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  • Working out withholding

    The way you work out withholding for donations depends on whether the donations are regular or an occasional donation.

    Regular donations

    When you set up a workplace giving program, you need to decide whether or not to reduce the amount of tax you withhold from the salaries of your participating employees to account for the amount donated each pay.

    To work out the reduced amount of tax to withhold from participating employees who make regular donations, you reduce the gross earnings by the total donation amount and use this reduced earnings figure to calculate the amount to withhold.

    In some circumstances, small donation amounts will result in no or minimal change to the amount of tax to be withheld.

    Using a software payroll package

    If you use a software payroll package, you will need to check whether it is able to calculate these deductions automatically for each pay period.

    If your payroll software can't reduce the amount of tax withheld each pay period, you can still set up a workplace giving program but will not be able to reduce the withholding tax; each participating employee will be able to claim a deduction when lodging their tax return at the end of the income year.

    Occasional donations

    You can vary the amount of tax you withhold from the salary of an employee who makes donations to a charity under an occasional workplace giving arrangement.

    This variation should be used when donations are not made under a regular planned arrangement, for example:

    • a one-off donation of $250 to Make a Wish Foundation in March
    • a one-off donation of $500 to Cancer Foundation in May.

    Employees receive the tax benefit of the donation at the time they make the donation, instead of waiting until the end of the financial year when lodging their tax return.

    Working out withholding for occasional donations

    To work out the amount of tax to withhold when occasional payroll donations are made:

    1. Calculate the amount of withholding required from the employee’s gross earnings for the relevant pay period (before deducting the donation).
    2. Multiply the amount of the donation by 0.34, and then subtract from the withholding figure calculated at (1).

    If the resulting withholding amount is zero or negative, there is no amount to withhold.

    See also:

      Last modified: 23 Aug 2021QC 17036