the salary and wages of their employees. However, the Registrar will give the benefit of the doubt to an employer who claims not to have understood their obligation to notify a variation to an expected deduction on the first occasion and will remit the penalty.
Circumstances that led to the delay or failure - within the control of the employer
The employer must demonstrate that they could not make adequate provision to deduct a periodic amount or to remit the amount to the Registrar by the due date because of exceptional circumstances within their control.
A bad business decision (although reasonable at the time it was made) resulted in a direct financial loss or adverse and unforeseen consequences.
An employer's payment history may also be considered as an indication of the degree of control that the employer has over events and attempts made to plan around these events.
If the Registrar is satisfied that the circumstances were exceptional, and the employer demonstrates that reasonable steps have been taken to mitigate the effects of those circumstances, the Registrar will remit the penalty in full.
Steps taken to mitigate the effects
Example: Where the inability to pay is caused by the collapse of a major debtor, the penalties may be remitted where the employer can demonstrate that necessary action has been taken to secure the debt.
Special circumstances in which it would be fair & reasonable to remit the penalty
The Registrar may be satisfied that there are special circumstances where it would be fair and reasonable to remit the penalty. These would normally be limited to cases of serious financial hardship or where the employer is deceased.
Employer obligations when more than one notice received
If an employer receives a notice from the Registrar and a statutory notice from another Commonwealth, state or territory authority, both instructing the employer to deduct from an employee's wage or contractor's payments, the general rule is that notices are complied with in the order they were received by the employer. Employer withholding notices to deduct amounts in relation to a deductible liability can be processed after any notices received earlier have been actioned by the employer. If a statutory notice issued to the employer is later varied, for example, by instructing the employer to deduct a different amount, the priority given to each notice will not change.
If an employer receives a notice from the Registrar and a Commonwealth, state or territory court order, both instructing the employer to deduct from an employee's wage or contractor's payments, the notice from the Registrar will take priority over the court order regardless of the order in which the employer receives the garnishee order or notice.
Employers should contact Services Australia to get advice specific to an employee or contractor's situation if they are unsure of their obligations in relation to multiple garnishee notices.