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  • Overpayment identified in the same financial year

    If an overpayment is identified in the same financial year it is paid, the employee will only need to repay the net amount of the overpaid amount. The net amount is the amount received by the payee.

    Details of the overpayment should not be included on the employee's PAYG payment summary. The overpaid amount can be repaid in the same financial year or a subsequent financial year.

    Example 2 – Repayment in the same financial year

    An employee normally receives wages of $3,200 per month. In October 2014 you found out you incorrectly paid them an amount of $4,200 in September 2014, which is an overpayment of $1,000. An amount of $200 was withheld from the overpayment amount with the employee receiving the remaining $800. If the employee agreed to repay the overpayment by 30 June 2015, the employee is only required to repay $800.

    End of example

     

    Example 3 – Repayment in a subsequent financial year

    An employee normally receives wages of $3,200 per month but you incorrectly paid them an amount of $4,200 in March 2014, which is an overpayment of $1,000. An amount of $200 was withheld from the overpayment amount with the employee receiving the remaining $800. You and the employee agreed that the amount was to be repaid over two instalments, being June 2014 and September 2014. The employee is only required to repay $800. The 2014 and 2015 financial year payment summaries do not reflect the overpaid or repaid amounts.

    End of example

    When you provide payees with time to repay an overpaid amount, fringe benefits tax may apply.

    Reporting the overpaid amount

    If you identify the overpayment amount in the same financial year, you will need to ensure that the correct amounts are shown on the PAYG payment summary issued to the employee for the income year – do not include details of the overpayment.

    You will need to revise any affected activity statements to reduce the withholding and wage figures.

    If you are a large withholder reporting electronically, you reduce your next payment by the relevant withholding amount.

    See also:

    • TD 2008/9Income tax: are amounts mistakenly paid as salary or wages to employees (or as income support payments or worker's compensation amounts to persons), to which they are not beneficially entitled, but are obliged to repay, 'ordinary income' under section 6-5 of the Income Tax Assessment Act 1997?
    • TD 2008/10Fringe benefits tax: where an employer recognises they mistakenly paid to their employee an amount that the employee is not legally entitled to, but is obliged to repay, and afterwards allows the employee time to repay the amount, is there a 'loan benefit' under subsection 16(1) of the Fringe Benefits Tax Assessment Act 1986?
    • TD 2008/11Fringe benefits tax: where an employer mistakenly pays to their employee an amount that the employee is not legally entitled to, but is obliged to repay, does the employer's subsequent waiver of that obligation constitute a 'debt waiver benefit' under section 14 of the Fringe Benefits Tax Assessment Act 1986?
      Last modified: 24 Oct 2017QC 16338