Tax table for back payments, commissions, bonuses and similar payments

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1 Schedule 30 Pay as you go (PAYG) withholding NAT 3348 Tax table for back payments, commissions, bonuses and similar payments Including lump sum payments in arrears. FOR PAYMENTS MADE ON OR AFTER 1 JULY This document is a withholding schedule made by the Commissioner of Taxation in accordance with sections and of Schedule 1 to the Taxation Administration Act It applies to certain withholding payments covered by Subdivisions 12 B (except sections and 12 55), 12 C (except sections and 12 90) and 12 D of Schedule 1 paid as a lump sum. For more information visit NAT

2 WHO SHOULD USE THIS TABLE? Use this table if you make a payment of salary and wage which includes any of the following additional amounts: n a back payment (including lump sum payments in arrears) n a commission n a bonus or similar payment. Commissions Commissions are typically payments made as recognition of performance or service, and may be calculated as a percentage of the proceeds from a particular transaction or series of transactions. Bonus and similar payments A bonus is usually made to an employee in recognition of performance or services and may be calculated as a percentage of the proceeds from a particular business transaction. These payments may not necessarily be related to a particular period of work. A payment will be treated as similar to a bonus if it is an amount of a one off nature which does not relate to work performed in a particular period. Examples include: n a once only payment made to an employee as compensation for a changed work location n an amount paid as a sign on bonus to a worker entering a workplace agreement n one-off allowances. TAX FILE NUMBER (TFN) DECLARATIONS The answers payees provide on a Tax file number declaration (NAT 3092) primarily determine the amount to be withheld from payments. A Tax file number declaration applies to payments made after the declaration is provided to you. A later declaration provided by a payee overrides an earlier declaration. If a payee does not give you a valid Tax file number declaration within 14 days of starting a payer/payee relationship, you must fill in a Tax file number declaration with all available details of the payee and send it to the Australian Taxation Office (ATO). NO TFN PROVIDED You must withhold 46.5% from a payment made to a resident payee and 45% from a foreign resident payee (ignoring any cents) who has not: n quoted their TFN n claimed an exemption from quoting, or n advised that they have applied for a TFN or have made an enquiry with the ATO. If a payee states at question 1 of the Tax file number declaration that they have lodged a Tax file number application or enquiry with the ATO, the payee has 28 days to give you their TFN. If the payee has not given you their TFN within 28 days, you must withhold 46.5% from a payment made to a resident payee and 45% from a foreign resident payee from all payments made (ignoring any cents) unless the ATO tells you not to. Do not allow for any tax offsets or Medicare levy adjustment. Do not add amounts for flood levy, Higher Education Loan Program (HELP) or Student Financial Supplement Scheme (SFSS). DEFINITIONS Additional payments Additional payments include back payments (including lump sum payments in arrears), commissions, bonuses and similar payments. Normal earnings Normal earnings are gross earnings and include all salary and wages, taxable allowances, additional payments (as defined above) and overtime earnings for the current financial year. Therefore, a payee s normal earnings are those earnings relating to the last full pay period worked. Where a payee s pay fluctuates significantly over a number of pay periods, you can use an average of gross taxable earnings for the financial year to date over the number of pays received. For the purposes of this table normal earnings do not include employment termination payments or unused leave payments made on termination of employment. Pay periods per year Pay periods per year refers to a total of 52 pay periods if paid weekly, or a total of 26 pay periods if paid fortnightly, or 12 pay periods if paid monthly. No adjustments are required for a 53/27 year. Other payments that use this tax table These payments include: n compensation or sickness or accident payments in respect of an incapacity for work that is not tax exempt n commonwealth education or training payments, for example, Austudy or ABSTUDY allowance n assessable pensions, benefits and allowances under the Social Security Act 1991 or the Veterans Entitlements Act 1986, or similar payments made under a law of a foreign country, state or province. HOW TO WORK OUT WITHHOLDING AMOUNTS To work out the amount to withhold from an additional payment you can use either: n Method A uses complex calculations and is best suited to employers who use computer based payroll systems, or n Method B uses simple calculations, more suited to employers who have to calculate withholding amounts manually. Results obtained using Method A may differ slightly from results using Method B. Calculations made in accordance with either method are acceptable to calculate the withholding amount. Method A How you calculate the amount to withhold will depend on whether the additional payment applied to periods in: n the current financial year, or n a prior financial year. 2 SCHEDULE 30 TAX TABLE FOR BACK PAYMENTS, COMMISSIONS, BONUSES AND SIMILAR PAYMENTS

3 Current financial year This method recalculates withholding for each pay period for which the additional payment applies. Step Instruction 1 Work out how much of the additional payment applied to each earlier pay period in the current financial year. 2 For the first affected pay period, add the additional payment relevant to that period to the normal earnings 1 previously paid to get total normal earnings for that period. 3 Use the relevant tax table to find the amount to be withheld from the total normal earnings for that period. 4 Subtract the amount previously withheld for the period from the amount at step 3. 5 Repeat steps 2 4 for each pay period affected. Total the amounts calculated in step 4 for each pay period for the withholding on the additional payment. 6 Use the relevant tax table to find the amount to be withheld from the payee s gross earnings (excluding additional payments) for the current pay period. 7 Work out the total PAYG withholding for the current pay period by adding the withholding on the additional payment (step 5) to the withholding on the gross earnings (step 6). Prior financial year This method calculates withholding by averaging all additional payments made in the current financial year over the number of pay periods in a year, and applying that to the average normal earnings to date. Step Instruction 1 Calculate the average normal earnings by taking the sum of all normal earnings 1 paid to the payee over the current financial year to date (including current pay but excluding the current additional payment), and then divide by the number of pay periods to date (including current pay period). Ignore any cents. 2 Use the relevant tax table to find the amount to be withheld from the average normal earnings in step 1. 3 Add all additional payments made in current financial year (including additional payment in current pay), and then divide by the number of pay periods in the year (that is, 52 weekly pay periods, 26 fortnightly pay periods or 12 monthly pay periods). Ignore any cents. 4 Add the amount at step 3 to the average normal earnings at step 1. 5 Use the relevant tax table to find the amount to be withheld from the amount at step 4. 6 Subtract the amount at step 2 from the amount at step 5. 7 Multiply the amount in step 6 by the number of pay periods used in step 3. 8 Subtract any amounts previously withheld from additional payments in the current financial year from the amount at step 7 for the withholding on the additional payment. 9 Use the relevant tax table to find the amount to be withheld from the payee s gross earnings (excluding additional payments) for the current pay period. 10 Work out the total PAYG withholding for this pay period by adding the withholding on the additional payment (step 8) to the withholding on the gross earnings (step 9). When making a commission or bonus payment using Method A you can choose either calculation method, that is current or prior year, irrespective of the period the payment applies to. Multiple additional payments in the current pay period using Method A If you are making multiple additional payments you first need to calculate withholding on the total of any back payments (including lump sum in arrears) then calculate the withholding on the total of any commissions and bonuses and similar payments. Method B This method provides simple calculations suited to employers who have to calculate withholding manually. Current or prior financial years This method calculates withholding by apportioning additional payments made in the current pay period over the number of pay periods in a year, and applying that average amount to the gross earnings in the current pay period. Step Instruction 1 Determine the gross earnings for the current pay period. Ignore any cents. 2 Use the relevant tax table to find the amount to be withheld from the payee s gross earnings in step 1. 3 Add any additional payments to be made in this pay period together and divide the total by the number of pay periods in the year (that is, 52 weekly pay periods, 26 fortnightly pay periods or 12 monthly pay periods). Ignore any cents. 4 Add the amount at step 3 to the gross earnings at step 1. 5 Use the relevant tax table to find the amount to be withheld from the amount at step 4. 6 Subtract the amount at step 2 from the amount at step 5. 7 Multiply the amount at step 6 by the number of pay periods used in step 3 for the withholding on the additional payment. 8 Work out the total PAYG withholding for the current pay period by adding the withholding on the additional payment (step 7) to the withholding on the gross earnings (step 2). COMMISSION, BONUS OR SIMILAR PAYMENT RELATING TO A SINGLE PAY PERIOD Where the commission, bonus or similar payment relates to work performed in a single pay period (for example one week or one month) the amount is added to all other earnings for the current period. An amount should then be withheld in accordance with the normal PAYG withholding tax tables. If the payment is a one-off payment and does not relate to a particular pay period or relates to a number of pay periods in excess of 12 months, for the purpose of this table, the payment is treated as being paid over a 12 month period. 1 Refer to page 2 for the definition of normal earnings. SCHEDULE 30 TAX TABLE FOR BACK PAYMENTS, COMMISSIONS, BONUSES AND SIMILAR PAYMENTS 3

4 HELP, SFSS AND ADDITIONAL PAYMENTS If a payee has advised you they have a Higher Education Loan Program (HELP) or Student Financial Supplement Scheme (SFSS) debt on their Tax file number declaration (NAT 3092) or Withholding declaration (NAT 3093), you are required to withhold an additional amount from the additional payment according to the relevant HELP/SFSS tax tables. The amounts that are required to be withheld from additional payments for HELP and SFSS should be calculated using the same method used to calculate the PAYG withholding amount to be withheld from the additional payment. For example, if you calculate the amount to be withheld from the additional payment using Method B, you should use the same method to calculate the amounts to be withheld for HELP and SFSS purposes. USING RELEVANT TAX TABLE You can use the following schedules that combine PAYG withholding with HELP and SFSS instead of repeating the calculation separately for each component: n PAYG withholding Statement of formulas for calculating Higher Education Loan Program (HELP) component (NAT 2335) n PAYG withholding Statement of formulas for calculating Student Financial Supplement Scheme (SFSS) component (NAT 3305) n PAYG withholding Calculating Higher Education Loan Program in conjunction with Student Financial Supplement Scheme (NAT 3539). The results obtained when using the coefficients in the above schedules may differ slightly from the sums of the amounts shown in the PAYG tax tables. Either calculation is acceptable. Copies of all tax tables are available from VARIATIONS Where a payee has a withholding variation in place for the current financial year, to work out the amount of withholding you should use: n the varied rate if the payee included the income from the additional payment in their variation application, or n this tax table if the payee did not include the income from the additional payment in their variation application. If a payee had a withholding variation in place at the time the additional payment accrued, but the withholding variation is no longer in effect when the additional payment is made, it does not apply when working out the amount to withhold. If you need help to determine whether to use a withholding variation to work out the amount to withhold from an additional payment, phone us on WHERE A PAYEE HAS TAKEN LEAVE WITHOUT PAY For the purposes of this table, any periods where a payee has taken leave without pay does not affect the calculations outlined in each of the methods. For example, for Method A Prior financial year and Method B Current or prior financial years, you are still required at step 3 to apportion all additional payments made by the total number of pay periods in a year (that is, 52 weekly pay periods, 26 fortnightly pay periods or 12 monthly pay periods). HIGHER THAN NORMAL WITHHOLDING Higher than normal withholding may arise from additional payments made, resulting in a payee s earnings exceeding the HELP or SFSS threshold. Under these circumstances, a payee can apply to the ATO for a withholding variation to reduce their withholding for the rest of the financial year if their expected income will be under the compulsory repayment threshold for that year. Alternatively, a payee can wait until they lodge their income tax return and will receive credit against their tax assessment for the excess withholding. 4 SCHEDULE 30 TAX TABLE FOR BACK PAYMENTS, COMMISSIONS, BONUSES AND SIMILAR PAYMENTS

5 EXAMPLE 1: Missed payment (Method A Current financial year) Robyn, who has an accumulated HELP debt, is due to receive a back payment relating to the current year following a pay rise. Since the first pay period of the current financial year and up until her last period 10, Robyn has earned $900 per week. From pay period 11 (current), Robyn will earn $990 per week. Robyn s back payment which covers the first 10 pay periods of the current financial year will be paid to her in pay period 11. Therefore, Robyn will receive a back payment of $900 along with her normal gross earnings of $990. Using Method A the withholding amount for the current pay period 11 is calculated as follows: PAYG withholding component 1 Work out how much of Robyn s additional payment applied to each earlier pay period in the current financial year. In this example it is $900 over 10 pay periods. = $900 / 10 = $90 2 For the first affected pay period, add the additional payment relevant to that period to the normal earnings previously paid to get the total normal earnings for that period. = $900 + $90 = $990 3 Use the relevant tax table to find the amount to be withheld from Robyn s total normal earnings for that period. = $183 4 Subtract the amount previously withheld for the period from the amount at step 3. = $183 $152 = $31 5 Repeat steps 2 4 for each pay period affected. Total the amounts calculated in step 4 for each pay period for the withholding on the additional payment. As it is the same amount for each pay period in this example, it will be 10 $31. = $310 6 Use the relevant tax table to find the amount to be withheld from Robyn s gross earnings for the current pay period. = $183 7 Add the withholding on the additional payment (step 5) to the withholding on Robyn s gross earnings (step 6) to work out the total withholding for the current pay period. = $183 + $310 = $493 As Robyn has an accumulated HELP debt, a withholding amount from the back payment will also need to be calculated for HELP. Use the same method as was used to calculate withholding for the back payment in the first part of this example. HELP component 1 Work out how much of Robyn s additional payment applied to each earlier pay period in the current financial year. In this example it is $900 over 10 pay periods. = $900 / 10 = $90 2 For the first affected pay period, add the additional payment relevant to that period to the normal earnings previously paid to get total normal earnings for that period. = $900 + $90 = $990 3 Use the relevant tax table to find the amount to be withheld for HELP from Robyn s total normal earnings for that period. = $45 4 Subtract the amount previously withheld for the period from the amount at step 3. = $45 $36 = $9 5 Repeat steps 2 4 for each pay period affected. Total the amounts calculated in step 4 for each pay period for the HELP withholding on the additional payments. As it is the same amount for each pay period in this example, it will be 10 $9. = $90 6 Use the relevant tax table to find the amount to be withheld for HELP from Robyn s gross earnings for the current pay period. = $45 7 Add the HELP withholding on the additional payment (step 5) to the withholding on Robyn s gross earnings (step 6) to work out the withholding for HELP for the current period. = $45 + $90 = $135 Calculate the total PAYG withholding amount for the current pay period Add the amounts to be withheld: n PAYG withholding on gross earnings in the current pay period = $183 n PAYG withholding on additional payment = $310 n HELP withholding on gross earnings in the current pay period = $45 n HELP withholding on additional payment = $90 The total PAYG withholding is $628 ($183 + $310 + $45 + $90). Example 1 uses: n PAYG withholding Higher Education Loan Program (HELP) weekly tax table (NAT 2173) effective from 1 July 2010, and n PAYG withholding Statement of formulas for calculating the amount to be withheld (NAT 1004) effective from 1 July The calculations are made using scale 7, with tax free threshold and no leave loading. SCHEDULE 30 TAX TABLE FOR BACK PAYMENTS, COMMISSIONS, BONUSES AND SIMILAR PAYMENTS 5

6 EXAMPLE 2: Bonus payment (Method B Current or prior financial years) Mark, who has an accumulated HELP debt, is due to receive an annual bonus of $900. Mark earns $1,000 per week. Using Method B, the withholding amount for the current pay period is calculated as follows: PAYG withholding component 1 Determine Mark s gross earnings for the current pay period. = $1,000 2 Use the relevant tax table to find the amount to be withheld from Mark s gross earnings in step 1. = $186 3 Divide the additional payment by the number of pay periods in the year. = $900 / 52 = $17 4 Add the amount at step 3 to the gross earnings at step 1. = $1,000 + $17 = $1,017 5 Use the relevant tax table to find the amount to be withheld from the amount at step 4. = $191 6 Subtract the amount at step 2 from the amount at step 5. = $191 $186 = $5 7 Multiply the amount at step 6 by the number of pay periods in the year for the withholding on the additional payment. = $5 52 = $260 8 Work out the PAYG withholding for the current pay period by adding the withholding on the additional payment (step 7) to the withholding on the gross earnings (step 2). = $446 As Mark has an accumulated HELP debt, a withholding amount from the bonus payment will also need to be calculated for HELP. Use the same method as was used to calculate withholding for the bonus payment in the first part of this example. HELP component 1 Determine Mark s gross earnings for the current pay period. = $1,000 2 Use the relevant tax table to find the amount to be withheld for HELP from Mark s gross earnings determined in step 1. = $45 3 Divide the additional payment by the number of pay periods in the year. = $900 / 52 = $17 4 Add the amount at step 3 to the gross earnings at step 1. = $1,000 + $17 = $1,017 5 Use the relevant tax table to find the amount to be withheld for HELP from the amount at step 4. = $46 6 Subtract the amount at step 2 from the amount at step 5. = $46 $45 = $1 7 Multiply the amount at step 6 by the number of pay periods in the year for the HELP withholding on the additional payment. = $1 52 = $52 8 Work out the withholding for HELP for the current pay period by adding the HELP withholding on the additional payment (step 7) to the withholding on the gross earnings (step 2). = $97 Calculate the total PAYG withholding amount for the current pay period Add the amounts to be withheld: n PAYG withholding on gross earnings in the current pay period = $186 n PAYG withholding on additional payment = $260 n HELP withholding on gross earnings in the current pay period = $45 n HELP withholding on additional payment = $52 The total PAYG withholding is $543 ($186 + $260 + $45 + $52). Example 2 uses: n PAYG withholding Higher Education Loan Program (HELP) weekly tax table (NAT 2173) effective from 1 July 2010, and n PAYG withholding Statement of formulas for calculating the amount to be withheld (NAT 1004) effective from 1 July The calculations are made using scale 7, with tax free threshold and no leave loading. 6 SCHEDULE 30 TAX TABLE FOR BACK PAYMENTS, COMMISSIONS, BONUSES AND SIMILAR PAYMENTS

7 EXAMPLE 3: Lump sum payment in arrears (Method A Prior financial year) Mary is employed by Minercorp Pty Ltd and receives a weekly salary of $ She is entitled to an allowance from her employer when working in remote areas. In 2006, Mary worked in a remote area for six months, but she was not paid this allowance. The total allowance that she should have been paid for this period was $2,480. Her employer s oversight was finally discovered and her employer agreed to pay her the $2,480 as a lump sum payment in arrears on 11 November Her gross earnings for week 20 is $900. Mary has received normal earnings of $18,000 including the current pay. The amount Mary s employer must withhold from this payment is calculated using Method A as follows. Example 3 uses PAYG withholding Statement of formulas for calculating the amount to be withheld (NAT 1004) effective from 1 July The calculations are made using scale 7, with tax free threshold and no leave loading. 1 Calculate Mary s average normal earnings over the current financial year to date (including current pay) and then divide by the number of pay periods to date (including current pay period). = $18,000 / 20 = $900 2 Use the relevant tax table to find the amount to be withheld from Mary s average normal earnings in step 1. = $152 3 Add all additional payments made to Mary in the current financial year (including additional payment in the current pay). Mary s additional payment of $2,480 is then divided by the number of pay periods in the year. = $2,480 / 52 = $47 4 Add the amount at step 3 to the average normal earnings at step 1. = $900 + $47 = $947 5 Use the relevant tax table to find the amount to be withheld from the amount at step 4. = $168 6 Subtract the amount at step 2 from the amount at step 5. = $168 $152 = $16 7 Multiply the amount in step 6 by the number of pay periods used in step 3. = $16 52 = $832 8 Subtract any amounts previously withheld from additional payments in the current financial year from the amount at step 7 for the withholding on the additional payment. = $832 $0 = $832 9 Use the relevant tax table to find the amount to be withheld from the payee s gross earnings (excluding additional payments) for the current pay period. = $ Work out the total PAYG withholding for this pay period by adding the withholding on the additional payment (step 8) to the withholding on the gross earnings (step 9). = $832 + $152 = $984 SCHEDULE 30 TAX TABLE FOR BACK PAYMENTS, COMMISSIONS, BONUSES AND SIMILAR PAYMENTS 7

8 EXAMPLE 4: Integrated example (Method A Current and prior financial year) Pablo, who has an accumulated Financial Supplement debt, is employed by Macropayers Pty Ltd. On 1 September 2010 he received a salary increase of $5 an hour, taking his gross monthly salary from $3,600 to $4,400. His employer agreed that the increase would be backdated to 1 August 2009 and paid at the end of September This means that the back payment of salary covers 13 pay periods. The total back payment of salary is $10,400. To work out the total amount to be withheld from the back payment to Pablo, his employer will need to calculate the amount accrued in: n the current financial year (2 pay periods from 1 July to August 2010) = $1,600, and n a prior financial year (11 pay periods from 1 August 2009 to 30 June 2010) = $8,800. PAYG withholding component for current financial year 1 Work out how much of Pablo s additional payment applied to each earlier pay period in the current financial year. In this example it is $1,600 over 2 pay periods. = $1,600 / 2 = $800 2 For the first affected pay period, add the additional payment relevant to that period to the normal earnings previously paid to get total normal earnings for that period. = $3,600 + $800 = $4,400 3 Use the relevant tax table to find the amount to be withheld from Pablo s total normal earnings for that period. = $828 4 Subtract the amount previously withheld for the period from the amount at step 3. = $828 $559 = $269 5 Repeat steps 2 4 for each pay period affected. Total the amounts calculated in step 4 for each pay period for the withholding on the additional payment. As it is the same amount for each pay period in this example, it will be 2 $269. = $538 6 Use the relevant tax table to find the amount to be withheld from Pablo s gross earnings for the current period. = $828 7 Add the withholding on the additional payment (step 5) to the withholding on Pablo s gross earnings (step 6) to work out the withholding for the current period. = $538 + $828 = $1,366 As Pablo has an accumulated Financial Supplement debt, a withholding amount from the back payment will also need to be calculated for SFSS. Use the same method as was used to calculate withholding for the back payment in the first part of this example. SFSS component for current financial year 1 Work out how much of Pablo s additional payment applied to each earlier pay period in the current financial year. In this example it is $1,600 over 2 pay periods. = $1,600 / 2 = $800 2 For the first affected pay period, add the additional payment relevant to that period to the normal earnings previously paid to get total normal earnings for that period. = $3,600 + $800 = $4,400 3 Use the relevant tax table to find the amount to be withheld for SFSS from Pablo s total normal gross earnings for that period. = $87 4 Subtract the amount previously withheld for the period from the amount at step 3. = $87 $0 = $87 5 Repeat steps 2 4 for each pay period affected. Total the amounts calculated in step 4 for each pay period for the SFSS withholding on the additional payment. As it is the same amount for each pay period in this example, it will be 2 $87. = $174 6 Use the relevant tax table to find the amount to be withheld for SFSS from Pablo s gross earnings for the current period. = $87 7 Add the withholding on the additional payment (step 5) to the withholding on Pablo s gross earnings (step 6) to work out the withholding for SFSS for the current period. = $174 + $87 = $261 Example 4 uses: n PAYG withholding Student Financial Supplement Scheme (SFSS) monthly tax table (NAT 3308) effective from 1 July 2010, and n PAYG withholding Statement of formulas for calculating the amount to be withheld (NAT 1004) effective from 1 July The calculations are made using scale 7, with tax free threshold and no leave loading. 8 SCHEDULE 30 TAX TABLE FOR BACK PAYMENTS, COMMISSIONS, BONUSES AND SIMILAR PAYMENTS

9 EXAMPLE 4 continued: Integrated example (Method A Current and prior financial year) PAYG withholding component for prior financial year 1 Calculate Pablo s average normal earnings, which in this example is = (salary earnings to date + current year additional payments to date) / number of pay periods = ($3,600 + $3,600 + $4,400 + $1,600) / 3 = $4,400 2 Use the relevant tax table to find the amount to be withheld from Pablo s average normal earnings in step 1. = $828 3 Add all additional payments paid to Pablo in the current financial year (including the additional payment in the current pay) then divide by the number of pay periods in the year. = $10,400 ($8,800 + $1,600) / 12 = $866 4 Add the amount at step 3 to the average normal earnings at step 1. = $4,400 + $866 = $5,266 5 Use the relevant tax table to find the amount to be withheld from the amount at step 4. = $1,118 6 Subtract the amount at step 2 from the amount at step 5. = $1,118 $828 = $290 7 Multiply the amount in step 6 by the number of pay periods used in step 3. = $ = $3,480 8 Subtract any amounts previously withheld from additional payments in the current financial year from the amount at step 7 for the withholding on the additional payment. = $3,480 $538 = $2,942 As Pablo has an accumulated Financial Supplement debt, a withholding amount from the back payment will also need to be calculated for SFSS. Use the same method as was used to calculate withholding for the back payment in the first part of this example. SFSS component for prior financial year 1 Calculate Pablo s average normal earnings, which in this example is = (salary earnings to date + current year additional payments to date) / number of pay periods = ($3,600 + $3,600 + $4,400 + $1,600) / 3 = $4,400 2 Use the relevant tax table to find the amount to be withheld for SFSS on Pablo s average normal earnings in step 1. = $87 3 Add all additional payments paid to Pablo in the current financial year (including the additional payment in the current pay) then divide by the number of pay periods in the year. = $10,400 ($8,800 + $1,600) / 12 = $866 4 Add the amount at step 3 to the average normal earnings at step 1. = $4,400 + $866 = $5,266 5 Use the relevant tax table to find the amount to be withheld for SFSS from the amount at step 4. = $156 6 Subtract the amount at step 2 from the amount at step 5. = $156 $87 = $69 7 Multiply the amount in step 6 by the number of pay periods used in step 3. = $69 12 = $828 8 Subtract any amounts previously withheld from additional payments in the current financial year from the amount at step 7 for the withholding for SESS on the additional payment. = $828 $174 = $654 Calculate the total PAYG withholding amount for the current pay period Add the amounts to be withheld: n PAYG withholding on gross earnings in the current pay period = $828 n PAYG withholding on additional payment for current year = $538 n PAYG withholding on additional payment for prior year = $2,942 n SFSS withholding on gross earnings in the current pay period = $87 n SFSS withholding on additional payment for current year = $174 n SFSS withholding on additional payment for prior year = $654 The total PAYG withholding is $5,223 ($828 + $538 + $2,942 + $87 + $174 + $654). SCHEDULE 30 TAX TABLE FOR BACK PAYMENTS, COMMISSIONS, BONUSES AND SIMILAR PAYMENTS 9

10 SUPERANNUATION INCOME STREAMS To work out the amount to withhold from the taxable component of back payments of superannuation income streams (pensions and annuities), including lump sum payments in arrears, use either Method A or B. PAYMENT SUMMARIES You must record back payments on your payee s payment summary. The payment summary you use depends on whether the back payments relate to a superannuation income stream or not. Use: n PAYG payment summary individual non business (NAT 0046) for all back payments except those for superannuation income streams or if they were related to a previous period of assessable foreign service n PAYG payment summary superannuation income stream (NAT 70987) for superannuation income stream payments n PAYG payment summary foreign employment (NAT 72397) for payments related to a previous period of assessable foreign service. For more information on payment summaries, visit Completing the individual non business payment summary For payments accrued in the current financial year include: n the total gross amount of all payments at Gross payments Salary and/or wages accrued prior to the current financial year For one or more payments that were accrued in a prior financial year, but not more than 12 months prior to the date of payment include: n the total gross amount of the payments at Gross payments For one or more payments that were accrued more than 12 months prior to the date of payment that were each less than $400, include: n the total gross amount of the payments at Gross payments For one or more payments that were accrued more than 12 months prior to the date of payment that were each $400 or more, include: n the total gross amount of the payments at Lump sum E Other amounts accrued prior to the current financial year 2 For one or more payments that were accrued in a prior financial year that were each less than $400, include: n the total gross amount of the payments at Gross payments For one or more payments that were accrued in a prior financial year that were each $400 or more, include: n the total gross amount of the payments at Lump sum E Letter You must also provide the payee with a letter specifying the financial years over which the amount accrued and the gross amount that accrued each year. Completing the superannuation income stream payment summary For payments accrued in the current financial year, include: n the component amounts at Taxable component (both taxed and untaxed elements if applicable), and Tax free component n the amount withheld at Total tax withheld. For payments accrued prior to the current financial year, include: n the component amounts at Lump sum in arrears taxable component (both taxed and untaxed elements if applicable), and Lump sum in arrears tax free component n the amount withheld at Total tax withheld. Letter You must also provide the payee with a letter specifying the financial years over which the amount accrued and the gross amount that accrued each year. Completing the foreign employment payment summary If the payment of salary and/or wages accrued in the current financial year, include: n the total gross amount of all payments at Gross payments n the total amount withheld and paid to a foreign tax jurisdiction (if applicable) at Foreign tax paid n the total amount withheld for Australian tax purposes at Total Australian tax withheld. If one or more payments of salary and/or wages were accrued in a prior financial year, but not more than 12 months prior to the date of payment that were each less than $400, include: n the total gross amount of the payments at Gross payments n the total amount withheld and paid to a foreign tax jurisdiction (if applicable) at Foreign tax paid n the total amount withheld for Australian tax purposes at Total Australian tax withheld. If one or more payments of salary and/or wages were accrued in a prior financial year, but not more than 12 months prior to the date of payment that were each $400 or more, include: n the total gross amount of the payments at Lump sum E n the total amount withheld and paid to a foreign tax jurisdiction (if applicable) at Foreign tax paid n the total amount withheld for Australian tax purposes at Total Australian tax withheld. Letter You must also provide the payee with a letter specifying the financial years over which the amount accrued and the gross amount that accrued each year. PAYG WITHHOLDING PUBLICATIONS All PAYG withholding tax tables and other PAYG publications can be accessed quickly and easily from Copies of weekly and fortnightly tax tables are available from most newsagents. Newsagents also hold copies of the Tax file number declaration (NAT 3092), Withholding declaration (NAT 3093) and the Flood levy exemption declaration (NAT 73797). 2 Refer to page 2 for the definition of other payments that use this tax table. 10 SCHEDULE 30 TAX TABLE FOR BACK PAYMENTS, COMMISSIONS, BONUSES AND SIMILAR PAYMENTS

11 AUSTRALIAN TAXATION OFFICE FOR THE COMMONWEALTH OF AUSTRALIA, 2012 You are free to copy, adapt, modify, transmit and distribute this material as you wish (but not in any way that suggests the ATO or the Commonwealth endorses you or any of your services or products). PUBLISHED BY Australian Taxation Office Canberra February 2012 OUR COMMITMENT TO YOU We are committed to providing you with accurate, consistent and clear information to help you understand your rights and entitlements and meet your obligations. If you feel that this publication does not fully cover your circumstances, or you are unsure how it applies to you, you can seek further assistance from us. We regularly revise our publications to take account of any changes to the law, so make sure that you have the latest information. If you are unsure, you can check for more recent information on our website at or contact us. This publication was current at February JS SCHEDULE 30 TAX TABLE FOR BACK PAYMENTS, COMMISSIONS, BONUSES AND SIMILAR PAYMENTS 11

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