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  • Varying your PAYG withholding

    This explains when and how you can vary the rate of your pay as you go (PAYG) withholding, including:

    What is a withholding variation?

    Under tax law, the Commissioner of Taxation may vary the amount a payer is required to withhold from a withholding payment, to meet the special circumstances of a particular case or class of cases.

    The main purpose of varying your rate or amount of withholding is to make sure that the amount withheld during the income year best meets your end-of-year tax liability. For example, you may want to apply for a variation if the normal rate of withholding leads to a large credit at the end of the income year because your tax-deductible expenses are higher than normal.

    If you believe your circumstances warrant a variation of the rate or amount of withholding, you will need to determine whether the variation is upwards or downwards.

    The granting of a variation doesn't mean that we have accepted the tax treatment of the income and deductions in your application – your actual tax liability will be determined when you lodge your income tax return. Under tax law, you must keep records of your relevant income and expenditure for a minimum of five years.

    Upward variations

    You can ask your payer to increase the amount of withholding from your income.

    Example

    Keith is retired and receives an annual superannuation pension income of $25,000. He also receives interest on his term deposit. Keith estimates his interest will be $1,000. So, his estimated taxable income will be $26,000 ($25,000 + $1,000). Keith can apply for a variation to have his withholding rate calculated based on his estimated taxable income of $26,000.

    End of example

    How to apply for an upward variation

    You can arrange an upward variation by entering into an agreement with your payer to vary the rate or amount of withholding. Your request should be in writing, but can be in any format – you can send an email request; or you can use a paper or computer-based form.

    See also:

    Downward variations

    You can ask your payer to reduce the amount of withholding from your income.

    Example 1

    Sue is a salary and wage earner who uses her own vehicle for work purposes. Her payer pays her an annual motor vehicle allowance of $10,000. Sue estimates that her annual tax-deductible car expenses will be $9,000. She can apply for a variation so that her payer will withhold tax from only $1,000 of her allowance.

    End of example

    Example 2

    John is a real estate salesperson who is paid on a commission basis. He owns a rental property. John's annual gross income from his only payer is $45,000. He estimates that his rental property loss will be $15,000. So, his estimated taxable income will be $30,000 ($45,000 − $15,000). John can apply for a variation to have his withholding rate calculated based on his estimated taxable income of $30,000.

    End of example

    Processing times

    The processing time for an application depends on the method used to lodge your application. If you lodge:

    • online using an e-variation – within 28 days
    • by paper – within 56 days.

    How to lodge a downward variation

    If you want to vary your withholding amount downwards, you need to lodge a PAYG withholding variation application with us.

    Lodging an e-variation, rather than a paper application, will reduce the time taken to process the application.

    If you cannot lodge online, you will need to order a paper application (NAT 2036).

    Next steps:

      Last modified: 31 May 2019QC 19428