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  • Varying your PAYG withholding

    When and how you as an employee can vary your rate of your pay as you go (PAYG) withholding.

    On this page:

    Understanding withholding variations

    Under tax law, the Commissioner of Taxation may allow the variation of the amount a payer withholds from a withholding payment, to meet the special circumstances of a particular case or class of cases.

    The main purpose of varying your rate or amount of withholding is to make sure that the amount withheld during the income year best meets your end-of-year tax liability. For example, you may want to apply for a variation if the normal rate of withholding leads to a large credit at the end of the income year because your tax-deductible expenses are higher than normal.

    If you believe your circumstances warrant a variation of the rate or amount of withholding, you will need to determine whether the variation is upwards or downwards.

    The granting of a variation doesn't mean that we have accepted the tax treatment of the income and deductions in your application. Your actual tax liability will be determined when you lodge your income tax return. Under tax law, you must keep records of your relevant income and expenses for a minimum of five years.

    Upward variations

    An upwards variation increases the amount of tax that is withheld from your payments.

    You can ask your payer to increase the amount they withhold from your income. You may do this where you expect to have a tax amount to pay at the end of the income year.

    Example – upward variation

    Since retiring, Keith receives an annual superannuation pension income of $25,000. He also receives interest on his term deposit. Keith estimates his interest will be $1,000. So, his estimated taxable income will be $26,000 ($25,000 + $1,000). Keith can apply for a withholding variation to have his withholding rate calculated based on his estimated taxable income of $26,000.

    End of example

    How to apply for an upward variation

    You can arrange an upward variation by entering into an agreement with your payer to vary the rate or amount of withholding. Your request should be in writing, but can be in any format. For example, you can send an email request; or you can use a paper or computer-based form.

    See also:

    Downward variations

    A downwards variation reduces the amount of tax you would normally have withheld from your payments.

    You can ask your payer to reduce the amount of tax the withhold from your income. You generally only do this where you can show that having the normal withholding rate amount withheld will result in your paying more tax than you need to in the income year.

    Your payer can't vary the withholding rate until they receive an official variation notice from us.

    Example – downward variation for allowance

    Sue is a salary and wage earner who uses her own vehicle for work purposes. Her payer pays her an annual motor vehicle allowance of $10,000. Sue estimates that her annual tax-deductible car expenses will be $9,000. She can apply for a variation so that her payer will withhold tax from only $1,000 of her allowance.

    End of example

     

    Example 2 – downward variation for taxable income

    John, a real estate salesperson receives his payments on a commission basis. He also owns a rental property and receives rental income. John's annual gross income from his only payer is $45,000. He estimates that his rental property loss will be $15,000. So, his estimated taxable income will be $30,000 ($45,000 − $15,000). John can apply for a variation to have his withholding rate calculated based on his estimated taxable income of $30,000.

    End of example

    Processing times

    The processing time for an application depends on the method you use to lodge your application. If you lodge:

    • online – within 28 days
    • by paper – within 56 days.

    How to lodge a downward variation

    If you want to vary your withholding amount downwards, you need to lodge a PAYG withholding variation application with us.

    Individuals lodging online will need to:

    • log in to myGovExternal Link
    • select, Australian Taxation Office
    • from the menu select, Tax > Manage >PAYG withholding variation

    Tax agents, go to Online services for tax agents and select:

    • Lodgments
    • Client forms
    • PAYG withholding variation

    If you can't lodge online, you will need to order a paper application by either:

    • visiting our online ordering and searching for PAYG withholding variation
    • phoning our automated self-help ordering service on 13 28 65.

    For more information on downward variations, refer to:

      Last modified: 07 Dec 2020QC 19428