Terms we use
The following is a list of terms we use in the calculators and their meanings.
You must apply foreign resident withholding rates where a payee has declared they are not an Australian resident on their:
Select 'no' at the question Australian Resident? on the calculator if this applies to your payee.
To work out whether the payee is an Australian resident for tax purposes, refer to Work out your tax residency.
Commissioner's instalment rate
The rate of withholding is either the payees Commissioner's instalment rate or a flat rate of 20%.
If your payee:
- has a Commissioner's instalment rate of more than 20%, you must withhold at their Commissioner's instalment rate
- has a Commissioner's instalment rate of 20% or less, you must withhold at the flat rate of 20% unless you and your payee agree to use the Commissioner's instalment rate
- does not know their Commissioner's instalment rate at the time of the agreement, you must withhold at the flat rate of 20%.
It is your payee's responsibility to tell you their Commissioner's instalment rate in their voluntary agreement.
We can provide forms or you can develop your own voluntary agreement, providing it contains the required information of a voluntary agreement.
Gross earnings include:
- your payees normal earnings
- any allowances and irregular payments you will add.
Enter the total amount at the Gross earnings question on the calculator. Do not include cents, unless the payment is a monthly amount.
HELP, TSL, SSL or SFSS debt repayments
Payees who have deferred a HELP, TSL, SSL or SFSS loan will repay their loan/s through the tax system once they earn above the minimum repayment threshold for the relevant year.
Payees make compulsory repayments of HELP, TSL, SSL or Financial Supplement, debts through the tax system when their repayment income is above the minimum threshold. The amount they repay increases as their income increases.
You may need to withhold extra amounts for your payees with a HELP, TSL, SSL or Financial Supplement debt under the pay as you go (PAYG) withholding system. The extra amounts cover any compulsory repayment that may be included on their notice of assessment.
The Tax file number declaration and Withholding declaration include the following questions:
- Do you have a Higher Education Loan Program (HELP), Student Start-up Loan (SSL) or Trades Support Loan (TSL) debt?
- Do you have a Financial Supplement debt?
If they have answered yes to one or both of these questions, then you should answer yes to the equivalent questions on the calculator:
- Does the payee have a Higher Education Loan Program (HELP), Student Start-up Loan (SSL) or Trades Support Loan (TSL) debt?
- Does the payee have a Financial Supplement debt?
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Medicare levy variation
Prescribed persons may claim an exemption from, or variation to, the Medicare levy.
Prescribed persons include:
- repatriation and Centrelink pension or benefits recipients
- members of the Australian Defence Force (ADF).
To claim the Medicare levy variation available to some low-income earners with dependants, your payee must lodge a Medicare levy variation declaration along with their Withholding declaration.
If your payee has lodged both of these forms, you must complete questions under Medicare Levy Variation on the calculator. Enter the number of children your payee has claimed. For payees claiming a spouse only, enter 0 (zero).
Tax file number not provided
If your resident payee has not given you a valid Tax file number declaration quoting their tax file number (TFN) or one of the exemptions below (see TFN exempt), you must withhold 49% (47% for foreign residents) from the total gross payment, including:
- the whole amount of all leave loading payments
- payments on termination of employment – that is, holiday pay, unused annual leave and long service leave
- the taxable part of an employment termination payment.
Your payee is exempt from quoting a TFN if any of the following apply:
- They are under 18 years of age and earn less than $18,200 per year.
- They are receiving certain Centrelink pensions, benefits or allowances or a service pension from the Department of Veterans Affairs – however, they must quote their TFN if they receive Newstart, sickness allowance, special benefit or partner allowance.
- They have told you they lodged a TFN application or enquiry with us less than 28 days ago.
- They have an interim notice we issued which is still in force.
Tax-free threshold claimed
If your payee is an Australian resident for tax purposes, $18,200 of their yearly income is not taxed. This is called the tax-free threshold.
From 1 July 2012, payees who are certain that their total income for the year from all sources will be less than $18,200 can claim the tax-free threshold from all their payers.
Foreign residents cannot claim the tax-free threshold.
If your payee has claimed the tax-free threshold on the TFN declaration, you will need to select yes at ‘Tax-free threshold claimed’? question on the calculator.
Tax offsets reduce tax payable and are spread over the whole year in weekly instalments.
If your payee is entitled to a tax offset, you withhold less from their pay. Your payee can claim tax offsets only if they are also claiming the tax-free threshold.
If your payee chooses to claim their entitlement to a tax offset through reduced withholding, they must provide you with a Withholding declaration. Enter the amount your payee shows at the tax offsets question on the Withholding declaration at the Tax offsets question on the calculator.
Seniors and pensioners tax offset
You cannot use the tax withheld calculator for the seniors and pensioners tax offset tax rate calculation.
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Last modified: 07 Oct 2016QC 16944