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  • Terms we use

    The following is a list of terms we use in the calculators and their meanings.

    Australian resident

    You must apply foreign resident withholding rates where a payee has declared they are not an Australian resident on their:

    Select 'Non-Resident' at the What is the tax status of the payee? question 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 residency status for tax purposes.

    Commissioner's instalment rate

    The rate of withholding is either the payee's 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
    • doesn't 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

    Gross earnings include:

    • your payees normal earnings
    • any allowances and irregular payments you will add.

    Enter the total amount at the Payee's gross earnings question on the calculator. Do not include cents, unless the payment is a monthly amount.

    HELP, VSL, TSL, SSL or FS debt repayments

    Payees who have deferred a HELP, VSL, TSL, SSL or FS 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, VSL, TSL, SSL or FS debts through the tax system when their repayment income is above the minimum repayment threshold. The amount they repay increases as their income increases.

    You may need to withhold extra amounts for your payees with a HELP, VSL, TSL, SSL or FS 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 question:

    • Do you have a Higher Education Loan Program (HELP), VET Student Loan (VSL), Financial Supplement (FS), Student Start-up Loan (SSL) or Trade Support Loan (TSL) debt?

    If they have answered yes to this question, then you should answer yes to the equivalent question on the calculator:

    • Does the payee have a Study and Training Support Loan debt?

    Find out about:

    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 the Medicare Levy questions on the calculator. Enter the number of children your payee has claimed. For payees claiming a spouse only, enter 0 (zero).

    See also:

    Seniors and pensioners tax offset

    You can't use the tax withheld calculator for the seniors and pensioners tax offset tax rate calculation.

    See also:

    Tax file number not provided

    If your 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 47% for a resident employee and 45% for a foreign resident employee 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.

    TFN exempt

    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 an applicant or recipient of certain pensions, benefits or allowances from the:
      • Department of Human Services - however, they will need to quote their TFN if they receive Newstart, Youth or sickness allowance, or an Austudy, Jobseeker or parenting payment
      • Department of Veterans' Affairs - a service pension under the Veterans' Entitlement Act 1986
      • Military Rehabilitation and Compensation Commission
       
    • 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.

    If your payee is certain their total annual income from all payers will be less than $18,200 they can claim the tax-free threshold from each payer. Foreign residents can't 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 the Has the payee claimed the Tax Free Threshold? question on the calculator.

    Tax offsets

    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.

    Working holiday maker

    A payee is a working holiday maker if they are in Australia on either a Working Holiday visa (subclass 417) or Work and Holiday visa (subclass 462).

    • If you have registered as an employer of working holiday makers, you should apply the Working holiday maker withholding rates of 15% to the first $37,000 of income earned. Income in excess of $37,000 should be withheld at foreign resident withholding rates.
    • If you have not registered, you must apply foreign resident withholding rates from the first dollar of income earned.

    See also:

    Last modified: 27 Jun 2019QC 16944