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  • Claiming tax offsets

    If your employee chooses to claim their entitlement to a tax offset through reduced withholding, they must provide you with a Withholding declaration.

    If your employee claims a tax offset, reduce the amount to be withheld from their earnings per performance by the value of the tax offset. The per performance value is the tax offset amount claimed divided by 52, divided by the number of performances per week. Round to the nearest dollar.

    Do not allow for any tax offsets if any of the following apply:

    • when no TFN has been provided
    • you are using foreign resident rates
    • the payee has not claimed the tax-free threshold.

    Withholding declarations

    An employee may use a Withholding declaration to advise you of a tax offset they choose to claim through reduced withholding from you. For more information, see Claiming tax offsets.

    Employees can also use a Withholding declaration to advise you of any changes to their situation that may affect the amount you need to withhold from their payments.

    Changes that may affect the amount you need to withhold include:

    • becoming or ceasing to be an Australian resident for tax purposes
    • claiming or discontinuing a claim for the tax-free threshold
    • advising of a HELP, SSL, TSL or Financial Supplement debt, or changes to them.

    When your employee provides you with a Withholding declaration it will take effect from the next payment you make. If you receive an updated declaration from an employee, it will replace the previous one.

    An employee must have provided you with a valid Tax file number declaration before they can provide you with a Withholding declaration.

    When your employee is a foreign resident

    If your employee has answered no to the question ‘Are you an Australian resident for tax purposes?’ on their Tax file number declaration, you will need to use the foreign resident tax rates.

    There are two ways you can withhold from a foreign resident’s earnings:

    • if they have not given you a valid TFN, you need to withhold 45% for each $1 of earnings (ignoring any cents).
    • if they have given you a valid TFN, you need to withhold the amount calculated using the foreign resident tax rates, rounding any cents to the nearest dollar.

    Foreign resident tax rates

    Weekly tax rates

    Weekly earnings
    $

    Weekly rate

    0 to 1,729

    32.5 cents for each dollar of earnings

    1,730 to 3,460

    $562 plus 37 cents for each $1 of
    earnings over $1,729

    3,461 and over

    $1,202 plus 45 cents for each $1 of
    earnings over $3,460

    Foreign residents cannot claim tax offsets to reduce withholding. If your foreign resident employee has claimed a tax offset on the Withholding declaration, don’t make any adjustments to the amount you withhold.

    Last modified: 14 Jun 2019QC 55455