• # PAYG Withholding variation for income stream beneficiaries who turn 60 during the financial year

## Rules for calculating varied withholding amount

### Step 1

Calculate the amount of assessable income the payee will receive before their 60th birthday.

Assessable income before 60th birthday = (taxable component of the payment x number of payments before 60th birthday) where:

• the taxable component of a superannuation income stream benefit is the amount of the income stream minus the tax free component of the benefit
• the number of payments before 60th birthday is the number of payments expected to be made to the payee between 1 July and their 60th birthday.

### Step 2

Turn the Assessable income before 60th birthday (Step 1) into an average payment per pay period, as if spread over whole year.

Assessable income before 60th birthday / total number of payments in the year

Total number of payments made for the year:

• 52, for payments made weekly
• 26, for payments made fortnightly
• 12, for payments made monthly.

The result is the payee’s adjusted average payment.

### Step 3

Convert the Adjusted average payment calculated in Step 2 to its weekly equivalent. Where the payments are made weekly, ignore any cents and add 99 cents.

If the payments are made fortnightly or monthly, calculate the weekly equivalent using the following:

• fortnightly payments - divide the sum of the fortnightly payment by 2, ignore any cents in the result and then add 99 cents
• monthly payments - multiply the monthly payment by 3 and then divide by 13, ignore any cents in the result and then add 99 cents.

### Step 4

Calculate the withholding amount on the figure calculated in Step 3, using the appropriate formula from Statement of formulas for calculating amounts to be withheld (NAT 1004) or using the tables in Weekly tax table (NAT 1005).

If the payments are made fortnightly or monthly, calculate the withholding amounts using the following:

• fortnightly payments – determine the weekly withholding, multiply this amount by 2
• monthly payments – determine the weekly withholding, multiply this amount by 13, divide the product by 3.

Round the result to the nearest dollar.

### Step 5

Adjust the amount calculated in Step 4 for the number of payments made before the payee’s 60th birthday.

 Adjusted withholding amount total number of payments in year = withholding amount (Step 4) x divided by number of payments before 60th birthday

Round the result to the nearest dollar.

### Step 6

Calculate the superannuation tax offset applicable to the payment.

Taxable component of the payment x 15% = Superannuation tax offset

Round the result to the nearest dollar.

### Step 7

Calculate the Notional amount to be withheld per payment.

 Notional amount Adjusted withholding amount (Step 5) – Superannuation to be withheld = tax offset (Step 6)

Round the result to the nearest dollar.

Note: If the Superannuation tax offset is greater than the Adjusted withholding amount, the Notional amount to be withheld is nil.

### Step 8

Using the appropriate formula below, calculate the Medicare levy adjustment applicable to the payment.

If the payee’s Assessable income before 60th birthday (Step 1) is:

• less than \$21,655 – the payee’s Medicare levy adjustment is nil
• greater than \$21,655 but less than \$27,068 – the payee’s Medicare levy adjustment is equal to:

(Assessable income before 60th birthday - \$21,655) x 0.10 / number of payments before 60th birthday).

• greater than \$27,067 – the payee’s Medicare levy adjustment is equal to:

(Assessable income before 60th birthday x 0.02) / number of payments before 60th birthday).

Round the result to the nearest dollar.

### Step 9

To calculate the varied withholding amount, compare the Notional amount to be withheld (Step 7) to the Medicare levy adjustment (Step 8).

If the Notional amount to be withheld is more than the Medicare levy adjustment, withhold the Notional amount to be withheld (Step 7).

If the Notional amount to be withheld is less than the Medicare levy adjustment or zero, withhold the Medicare levy adjustment (Step 8).

## Example calculations:

Schedule 1 - Statement of formulas for calculating amounts to be withheld 2017/18, Scale 2 is used in these examples.

### Example 1

Sally is 59 years old and receives a fortnightly superannuation income stream of \$2,140 during the 2017-18 financial year.

The tax free component of Sally’s fortnightly superannuation income stream is \$440. The taxable component of the superannuation income stream is \$1,700, and is comprised wholly of a taxed element.

Sally will turn 60 on 8 January 2018. Her super fund will make 14 payments before she turns 60 and 12 payments after.

As the taxable component of Sally’s pension is comprised wholly of a taxed element she will not have to pay any tax on this after she turns 60. Sally’s withholding should be varied. Sally has claimed the tax-free threshold and is not entitled to leave loading.

#### Calculate the varied withholding amount

##### Step 1

Calculate Sally’s Assessable income before 60th birthday.

Assessable income before 60th birthday: \$1,700 x 14 = \$23,800

##### Step 2

Convert the amount calculated at Step 1 into an adjusted average payment.

Adjusted average payment: \$23,800 / 26 = \$915.38

##### Step 3

Calculate Sally’s adjusted weekly payment amount.

 Sally’s adjusted weekly amount \$915.38 / 2 = \$457.99 (ignoring cents, adding 0.99)
##### Step 4

Calculate the withholding on the amount calculated at Step 3.

 Weekly withholding = \$457.99 x 0.2900 – 109.1077 = \$23.7094 = \$24 per week (rounded to the nearest dollar) Fortnightly withholding \$48 per fortnight
##### Step 5

Calculate Sally’s Adjusted withholding amount based on the amount calculated at Step 4.

 Adjusted withholding amount = \$48 x 26 / 14 = \$89.1428 = \$89 per fortnight (rounded to the nearest dollar)

= \$89 per fortnight (rounded to the nearest dollar)

##### Step 6

Calculate the per payment Superannuation tax offset Sally is entitled to. This is calculated using the taxable component of her payment.

Superannuation tax offset: \$1,700 x 15% = \$255 (rounded to the nearest dollar)

##### Step 7

Calculate the Notional amount to be withheld.

As Sally’s Superannuation tax offset (\$255 – Step 6) is greater than her Adjusted withholding amount (\$89 – Step 5) her Notional amount to be withheld is \$0.