{"id":"C2009A00132","name":"Income Tax (TFN Withholding Tax (ESS)) Act 2009","slug":"income-tax-tfn-withholding-tax-ess-act-2009","collection":"act","jurisdiction":"commonwealth","status":"in_force","isInForce":true,"actNumber":"132 of 2009","makingDate":null,"administeringDepartment":null,"currentVersion":{"id":40450,"registerId":"commonwealth-C2009A00132-current","compilationNumber":null,"startDate":"2026-04-01","status":"InForce","reasons":null,"registeredAt":null},"sections":[{"sectionNumber":"1","sectionType":"section","heading":"Short title","content":"#### 1 Short title\n\n This Act may be cited as the Income Tax (TFN Withholding Tax (ESS)) Act 2009.","sortOrder":0},{"sectionNumber":"2","sectionType":"section","heading":"Commencement","content":"#### 2 Commencement\n\n (1) Each provision of this Act specified in column 1 of the table commences, or is taken to have commenced, in accordance with column 2 of the table. Any other statement in column 2 has effect according to its terms.\n\n```html\n

Commencement information

Column 1

Column 2

Column 3

Provision(s)

Commencement

Date/Details

1. Sections 1 and 2 and anything in this Act not elsewhere covered by this table

The day this Act receives the Royal Assent.

14 December 2009

2. Sections 3 and 4

At the same time as Schedule 1 to the Tax Laws Amendment (2009 Budget Measures No. 2) Act 2009 commences.

14 December 2009

\n```\n\n> Note: This table relates only to the provisions of this Act as originally passed by both Houses of the Parliament and assented to. It will not be expanded to deal with provisions inserted in this Act after assent.\n\n (2) Column 3 of the table contains additional information that is not part of this Act. Information in this column may be added to or edited in any published version of this Act.","sortOrder":1},{"sectionNumber":"3","sectionType":"section","heading":"Imposition of tax","content":"#### 3 Imposition of tax\n\n The tax known as income tax, to the extent that that tax is payable by an entity in accordance with section 14‑155 in Schedule 1 to the Taxation Administration Act 1953, is imposed on amounts mentioned in paragraph (1)(b) of that section.","sortOrder":2},{"sectionNumber":"4","sectionType":"section","heading":"Rate of tax","content":"#### 4 Rate of tax\n\n The rate of tax imposed by this Act on such an amount is the sum of the following:\n (a) the maximum rate specified in the table in Part I of Schedule 7 to the Income Tax Rates Act 1986;\n (b) 2%.","sortOrder":3},{"sectionNumber":"5","sectionType":"section","heading":"Temporary budget repair levy","content":"#### 5 Temporary budget repair levy\n\n (1) This section applies if the income year in which the amount is included as mentioned in paragraph 14‑155(1)(b) in Schedule 1 to the Taxation Administration Act 1953 is a temporary budget repair levy year.\n (2) Increase the rate of tax worked out under section 4 by 2 percentage points.\n (3) In this section:\n\n> temporary budget repair levy year means an income year corresponding to a temporary budget repair levy year (within the meaning of section 4‑11 of the Income Tax (Transitional Provisions) Act 1997).","sortOrder":4}],"analysis":{"issue_detection":{"absurdities":[{"type":"circular_definition","section":"5(3)","severity":"medium","reasoning":"Section 5(3) defines 'temporary budget repair levy year' as 'an income year corresponding to a temporary budget repair levy year (within the meaning of section 4-11 of the Income Tax (Transitional Provisions) Act 1997)'. The definition uses the very term being defined ('temporary budget repair levy year') as part of its own definition, creating a circular structure. While it cross-references an external Act for the ultimate meaning, the local definition adds no independent content — it says a thing is a year that corresponds to itself as defined elsewhere. The parenthetical could simply have been incorporated directly without the redundant self-referential wrapper.","confidence":0.72,"description":"Circular or tautological definition of 'temporary budget repair levy year'"},{"type":"other","section":"4","severity":"low","reasoning":"The rate of tax is set at the maximum marginal rate in Schedule 7 to the Income Tax Rates Act 1986 plus an additional 2 percentage points, meaning even a low-income employee who fails to quote a TFN pays the highest possible marginal rate plus a premium. This produces a structurally regressive and disproportionate outcome for low-income earners, though this may be intentional as a compliance incentive. There is no sliding scale or de minimis threshold. The logical absurdity is that a person earning very little could face a withholding tax rate far exceeding their actual marginal rate, potentially exceeding 100% of their tax liability on that amount.","confidence":0.65,"description":"Rate of tax is permanently fixed at maximum marginal rate plus 2%, creating a punitive rate with no discretion or scaling"},{"type":"other","section":"5(1) and 5(2)","severity":"low","reasoning":"The temporary budget repair levy applied only for the 2014-15, 2015-16, and 2016-17 income years. Section 5 of this Act, which increases the rate by 2 percentage points during those years, can never again be enlivened. The section remains in the Act but is permanently spent, creating legislative clutter. While not strictly a logical flaw, retaining operative provisions that can never again apply is a structural absurdity in legislative drafting.","confidence":0.85,"description":"The temporary budget repair levy has almost certainly expired, rendering section 5 permanently inoperative dead letter law"},{"type":"other","section":"2(2)","severity":"low","reasoning":"Section 2(2) states that Column 3 information 'is not part of this Act' but may be 'added to or edited in any published version of this Act'. This creates a logical oddity: official published versions of the Act may contain content that is simultaneously authorised to appear in the Act and declared to have no legal status as part of the Act. Editors are empowered to alter content in the Act that is not the Act. This is a known drafting convention in Australian federal legislation but remains logically peculiar.","confidence":0.55,"description":"Column 3 of the commencement table is declared not part of the Act yet may be edited in published versions, creating an authorised but legally null instrument"}],"contradictions":[{"severity":"low","section_a":"4","section_b":"5(2)","confidence":0.6,"description":"The base rate in section 4 is expressed as a permanent ongoing formula (maximum marginal rate + 2%). Section 5(2) modifies this by adding a further 2 percentage points for 'temporary budget repair levy years'. Since those years (2014-15 to 2016-17) have passed and the levy has not been extended, section 5 creates a conditional modification to section 4 that is permanently spent. The two sections are not directly contradictory in their terms but produce a structural incoherence where a modifying provision permanently overhangs a base provision it can never again affect."}]},"kimi_summary":{"content_quality":"ok","complexity_score":2,"scope_assessment":{"changed":false,"description":"This legislation remains tightly scoped to its original purpose. It was enacted in 2009 specifically to impose TFN withholding tax on employee share scheme benefits when TFNs are not quoted, and it continues to serve only that function. The 2014 addition of section 5 (temporary budget repair levy) was a routine temporal surcharge adjustment consistent with broader tax policy changes, not an expansion of substantive scope."},"complexity_factors":["Extremely short statute - only 5 sections total","No definitions section of its own; relies entirely on external references (Taxation Administration Act 1953, Income Tax Rates Act 1986, Income Tax (Transitional Provisions) Act 1997)","Simple mathematical formula for rate calculation (top marginal rate + 2%)","Single conditional provision (section 5) with straightforward temporal trigger","No nested exceptions or complex conditional logic","Purpose-built for one specific scenario (TFN non-quotation for ESS benefits)"],"plain_english_summary":"This law creates a special tax that applies when employees receive shares or rights to shares from their employer under an 'employee share scheme' (ESS), but haven't given their Tax File Number (TFN) to the company.\n\n**What it does:**\n- **Imposes a withholding tax** on the value of ESS interests (shares or rights to acquire shares) that are provided to employees\n- **Applies specifically** when the employee hasn't quoted their TFN to the employer\n- **Sets the tax rate** at the top marginal tax rate plus 2% (currently 47% + 2% = 49%, though rates change with legislation)\n- **Adds a temporary surcharge** of 2% for certain years (2014-15 to 2016-17) called the 'temporary budget repair levy' years\n\n**Who it affects:**\n- Employees who receive shares or share rights from their employer through an employee share scheme\n- Employers who provide ESS interests to employees who haven't provided their TFN\n\n**Why it matters:**\nThis is essentially a **penalty tax**. The government wants people to quote their TFN so it can track their tax affairs properly. If you don't give your TFN when receiving employee shares, you get hit with the highest possible tax rate instead of your normal income tax rate. This discourages people from hiding these benefits from the tax office."},"flash_summary_failed":{"failed":true,"reason":"Unauthenticated. Configure AI_GATEWAY_API_KEY or use a provider module. Learn more: https://ai-sdk.dev/unauthenticated-ai-gateway","source":"analysis-cron"},"summary":{"complexity_score":4,"scope_assessment":{"changed":false,"description":"The Act is narrow and targeted in scope — it does exactly what it sets out to do: impose and set the rate of TFN withholding tax for employee share schemes. There is no evidence of scope creep from its original intent. Section 5 (the Temporary Budget Repair Levy) was a pre-planned time-limited addition consistent with broader budget legislation of the same period."},"complexity_factors":["Short Act that primarily operates by cross-reference to other legislation (Taxation Administration Act 1953, Income Tax Rates Act 1986, Income Tax (Transitional Provisions) Act 1997) — you cannot fully understand it without consulting those Acts","The penalty rate calculation requires readers to locate the 'maximum rate' in a separate Schedule of a separate Act","The now-expired Temporary Budget Repair Levy adds a historical layer that requires understanding time-limited provisions and cross-referencing yet another Act","The underlying ESS withholding framework (section 14-155) is itself complex and not reproduced here, requiring external knowledge to understand the trigger conditions"],"plain_english_summary":"This Act makes employers withhold a penalty tax on employee share scheme (ESS) benefits when an employee fails to provide their Tax File Number (TFN). The penalty withholding is the top personal tax rate plus 2% (47%), with a now-expired temporary levy that briefly raised it to 49% for 2014–15 to 2016–17. It’s a compliance measure: not supplying a TFN can trigger heavy tax withholding on share remuneration."},"flash_summary":{"complexity_score":4,"scope_assessment":{"changed":false,"description":"Scope has not changed from the original enactment as presented. The Act applies only to amounts identified by s14‑155(1)(b) TAA 1953, sets the rate as the referenced maximum marginal rate plus 2%, and provides for an additional 2 percentage points in temporary budget repair levy years; commencement and timing are governed by the Act's table."},"complexity_factors":["Heavy reliance on cross‑references: taxable amounts defined by Schedule 1 to the Taxation Administration Act 1953 (s14‑155(1)(b)).","Rate defined by reference to another Act: uses the maximum marginal rate in Part I of Schedule 7 to the Income Tax Rates Act 1986 plus fixed percentage points.","Conditional increase: interaction with the temporary budget repair levy concept as defined in the Income Tax (Transitional Provisions) Act 1997 (s4‑11) adds conditional complexity.","Commencement drafting ties timing to other legislation (Schedule 1 to Tax Laws Amendment (2009 Budget Measures No. 2) Act 2009), requiring attention to commencement dates.","Substantively short, but effective operation requires reading multiple external provisions to determine who pays and the exact rate."],"plain_english_summary":"This Act imposes income tax on amounts identified by section 14‑155(1)(b) of Schedule 1 to the Taxation Administration Act 1953. The tax rate is the maximum marginal rate from Part I of Schedule 7 to the Income Tax Rates Act 1986 plus 2%. If the income year is a temporary budget repair levy year, the rate rises by a further 2 percentage points. It affects the entities liable under s14‑155 by increasing the tax applied to those specified amounts and requires compliance with the cross‑referenced tax rules."}},"importantCases":[],"_links":{"self":"/api/acts/income-tax-tfn-withholding-tax-ess-act-2009","history":"/api/acts/income-tax-tfn-withholding-tax-ess-act-2009/history","analysis":"/api/acts/income-tax-tfn-withholding-tax-ess-act-2009/analysis","conflicts":"/api/acts/income-tax-tfn-withholding-tax-ess-act-2009/conflicts","importantCases":"/api/acts/income-tax-tfn-withholding-tax-ess-act-2009/important-cases","documents":"/api/acts/income-tax-tfn-withholding-tax-ess-act-2009/documents"}}