In some income years, payees who are paid:
- fortnightly - will have 27 pay days for the year instead of the usual 26
- weekly - will have 53 pay days for the year instead of the usual 52.
The withholding tax tables published by the ATO are based on the normal number of pays in a year. Tax rates increase as taxable incomes increase. Therefore, the additional pay day will mean that amounts withheld from salary and wage payments made to many payees will not cover the amount payable when they lodge their tax returns.
Additional amounts can be withheld
Every taxpayer's circumstances are different, but those who normally expect to receive a small tax refund at the end of the year are likely to find that they owe money to the ATO because of the additional pay day. Payees who are concerned about the possible shortfall in amounts withheld are entitled to ask their payer to withhold additional amounts as shown below:
Weekly earnings*
|
Additional withholding per pay
|
$675 to $1,549
|
$3
|
$1,550 to $3,449
|
$4
|
$3,450 and over
|
$9
|
Fortnightly earnings*
|
Additional withholding per pay
|
$1,390 to $3,049
|
$11
|
$3,050 to $6,849
|
$18
|
$6,850 and over
|
$37
|
* These amounts are based on 2011-12 tax rates and incorporate the flood levy.
A schedule detailing the additional amounts to withhold to cover any shortfall is included in:
Payee requests
A payee's request to have additional amounts withheld in accordance with the tables above should be in writing but can be in any format that suits your business. For example, email requests could be used or you may design a paper or computer-based form for the purpose.
If any payees want to increase the amounts withheld in addition to those outlined in the tables above, they must provide you with these forms:
What can payers do?
If their payees will receive an additional pay during the year, they are encouraged to:
- inform them about this issue, and
- put processes in place so they can request additional amounts be withheld as shown in the tables above.
Example: effects of the additional pay day
Fortnightly pay
|
$2,500
|
amounts withheld per pay
amounts withheld 26 pays
amounts withheld 27 pays
|
$542
$14,092
$14,634
|
Annual pay (26 pays)
|
$65,000
|
tax payable
less amounts withheld
refund
|
$14,100
$14,092
$8
|
Annual pay (27 pays)
|
$67,500
|
tax payable
less amounts withheld
amount to be paid
|
$14,899
$14,634
$265
|
* For a normal, 26 fortnight year, the payee would receive a refund of $8 on assessment of their tax return. In a 27 fortnight year, they would face a bill for $265, which would be the tax payable on assessment.
This example uses 2011-12 tax rates incorporating the flood levy. It assumes the payee has no other income or deductions and is not entitled to leave loading.
Last Modified: Wednesday, 29 June 2011