For payments made on or after 13 October 2020.
IN THIS ARTICLE
- Using this table
- Working out the withholding amount
- Tax file number (TFN) declarations
- Holiday pay, long service and employment termination payments
- Leave loading
- Claiming tax offsets
- Withholding declarations
- Medicare levy adjustment
- When your employee is a foreign resident
- PAYG withholding publications
A. Using this table
You should use this table if you make any of the following payments on a monthly basis:
- salary, wages, allowances and leave loading to employees
- paid parental leave
- directors’ fees
- salary and allowances to office holders (including members of parliament, statutory office holders, • • defence force members and police officers)
- payments to labour-hire workers
- payments to religious practitioners
- government education or training payments
- compensation, sickness or accident payments that are calculated at a periodical rate and made because • a person is unable to work (unless the payment is made under an insurance policy to the policy owner).
Also use this table for payments made to foreign residents.
Other tax tables may apply if you made payments to shearers, workers in the horticultural industry, performing artists and those engaged on a daily or casual basis.
If you employ individuals under a working holiday makers visa, you must use the Tax table for working holiday makers for all payments made to them, including lump sum payments.
b. Working out the withholding amount
To work out the withholding amount:
1. Calculate your employee’s total monthly earnings – add any allowances and irregular payments that are to be included in this month’s pay to the normal monthly earnings, ignoring any cents.
2. Input the amount from step 1 into the Withholding lookup tool (XLSX 34KB)This link will download a file, as per instructions in the tool.
3. Use the appropriate column to find the correct amount to withhold. If your employee is
- claiming the tax-free threshold, use column 2
- not claiming the tax-free threshold, use column 3
4. If your employee has an entitlement to a tax offset, use the Ready reckoner for tax offsets to convert the employee’s estimate of their full-year entitlement into a monthly offset value. Then subtract this value from the withholding amount found in step 3.
5. If your employee is entitled to make an adjustment for the Medicare levy, subtract the value of the adjustment, determined from the Medicare levy adjustment monthly tax table from the amount found in step 4.
6. If your employee has advised you of an accumulated Higher Education Loan Program (HELP), VET Student Loan (VSL), Financial Supplement (FS), Student Start-up Loan (SSL) or Trade Support Loan (TSL) debt, add the amount determined from the Study and training support loans monthly tax table to the amount you calculated in step 5.
Do not allow for any tax offsets or Medicare levy adjustment if any of the following apply:
- you use column 3
- you use foreign resident tax rates
- when your employee has not provided you with their TFN
Using a formula
The withholding amounts shown in this table can be expressed in a mathematical form.
If you have developed your own payroll software package, refer to Statement of formulas for calculating amounts to be withheld.
c. Tax file number (TFN) declarations
The answers your employees provide on their Tax file number declaration determine the amount you need to withhold from their payments. A Tax file number declaration applies to any payments made after you receive the declaration. If you receive an updated declaration from an employee, it will override the previous one.
If an employee does not give you a valid Tax file number declaration within 14 days of starting an employer/employee relationship, you must complete a Tax file number declaration with all available details of the employee and send it to us.
1. When a TFN has not been provided
You must withhold 47% from any payment you make to a resident employee and 45% from a foreign resident employee (ignoring any cents), if all of the following apply:
- they have not quoted their TFN
- they have not claimed an exemption from quoting their TFN
- they have not advised you that they have applied for a TFN or have made an enquiry with us.
If an employee states at question 1 of the Tax file number declaration they have lodged a Tax file number – application or enquiry for individuals with us, they have 28 days to provide you with their TFN.
If the employee has not given you their TFN within 28 days, you must withhold 47% from any payment you make to a resident employee and 45% from a foreign resident employee (ignoring any cents) unless we tell you not to.
Do not allow for any tax offsets or Medicare levy adjustments. Do not withhold any amount for study and training support loans.
2. When your employee has a study and training support loan debt
If your employee has a HELP, VSL, FS, SSL or TSL debt, you may need to withhold additional amounts from their payments. Your employee will need to notify you of this on their Tax file number declaration or Withholding declaration.
To calculate additional withholding amounts for:
- HELP, VSL, FS, SSL or TSL debts, refer to Study and training support loans monthly tax table.
Generally, allowances are added to normal earnings and the amount to withhold is calculated on the total amount of earnings and allowances.
For more information on when to withhold and report on allowances, refer to Withholding for allowances.
E. Holiday pay, long service leave and employment termination payments
1. Employees who continue working for you
You must include holiday pay (including any leave loading) and long service leave payments as part of normal earnings, except when they are paid on termination of employment.
For more information, refer to Withholding from leave payments for continuing employees.
2. Employees who stop working for you
This tax table does not cover any lump sum payments made to an employee who stops working for you.
If an employee has unused annual leave, leave loading or long service leave, refer to Tax table for unused leave payments on termination of employment.
Any other lump sum payments may be employment termination payments, refer to Tax table for employment termination payments.
Do not withhold any amount for study and training support loans debts from lump sum termination payments.
F. Leave loading
If you pay leave loading as a lump sum, you would need to use Tax table for back payments, commissions, bonuses and similar payments to calculate withholding.
If you pay leave loading on a pro-rata basis, then add the leave loading payment to earnings for the period to calculate withholding.
G. Claiming tax offsets
If your employee chooses to claim their entitlement to a tax offset through reduced withholding, they must provide you with a Withholding declaration.
To work out the employee’s annual tax offset entitlement into a monthly value, use the Ready reckoner for tax offsets. Deduct the monthly amount from the amount shown in column 2 of the Withholding lookup tool (XLSX 34KB)This link will download a file.
Do not allow for any tax offsets if any of the following apply:
- you are using column 3
- you are using foreign resident tax rates
- when an employee does not provide you with their TFN
Ready reckoner for tax offsets
Tax offset entitlement – monthly value
If the exact tax offset amount claimed is not shown in the ready reckoner, add the values for an appropriate combination.
H. Withholding declarations
An employee may use a Withholding declaration to advise you of a tax offset they choose to claim through reduced withholding from you.
Employees can also use a Withholding declaration to advise you of any changes to their situation that may affect the amount you need to withhold from their payments.
Changes that may affect the amount you need to withhold include:
- becoming or ceasing to be an Australian resident for tax purposes
- claiming or discontinuing a claim for the tax-free threshold
- advising of a HELP, VSL, FS, SSL or TSL debt, or changes to them
- entitlement to a seniors and pensioners tax offset.
When your employee provides you with a Withholding declaration it will take effect from the next payment you make. If you receive an updated declaration from an employee, it will replace the previous one.
An employee must have provided you with a valid Tax file number declaration before they can provide you with a Withholding declaration.
i. Medicare levy adjustment
To claim the Medicare levy adjustment (available in certain situations), your employee must lodge a Medicare levy variation declaration with their Tax file number declaration.
Some employees may be liable for an increased rate of the Medicare levy surcharge as a result of the income for surcharge purposes tests. They can lodge a Medicare levy variation declaration, requesting you to increase the amount to be withheld from their payments.
For instructions on how to work out the Medicare levy adjustment refer to Medicare levy adjustment monthly tax table.
j. When your employee is a foreign resident
If your employee has answered no to the question ‘Are you an Australian resident for tax purposes?’ on their Tax file number declaration, you will need to use the foreign resident tax rates.
There are two ways you can withhold from a foreign resident’s earnings:
- If they have not given you a valid TFN, you need to withhold 45% for each $1 of earnings (ignoring any cents).
- If they have given you a valid TFN, you need to withhold the amount calculated using the foreign resident tax rates below, rounding any cents to the nearest dollar.
foreign resident tax rates
Weekly tax rates
|Weekly earnings ($)||Weekly rate|
|0 to 9,996||32.5 cents for each dollar of earnings|
|9,997 to 14,997||$3,249 plus 37 cents for each $1 of earnings over $9,996|
|14,998 and over||$5,099 plus 45 cents for each $1 of earnings over $14,997|
Foreign residents cannot claim tax offsets to reduce withholding. If your foreign resident employee has claimed a tax offset on the Withholding declaration, don’t make any adjustments to the amount you withhold.
This article is for general information only. It does not make recommendations nor does it provide advice to address your personal circumstances. To make an informed decision, always contact a registered tax professional.