Part A
Use this part where the payee is:
- below 60 years of age and is receiving a super income stream including a death benefit 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 × 10%
|
Super death benefits paid to a dependant
Age of deceased
|
Age of recipient
|
Tax offset
|
Below 60
|
Below 60
|
Taxed element × 15%
|
Below 60
|
60 and over
|
Untaxed element × 10%
|
60 and over
|
Any age
|
Untaxed element × 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 × 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 $1,047
|
Taxable component × 0.02
|
Untaxed element × 0.02
|
Greater than $1,046
|
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 13 October 2020.
Maree, 58, 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 58.
Step 1: Maree is 58 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 $38, 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 $876 (the Medicare levy threshold for singles, on a fortnightly basis) but less than $1,096 (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 − $876) × 0.10
= $2.40
= $2 per fortnight (rounded to the nearest dollar)
Maree’s offset adjustment amount is $2 per fortnight.
Step 5: To calculate the notional withholding amount, reduce the withholding amount ($38 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 = $38 − $135 = −$97
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 $2. This is the offset adjustment amount which will cover the Medicare levy payable.
End of example