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  • Part A

    Use this part where the payee is:

    • below 60 years of age and is receiving a super income stream
    • 60 years of age or over and is receiving a super income stream that is not a capped defined benefit income stream with an untaxed element.

    Note: if the payee turns 60 during the financial year and is in receipt of a capped defined benefit income stream, then you will also need to complete part E for post 60 income stream payments.

    Taxable component contains taxed and untaxed elements

    Withholding steps

    Step 1: Use the following table to work out which elements of the taxable component withholding applies to.

    How to apply withholding when taxable component contains untaxed element

    Age of the payee

    Taxable component of super income stream contains

    Withholding applies to the following element(s)

    Untaxed element

    Taxed element

    Below 60

    Yes

    Yes

    Sum of untaxed and taxed elements

    Below 60

    No

    Yes

    Taxed element

    Any age

    Yes

    No

    Untaxed element

    Note: Do not withhold where the payee is receiving an account-based super income stream with a taxed element and tax-free component and is aged 60 years or older.

    Step 2: Use the appropriate PAYG withholding tax table to calculate the withholding amount relevant to the amount worked out in step 1. The tax table you use depends on the period the super income stream covers – that is, weekly, fortnightly or monthly.

    Note: Some payees aged 60 years or over may be eligible to claim the seniors and pensioners tax offset (SAPTO). If the payee gives you a Withholding declaration indicating they want to claim a SAPTO entitlement through PAYG withholding, you should use the Tax table for seniors and pensioners to work out the amount to withhold from the amount calculated in step 1.

    Step 3: Some payees may be eligible for a tax offset. Use the following table to work out the tax offset amount for the payee.

    Super income stream – taxable component

    Age

    Tax offset

    Below preservation age

    Nil

    Preservation age to under 60 years old

    Taxed element × 15%

    Untaxed element - Nil

    60 years or over

    Untaxed element x 10%

    Disability super income stream – taxable component

    Age

    Tax offset

    Below preservation age

    Taxed element × 15%

    Untaxed element - Nil

    Preservation age to under 60 years old

    Taxed element × 15%

    Untaxed element - Nil

    60 years or over

    Untaxed element x 10%

    Step 4: For some payees, the application of the offset from step 3 leads to under withholding for their Medicare levy. An offset adjustment is required where the tax offset calculated in step 3 is greater than zero. Use the applicable formulas below to calculate the offset adjustment amount. You will need to calculate the weekly equivalent of the taxable component or untaxed element if making fortnightly, monthly or quarterly payments. If an offset adjustment is not required set the offset adjustment to zero.

    Adjustment amounts per taxable component amount

    Equivalent amount
    (on a weekly basis)

    Offset adjustment amount

    Under 60 years of age

    60 years of age or over

    Less than the Medicare levy threshold for singles

    Nil

    Nil

    Greater than the Medicare levy threshold for singles, but less than the Medicare levy shade out point (SOP) for singles

    (Taxable component - Medicare levy threshold for singles) × 0.10

    (Untaxed element -Medicare levy threshold for singles) × 0.10

    Greater than or equal to the Medicare levy SOP for singles, but less than $934

    Taxable component × 0.02

    Untaxed element × 0.02

    Greater than $933

    Nil

    Nil

    Medicare levy parameters are contained in Statement of formulas for calculating amounts to be withheld.

    Step 5: Calculate the notional amount to withhold by first subtracting the tax offset per payment (step 3) from the withholding amount (step 2).

    Notional amount to withhold = withholding amount − tax offset

    Then compare the notional amount to withhold with the offset adjustment amount calculated at step 4.

    If the notional amount to withhold is:

    • less than the amount calculated at step 4, withhold the amount calculated at step 4
    • more than the amount calculated at step 4, withhold the notional amount to be withheld.

    Tax-free component

    If the super income stream is being paid to a payee under 60, you do not need to consider their tax-free component when calculating their withholding.

    Example: Case A: Payee is under 60 years old

    This example uses the PAYG withholding tax tables that apply from 1 July 2018.

    Maree, 57, receives a fortnightly super income stream of $1,200 comprising:

    • a tax-free component of $300
    • a taxable component – taxed element of $900.

    Maree’s preservation age is 57.

    Step 1: Maree is 57 years old therefore withholding applies to the taxable component.

    Step 2: As Maree is paid fortnightly, use the Fortnightly tax table to work out the withholding required from the $900 taxed element. This amount is $42, assuming that Maree is claiming the tax-free threshold.

    Step 3: Maree is entitled to a tax offset.

    Tax offset = taxed element × 15%

    = $900 × 15%

    = $135

    Step 4: Calculate Maree’s fortnightly offset adjustment amount. As Maree’s fortnightly payment is more than $844 (the Medicare levy threshold for singles, on a fortnightly basis) but less than $1,056 (the Medicare levy SOP for singles, on a fortnightly basis), her offset adjustment amount is calculated as:

    Offset adjustment amount = (Taxable component − Medicare levy threshold for singles) × 0.10

    = ($900 − $844) × 0.10

    = $5.60

    = $6 per fortnight (rounded to the nearest dollar)

    Maree’s offset adjustment amount is $6 per fortnight.

    Step 5: To calculate the notional withholding amount, reduce the withholding amount ($42 as worked out in step 2) by the value of the tax offset ($135 as worked out in step 3). That is:

    Notional withholding amount = $42 − $135 = −$93

    Since the notional withholding amount is negative and less than the offset adjustment amount, the amount to be withheld from Maree’s fortnightly super income stream is $6. This is the offset adjustment amount which will cover the Medicare levy payable.

    End of example
    Last modified: 14 Jun 2019QC 55469