{"id":"F2018L00775","name":"PAYG Withholding variation to the rate of withholding for superannuation income stream beneficiaries who turn 60 during the financial year","slug":"payg-withholding-variation-to-the-rate-of-withholding-for-superannuation-income-stream-beneficiaries","collection":"legislative_instrument","jurisdiction":"commonwealth","status":"in_force","isInForce":true,"actNumber":null,"makingDate":null,"administeringDepartment":null,"currentVersion":{"id":97411,"registerId":"commonwealth-F2018L00775-current","compilationNumber":null,"startDate":"2026-04-02","status":"InForce","reasons":null,"registeredAt":null},"sections":[{"sectionNumber":"1","sectionType":"section","heading":"PAYG Withholding variation to the rate of withholding for superannuation income stream beneficiaries who turn 60 during the financial year","content":"Legislative Instrument\n\nPAYG Withholding variation to the rate of withholding for superannuation income stream beneficiaries who turn 60 during the financial year\n\nI, Deborah Anne Jenkins, Deputy Commissioner of Taxation, make this instrument under section 15-15 of Schedule 1 of the Taxation Administration Act 1953.\n\nDeputy Commissioner of Taxation\n\nDated: 31 May 2018\n\n    Name of instrument\n\n    This instrument is the PAYG Withholding variation to the rate of withholding for superannuation income stream beneficiaries who turn 60 during the financial year.\n\n    2. Effective dates\n    This instrument commences on 1 July 2018.\n\n    3. Application\n    This instrument applies to the taxed element of the taxable component of payments that:\n\n    are superannuation income streams covered by paragraph 12-80(a) of Schedule 1 to the Taxation Administration Act 1953\n    consist of a taxed element only\n    are paid to a payee who is aged 59 years on 30 June immediately before the start of the relevant financial year; and\n    do not exceed the defined benefit income cap.\n\nThe amount to be withheld from the taxable component of these payments is the amount calculated using the following rules.\n\nRULES FOR CALCULATING VARIED WITHHOLDING AMOUNT\n\nStep 1\n\nCalculate the amount of assessable income the payee will receive before their 60th birthday.\n\nAssessable income before 60th birthday = (taxable component of the payment x number of payments before 60th birthday)\n\nwhere:\n\n-   the taxable component of a superannuation income stream benefit is the amount of the income stream minus the tax free component of the benefit,\n\nand\n\n-   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.\n\nStep 2\n\nTurn the Assessable income before 60th birthday (Step 1) into an average payment per pay period, as if spread over whole year.\n\nAssessable income before 60th birthday / total number of payments in the year\n\nTotal number of payments made for the year:\n\n-   52, for payments made weekly\n-   26, for payments made fortnightly; or\n-   12, for payments made monthly.\n\nThe result is the payee’s Adjusted average payment.\n\nStep 3\n\nConvert 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.\n\nIf the payments are made fortnightly or monthly, calculate the weekly equivalent using the following:\n\n    fortnightly payments - divide the sum of the fortnightly payment by two. Ignore any cents in the result and then add 99 cents.\n\nor\n\n    monthly payments - multiply the monthly payment by 3 and then divide by 13. Ignore any cents in the result and then add 99 cents.\n\nStep 4\n\nCalculate 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).\n\nIf the payments are made fortnightly or monthly, calculate the withholding amounts using the following:\n\n    fortnightly payments – determine the weekly withholding. Multiply this amount by two.\n\nor\n\n    monthly payments – determine the weekly withholding. Multiply this amount by 13, divide the product by 3.\n\nRound the result to the nearest dollar.\n\nStep 5\n\nAdjust the amount calculated in Step 4 for the number of payments made before the payee’s 60th birthday.\n\nAdjusted total number of payments\n\nwithholding \\= withholding amount (Step 4) x in year\n\namount number of payments\n\nbefore 60th birthday\n\nRound the result to the nearest dollar.\n\nStep 6\n\nCalculate the superannuation tax offset applicable to the payment.\n\nTaxable component of the payment x 15% = Superannuation tax offset\n\nRound the result to the nearest dollar.\n\nStep 7\n\nCalculate the Notional amount to be withheld per payment.\n\nNotional amount Adjusted withholding amount (Step 5) – Superannuation\n\nto be withheld \\= tax offset (Step 6)\n\nRound the result to the nearest dollar.\n\nNote: If the Superannuation tax offset is greater than the Adjusted withholding amount, the Notional amount to be withheld is nil.\n\nStep 8\n\nUsing the appropriate formula below, calculate the Medicare levy adjustment applicable to the payment.\n\nIf the payee’s Assessable income before 60th birthday (Step 1) is:\n\n-   less than $21,655 – the payee’s Medicare levy adjustment is nil.\n\n-   greater than $21,655 but less than $27,068 – the payee’s Medicare levy adjustment is equal to:\n\n(Assessable income before 60th birthday \\- $21,655) x 0.10 / number of payments before 60th birthday.\n\n-   greater than $27,067 – the payee’s Medicare levy adjustment is equal to:\n\n(Assessable income before 60th birthday x 0.02) / number of payments before 60th birthday\n\nRound the result to the nearest dollar.\n\nStep 9\n\nTo calculate the varied withholding amount, compare the Notional amount to be withheld (Step 7) to the Medicare levy adjustment (Step 8).\n\nIf the Notional amount to be withheld is more than the Medicare levy adjustment, withhold the Notional amount to be withheld (Step 7).\n\nIf the Notional amount to be withheld is less than the Medicare levy adjustment or zero, withhold the Medicare levy adjustment (Step 8).\n\nEXAMPLE CALCULATIONS:\n\nSchedule 1 \\- Statement of formulas for calculating amounts to be withheld 2017/18, Scale 2 is used in these examples\n\nExample 1\n\nSally is 59 years old and receives a fortnightly superannuation income stream of $2,140 during the 2017-18 financial year.\n\nThe 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.\n\nSally will turn 60 on 8 January 2018\\. Her super fund will make 14 payments before she turns 60 and 12 payments after.\n\nAs 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.\n\nCalculate the varied withholding amount\n\nStep 1\n\nCalculate Sally’s Assessable income before 60th birthday.\n\nAssessable income before 60th birthday: $1,700 x 14 = $23,800\n\nStep 2\n\nConvert the amount calculated at Step 1 into an Adjusted average payment.\n\nAdjusted average payment: $23,800 / 26 = $915.38\n\nStep 3\n\nCalculate Sally’s adjusted weekly payment amount.\n\nSally’s adjusted weekly amount: $915.38 / 2\n\n\\= $457.99 (ignoring cents, adding 0.99)\n\nStep 4\n\nCalculate the withholding on the amount calculated at Step 3.\n\nWeekly withholding \\= $457.99 x 0.2900 – 109.1077\n\n\\= $23.7094\n\n\\= $24 per week (rounded to the nearest dollar)\n\nFortnightly withholding: $24 x 2 = $48 per fortnight\n\nStep 5\n\nCalculate Sally’s Adjusted withholding amount based on the amount calculated at Step 4.\n\nAdjusted withholding \\= $48 x 26 / 14\n\namount \\= $89.1428\n\n\\= $89 per fortnight (rounded to the nearest dollar)\n\nStep 6\n\nCalculate the per payment Superannuation tax offset Sally is entitled to. This is calculated using the taxable component of her payment.\n\nSuperannuation tax offset: $1,700 x 15% = $255 (rounded to the nearest dollar)\n\nStep 7\n\nCalculate the Notional amount to be withheld.\n\nAs 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.\n\nStep 8\n\nCalculate Sally’s Medicare levy adjustment.\n\nAs Sally’s assessable income before her 60th birthday of $23,800 (Step 1) is greater than $21,655, her Medicare levy adjustment is:\n\n$23,800 - $21,655 = $2,145\n\n$2,145 x 0.100 / 14 = $15 (rounded to the nearest dollar)\n\nStep 9\n\nCalculate Sally’s varied withholding amount.\n\nAs Sally’s Medicare levy adjustment ($15 – Step 8) is greater than her Notional amount to be withheld ($0 – Step 7), her varied withholding amount is $15.\n\nExample 2\n\nScott is 59 years old and receives a weekly superannuation income stream of $1,900, during the 2017-18 financial year.\n\nThe tax free component of Scott’s weekly superannuation income stream is $175. The taxable component of the superannuation income stream is $1,725\\. The taxable component is comprised wholly of a taxed element.\n\nScott will turn 60 on 21 April 2018\\. His superannuation fund will make 42 payments before his 60th birthday and 10 payments after.\n\nAs the taxable component of Scott’s income stream is comprised wholly of a taxed element he will not have to pay any tax on this income after his 60th birthday. The amount to be withheld from each payment should be varied. Scott has claimed the tax-free threshold.\n\nCalculate the varied withholding amount\n\nStep 1\n\nCalculate Scott’s Assessable income before 60th birthday.\n\nAssessable income before 60th birthday: $1,725 x 42 = $72,450\n\nStep 2\n\nConvert the amount calculated at Step 1 into an Adjusted average payment.\n\nAdjusted average payment: $72,450 / 52 = $1,393.27\n\nStep 3\n\nCalculate Scott’s adjusted weekly payment amount.\n\n\\= $1,393.99 (ignoring cents, adding 0.99)\n\nStep 4\n\nCalculate the withholding on Scott’s adjusted weekly payment amount.\n\nWeekly withholding \\= $1,393.99 x 0.3450 – 161.9819\n\n\\= $318.9447\n\n\\= $319 per week (rounded to the nearest dollar)\n\nStep 5\n\nCalculate Scott’s Adjusted withholding amount based on the amount calculated at Step 4.\n\nAdjusted withholding \\= $319 x 52 / 42\n\namount \\= $394.9524\n\n\\= $395 per week (rounded to the nearest dollar)\n\nStep 6\n\nCalculate the per payment Superannuation tax offset that Scott is entitled to, based on the taxable component of his payment.\n\nSuperannuation tax offset: $1,725 x 15% = $259 (rounded to the nearest dollar)\n\nStep 7\n\nCalculate the Notional amount to be withheld.\n\nAs Scott’s Adjusted withholding amount is greater than his superannuation tax offset then the notional amount to be withheld is:\n\nNotional amount to be withheld \\= $395 (Step 5) - $259 (Step 6) = $136\n\nStep 8\n\nCalculate Scott’s Medicare levy adjustment.\n\nAs Scott’s assessable income before his 60th birthday of $72,450 (Step 1) is greater than $27,067, his Medicare levy adjustment is:\n\n$72,450 x 0.02 / 42 = $35 (rounded to the nearest dollar)\n\nStep 9\n\nCalculate Scott’s varied withholding amount.\n\nAs Scott’s notional amount to be withheld ($136 – Step 7) is greater than his Medicare levy adjustment ($35 – Step 8), his varied withholding amount is $136.\n\nExample 3  \n\nBrian is 59 years old and has just commenced receiving weekly superannuation income stream benefits of $1,500. His first payment will be made on 6th September 2017.\n\nThe tax free component of Brian’s weekly superannuation income stream benefit is $115. The taxable component of the superannuation income stream is $1,385. The taxable component is comprised wholly of a taxed element.\n\nBrian will turn 60 on 3 February 2018\\. His super fund will make 22 payments before he turns 60 and 21 payments after.\n\nAs the taxable component of Brian's superannuation income stream is comprised wholly of a taxed element he will not have to pay any tax on this after he turns 60. The amount to be withheld from each payment should be varied. Brian has claimed the tax-free threshold and is not entitled to leave loading.\n\nCalculate the adjusted withholding amount\n\nStep 1\n\nCalculate Brian's Assessable income before 60th birthday.\n\nAssessable income before 60th birthday: $1,385 x 22 = $30,470\n\nStep 2\n\nConvert the amount calculated at Step 1 into an Adjusted average payment.\n\nAdjusted average payment: $30,470 / 52 = $585.96\n\nStep 3\n\nCalculate Brian's adjusted weekly payment amount.  \n\\= $585.99 (ignoring cents, adding 0.99)\n\nStep 4\n\nCalculate the withholding on Brian's adjusted weekly payment amount.\n\nWeekly withholding \\= $585.99 x 0.2100 – 67.4646\n\n\\= $55.5933\n\n\\= $56 per week (rounded to the nearest dollar)\n\nStep 5\n\nCalculate Brian’s Adjusted withholding amount based on the amount calculated at\n\nAdjusted withholding \\= $56 x 52 / 22\n\namount \\= $132.3636\n\n\\= $132 per week (rounded to the nearest dollar)\n\nStep 6\n\nCalculate the per payment superannuation tax offset Brian is entitled to, based on the taxable component of his payment.\n\nSuperannuation tax offset: $1385 x 15% = $208 (rounded to the nearest dollar)\n\nStep 7\n\nCalculate the Notional amount to be withheld.  \nAs Brian’s Superannuation tax offset ($208 – Step 6) is greater than his Adjusted withholding amount ($132 – Step 5) his Notional amount to be withheld is $0.\n\nStep 8\n\nCalculate Brian’s Medicare levy adjustment.\n\nAs Brian’s assessable income before his 60th birthday of $30,470 (Step 1) is greater than $27,067, his Medicare levy adjustment is:\n\n$30,470 x 0.02 / 22 = $28 (rounded to the nearest dollar)\n\nStep 9\n\nCalculate Brian’s varied withholding amount.\n\nAs Brian’s Medicare levy adjustment ($28 – Step 8) is greater than his Notional amount to be withheld ($0 – Step 7), his varied withholding amount is $28.","sortOrder":0}],"analysis":{"flash_summary":{"complexity_score":6,"scope_assessment":{"changed":false,"description":"This instrument is narrowly focused and consistent with its apparent original purpose: to adjust PAYG withholding so that tax withheld before a beneficiary’s 60th birthday better reflects that the taxed element becomes tax-free after age 60. It does not extend coverage to new classes of payees, create new tax liabilities, or add enforcement powers. The rules prescribe a specific computational procedure rather than broadening the legal scope of PAYG withholding. Therefore the policy scope has not grown significantly beyond its original, targeted intent."},"complexity_factors":["Nine-step numerical algorithm (Steps 1–9) with sequential dependencies","Multiple frequency-conversion rules (weekly, fortnightly, monthly) including non-standard conversion formulas (Step 3)","Rounding rules at several stages (ignore cents then add $0.99; round to nearest dollar in multiple steps)","Cross-reference to external ATO materials (Statement of formulas NAT 1004 and Weekly tax table NAT 1005) for core withholding formula (Step 4)","Eligibility requires satisfying four separate conditions (Schedule 1 para 12-80(a) coverage; taxed-element-only; aged 59 on prior 30 June; not exceeding defined benefit income cap) (\"Application\")","Two separate offsets/adjustments (15% superannuation tax offset in Step 6; Medicare levy adjustment with three threshold branches in Step 8)","Conditional logic at final stage comparing notional withholding and Medicare levy adjustment (Step 9)","Examples included that illustrate applications but add interpretive load across different payment frequencies and counts","Dependence on accurate predictions (number of payments before 60th birthday) increasing operational complexity"],"plain_english_summary":"**What this instrument does (mechanically)**\n\n- This is a binding instruction by the Deputy Commissioner of Taxation that changes how much tax (PAYG withholding) a superannuation income stream provider must withhold from payments to certain pension recipients who turn 60 during a financial year (see \"Application\" and Steps 1–9).\n- It applies only to payments that are: (a) superannuation income streams covered by paragraph 12-80(a) of Schedule 1 to the Taxation Administration Act 1953; (b) made up only of a \"taxed element\" (i.e. not including an untaxed element); (c) paid to someone who was 59 years old on the preceding 30 June; and (d) do not exceed the defined benefit income cap (see \"Application\").\n- The instrument replaces the normal withholding rate with a nine-step calculation that: (1) estimates the assessable income the recipient will receive before they turn 60, (2) converts that amount into an equivalent weekly figure depending on payment frequency, (3) calculates a withholding amount from the weekly figure using the ATO formulae or tables (NAT 1004/NAT 1005), (4) adjusts for the number of payments before the 60th birthday, (5) subtracts a 15% superannuation tax offset, and (6) ensures a Medicare levy component is collected if appropriate (see Steps 1–9). Rounding and frequency-conversion rules are given for weekly, fortnightly and monthly payment patterns (see Steps 2–4 and Step 3 rounding rule).\n\n**Who it affects**\n\n- Primary effect: individual recipients of certain superannuation income streams who are 59 on 30 June and will turn 60 during that financial year; those recipients will have less tax withheld from their payments before their 60th birthday than would otherwise be withheld under standard PAYG tables (see \"Application\" and Step 9).\n- Secondary effect: superannuation funds and administrators — they must apply the 9-step withholding variation and record/calculatethe adjusted withholding per payment.\n- The Australian Taxation Office (ATO) administers the instrument; it is made under the Taxation Administration Act 1953 (section 15-15 of Schedule 1) and therefore sets mandatory withholding rules for applicable funds/providers.\n\n**Why it matters (official purpose, then practical effects and trade-offs)**\n\n- Official purpose claim: the instrument is intended to reduce withholding on payments made before the beneficiary turns 60 because once a person is 60, the taxed element of certain income streams becomes tax-free — so a full-year withholding pattern would over-collect tax before that birthday (see \"Application\" and Steps 1–7).\n\n- Practical effect: for qualifying recipients, funds will withhold less tax in the part-year before the 60th birthday. The instrument achieves this by estimating the part-year assessable income and applying PAYG formulas pro rata, then offsetting the result by the 15% superannuation tax offset and ensuring an appropriate Medicare levy is collected (Steps 1–9). The immediate cash effect is increased net payments to those recipients before they turn 60.\n\n- Who pays and who decides: the recipient ultimately bears any final tax liability at assessment, but the immediate change is implemented by the super fund (or payer) who must withhold according to this instrument. The Deputy Commissioner decided the rule (instrument made under TAA s15-15).\n\n- Costs, incentives and trade-offs:\n  - Implementation and compliance costs: super funds and payroll/payments software must implement the 9-step algorithm, apply frequency conversions and rounding rules, and track the number of payments before the 60th birthday. This creates an administrative burden and potential need for software updates (Steps 1–5, Step 3 rounding rules, cross-reference to NAT 1004/NAT 1005).\n  - Estimation and operational risk: the calculation requires predicting the number of payments before the birthday and converting payment frequencies: errors in counting payments, mis-timing the birthday, or incorrect application of rounding rules may lead to under- or over-withholding and later adjustments on the recipient’s tax return (Steps 1–3, Step 5).\n  - Revenue timing: the ATO (and government) may receive tax later in the year or at assessment rather than at each pay event; the instrument retains a Medicare levy collection step to protect some levy revenue (Step 8–9).\n  - Concentrated benefit, diffuse cost: the direct cash benefit is concentrated on those who turn 60 mid-year; administrative costs are spread across funds, software vendors and the ATO.\n  - Behavioural or market effects: this is a targeted payroll-withholding change. It does not change substantive tax treatment (the underlying tax-free status after age 60 remains in law) and does not affect competition, prices, ownership, or contractual freedom outside the operational burden on super funds. It may slightly alter recipients’ short-term consumption possibilities by increasing net payments pre-60.\n\n**Implementation notes and risks**\n\n- Cross-references: the instrument requires use of external ATO tables/formulae (NAT 1004/NAT 1005) to compute the base withholding (Step 4) — funds must ensure they use the correct year’s tables.\n- Rounding and frequency rules are specific (e.g. ignore cents then add $0.99 for weekly-equivalent conversion; multiply/divide rules for monthly payments) and are operational points that typically require system changes (Step 3).\n- The Medicare levy adjustment uses fixed thresholds specified in the instrument (Step 8). If thresholds change in broad tax settings, the instrument would need updating or risk mis-collection.\n\n**Where the instrument sits legally**\n\n- This is a variation to the PAYG withholding rules made under powers in the Taxation Administration Act 1953 (section noted at the head of the instrument). It prescribes a binding withholding method for a narrowly defined class of superannuation payments (\"Application\").\n\n(References: eligibility conditions and the step-by-step calculation are set out in the instrument under \"Application\" and Steps 1–9.)"},"flash_summary_failed":{"failed":true,"reason":"Unauthenticated. Configure AI_GATEWAY_API_KEY or use a provider module. Learn more: https://ai-sdk.dev/unauthenticated-ai-gateway","source":"analysis-cron"},"kimi_summary":{"content_quality":"ok","complexity_score":7,"scope_assessment":{"changed":false,"description":"This legislative instrument performs exactly the function described in its title. It provides a specific withholding variation methodology for a narrow, well-defined cohort (59-year-olds turning 60 during the financial year receiving taxed-element superannuation income streams). The scope remains tightly constrained to this specific administrative problem without expansion into broader tax policy areas."},"complexity_factors":["9-step calculation algorithm with nested conditional logic (Steps 8 and 9 contain threshold tests and alternative formulas)","Cross-references to external tax tables (NAT 1004 and NAT 1005) and the Taxation Administration Act 1953","Multiple rounding rules applied at different stages (ignore cents, add 99 cents, round to nearest dollar)","Three different payment frequency branches (weekly/fortnightly/monthly) with distinct conversion formulas","Defined terms requiring external knowledge ('taxed element', 'taxable component', 'tax free component', 'defined benefit income cap', 'superannuation income stream')","Mathematical operations that must be performed in precise sequence (each step depends on the previous)","Exception handling (Note in Step 7: if offset exceeds withholding, result is nil)","Medicare levy adjustment with three-tier threshold structure ($21,655 and $27,067 breakpoints)"],"plain_english_summary":"This instrument tells superannuation funds how to withhold tax from regular pension payments when a member turns 60 part-way through the financial year. It applies where payments are taxed elements and fall within the defined benefit cap.\n\nIt prescribes a precise formula to apportion taxable income across the year, apply the 15% super offset and Medicare levy, and set a fair withholding rate so members neither overpay early nor face surprise tax bills later."}},"importantCases":[],"_links":{"self":"/api/acts/payg-withholding-variation-to-the-rate-of-withholding-for-superannuation-income-stream-beneficiaries","history":"/api/acts/payg-withholding-variation-to-the-rate-of-withholding-for-superannuation-income-stream-beneficiaries/history","analysis":"/api/acts/payg-withholding-variation-to-the-rate-of-withholding-for-superannuation-income-stream-beneficiaries/analysis","conflicts":"/api/acts/payg-withholding-variation-to-the-rate-of-withholding-for-superannuation-income-stream-beneficiaries/conflicts","importantCases":"/api/acts/payg-withholding-variation-to-the-rate-of-withholding-for-superannuation-income-stream-beneficiaries/important-cases","documents":"/api/acts/payg-withholding-variation-to-the-rate-of-withholding-for-superannuation-income-stream-beneficiaries/documents"}}