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# Part C

Last updated 20 June 2021

Use this part if the payee is receiving a capped defined benefit income stream and:

• is 60 years old or over, and
• their income stream is only made up of a taxable component – untaxed element.

## Withholding steps

Step 1: Use the appropriate PAYG withholding tax table to calculate the withholding amount relevant to this pay period's taxable component – untaxed element. The tax table you use depends on the period the income stream covers – that is, weekly, fortnightly or monthly.

Note: Some payees 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 2: Determine the tax offset for the payment.

Convert the untaxed element the payee received this period to an annualised amount. Use the following table to work out the amount of tax offset that applies.

Untaxed element – annualised amount

Tax offset

Equal to or greater than the Defined benefit income cap

Tax offset is capped at 10% of the cap.

Less than the Defined benefit income cap

Tax offset is calculated at 10% of the untaxed element.

Step 3:

If the annualised amount from Step 2 is less than the cap, then:

Tax offset = Untaxed element for the payment × 10%

If the annualised amount from Step 2 is greater than the cap, then the annual tax offset is capped at 10% of the cap. Therefore, the tax offset for the payment is reduced to the weekly, fortnightly or monthly equivalent of the capped tax offset amount.

Step 4: Work out the amount to withhold by subtracting the tax offset per payment (Step 3) from the withholding amount (Step 1).

Amount to withhold = withholding amount − tax offset

If the tax offset amount is greater than the withholding amount, the amount to withhold is nil.

Example: Case C: Capped defined benefit income stream comprised of a taxable component – untaxed element only

This example uses the PAYG withholding tax tables that apply from 13 October 2020.

Vera, 68, receives a weekly super income stream of \$2,500 comprised only of a taxable component – untaxed element.

Step 1: Using the Weekly tax table, the withholding amount relevant to the taxable component – untaxed element for \$2,500 is \$689 (Vera has claimed the tax-free threshold).

Step 2: The annual equivalent of Vera's weekly super income stream untaxed element (\$2,500 × 52 = \$130,000) is greater than the defined benefit income cap of \$106,250. Therefore, Vera's tax offset is capped at \$10,625 for the financial year.

Step 3: As Vera is over 60 years old she is eligible for a 10% tax offset of the untaxed element.

The weekly tax offset amount is capped at \$10,625 ÷ 52 = \$204 (ignore cents)

This weekly offset amount exceeds this cap (\$13,000 ÷ 52 = \$250). Therefore, the weekly tax offset is reduced to \$204.

Step 4: Work out the amount to withhold by subtracting the tax offset per payment (Step 3) from the withholding amount (Step 1).

Amount to withhold = withholding amount − tax offset

Amount to withhold = \$689 − \$204

Amount to withhold = \$485

End of example

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