Example 1: Withholding from a bonus payment using Method A
Mark, who has an accumulated HELP debt, is due to receive an annual bonus of $900. Mark earns $1,500 per week. Using Method A, calculate the withholding amount for the current pay period as follows:
PAYG withholding component
Step
Instruction
Result
1
Work out Mark’s gross earnings for the current pay period.
$1,500
2
Use the relevant tax table to find the amount to be withheld from Mark’s gross earnings in step 1.
$355
3
Divide the additional payment by the number of pay periods in the financial year.= $900 / 52
$17
4
Add the amount at step 3 to the gross earnings at step 1.= $1,500 + $17
$1,517
5
Use the relevant tax table to find the amount to be withheld from the amount at step 4.
$361
6
Subtract the amount at step 2 from the amount at step 5.= $361 − $355
$6
7
Multiply the amount at step 6 by the number of pay periods in the financial year for the withholding on the additional payment.= $6 × 52
$312
As Mark has an accumulated HELP debt, his employer also needs to calculate a withholding amount from the bonus payment for HELP. They use the same method as they used to calculate withholding for the bonus payment in the first part of this example.
HELP component
Step
Instruction
Result
1
Work out Mark’s gross earnings for the current pay period.
$1,500
2
Use the relevant tax table to find the amount to be withheld for HELP from Mark’s gross earnings in step 1.
$90
3
Divide the additional payment by the number of pay periods in the financial year.= $900 / 52
$17
4
Add the amount at step 3 to the gross earnings at step 1.= $1,500 + $17
$1,517
5
Use the relevant tax table to find the amount to be withheld for HELP from the amount at step 4.
$91
6
Subtract the amount at step 2 from the amount at step 5.= $91 − $90
$1
7
Multiply the amount at step 6 by the number of pay periods in the financial year for the HELP withholding on the additional payment.= $1 × 52
$52
Withholding limit (including HELP component)
Step
Instructions
Result
8
Multiply the additional payment being made in the current pay period by 49%.= $900 × 49%
$441
9
Use the lesser amount of step 7 (combined) and step 8 for the withholding on the additional payment. Ignore any cents.Combine two step 7 results $312 + $52= $364. This amount is used as it’s less than step 8.
$364
10
See below
Calculate the total PAYG withholding amount for the current pay period (step 10)
■ PAYG withholding on gross earnings in the current pay period = $355
■ HELP withholding on gross earnings in the current pay period = $90
■ PAYG withholding on additional payment = $312
■ HELP withholding on additional payment = $52
The total PAYG withholding is $809 ($355 + $90 + $312 + $52).
Example 1 uses both:
■ Higher Education Loan Program (HELP)/Trade Support Loan (TSL) weekly tax table (NAT 2173) effective from 1 July 2015
■ Statement of formulas for calculating the amount to be withheld (NAT 1004) effective from 1 July 2015 – the calculations are made using scale 2, with tax-free threshold.
Example 2: Withholding from a missed pay Example 2: Withholding from a missed payment using Method B(i)
Example 2: Withholding from a missed payment using Method B(i)
Robyn, who has an accumulated HELP debt, is due to receive a back payment relating to the current financial year following a pay rise. Since the first pay period of the current financial year and up until period 8, Robyn has earned $1,000 per week. From pay period 9 (her current pay period), Robyn will earn $1,100 per week. Robyn’s back payment which covers the first eight pay periods of the current financial year will be paid to her in pay period 9. Therefore, Robyn will receive a back payment of $800 along with her normal gross earnings of $1,100. Using Method B(i), calculate the withholding amount for the current pay period 9 as follows:
PAYG withholding component
Step
Instruction
Result
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 $800 over eight pay periods.= $800 / 8
$100
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 earnings for that period.= $1,000 + $100
$1,100
3
Use the relevant tax table to find the amount to be withheld from Robyn’s total earnings for that period.
$215
4
Subtract the amount previously withheld for the period from the amount at step 3.= $215 – $180
$35
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 8 × $35.
$280
6
Use the relevant tax table to find the amount to be withheld from Robyn’s gross earnings for the current pay period.
$215
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.= $215 + $280
$495
As Robyn has an accumulated HELP debt, her employer also needs to calculate a withholding amount from the back payment for HELP. They use the same method as they used to calculate withholding for the back payment in the first part of this example.
HELP component
Step
Instruction
Result
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 $800 over eight pay periods.= $800 / 8
$100
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.= $1,000 + $100
$1,100
3
Use the relevant tax table to find the amount to be withheld for HELP from Robyn’s total normal earnings for that period.
$44
4
Subtract the amount previously withheld for the period from the amount at step 3.= $44 – $0
$44
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 8 × $44.
$352
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.
$44
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.= $44 + $352
$396
Calculate the total PAYG withholding amount for the current pay period
■ PAYG withholding on gross earnings in the current pay period = $215
■ HELP withholding on gross earnings in the current pay period = $44
■ PAYG withholding on additional payment = $280
■ HELP withholding on additional payment = $352
The total PAYG withholding is $891 ($215 + $44 + $280 + $352).
Example 2 uses:
■ Higher Education Loan Program (HELP)/Trade Support Loan (TSL) weekly tax table (NAT 2173) effective from 1 July 2015
■ Statement of formulas for calculating the amount to be withheld (NAT 1004) effective from 1 July 2015 – the calculations are made using scale 2, with tax-free threshold.
Example 3: Withholding from a lump sum p Example 3: Withholding from a lump sum payment in arrears using Method B(ii)
Example 3: Withholding from a lump sum payment in arrears using Method B(ii)
Mary is employed by Minercorp Pty Ltd and receives a fortnightly salary of $1,800. She is entitled to an allowance from her employer when working in remote areas. In 2013, 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 discovers their oversight and agrees to pay her the $2,480 as a lump sum payment in arrears on 11 November 2015. Her gross earnings for pay period 10 is $1,800.
Mary has received normal earnings (year to date) of $18,000 including the current pay. The amount Mary’s payer must withhold from this payment is calculated using Method B(ii) as follows:
Step
Instruction
Result
1
Calculate Mary’s average total earnings over the current financial year to date (including current pay).= $18,000 / 10
$1,800
2
Use the relevant tax table to find the amount to be withheld from Mary’s average total earnings in step 1.
$290
3
Add all additional payments made to Mary in the current financial year if Method B(ii) was used to calculate the withholding, to the additional payment in the current pay. Mary’s additional payment of $2,480 is then divided by the number of pay periods in the financial year.= $2,480 / 26
$95
4
Add the amount at step 3 to the average total earnings at step 1.= $1,800 + $95
$1,895
5
Use the relevant tax table to find the amount to be withheld from the amount at step 4.
$324
6
Subtract the amount at step 2 from the amount at step 5.= $324 – $290
$34
7
Multiply the amount in step 6 by the number of pay periods used in step 3.= $34 × 26
$884
8
Subtract any amounts previously withheld from additional payments in the current financial year if Method B(ii) was used, from the amount at step 7 for the withholding on the additional payment.= $884 – $0
$884
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.
$290
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).= $884 + $290
$1,174
Example 3 uses Statement of formulas for calculating the amount to be withheld (NAT 1004) effective from 1 July 2015. The calculations are made using scale 2, with tax-free threshold.
Example 4: Withholding using Method B(i) Example 4: Withholding using Method B(i) and Method B(ii)
Example 4: Withholding using Method B(i) and Method B(ii)
Pablo, who has an accumulated Financial Supplement debt, is employed by Macropayers Pty Ltd. On 1 September 2015, he received a salary increase of $5 an hour, taking his gross monthly salary from $4,800 to $5,600. His employer agreed that the increase would be backdated to 1 August 2014 and paid at the end of September 2015.
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 both:
■ the current financial year (2 pay periods from 1 July to August 2015) = $1,600
■ a prior financial year (11 pay periods from 1 August 2014 to 30 June 2015) = $8,800.
You don’t need to complete some steps if both Methods B(i) and (ii) are used in the calculations.
Method B(i) – PAYG withholding component
Step
Instruction
Result
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 two 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 earnings for that period.= $4,800 + $800
$5,600
3
Use the relevant tax table to find the amount to be withheld from Pablo’s total earnings for that period.
$1,226
4
Subtract the amount previously withheld for the period from the amount at step 3.= $1,226 – $945
$281
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 × $281.
$562
6
This step is not required as withholding is also calculated using Method B(ii).
7
This step is not required as withholding is also calculated using Method B(ii).
As Pablo has an accumulated Financial Supplement debt, his employer will need to calculate a withholding amount from the back payment for SFSS. They use the same method as they used to calculate withholding for the back payment in the first part of this example.
Method B(i) – SFSS component
Step
Instruction
Result
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 two 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.= $4,800 + $800
$5,600
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.
$169
4
Subtract the amount previously withheld for the period from the amount at step 3.= $169 – $95
$74
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 × $74.
$148
6
This step is not required as withholding is also calculated using Method B(ii).
7
This step is not required as withholding is also calculated using Method B(ii).
Method B(ii) – PAYG withholding component
Step
Instruction
Result
1
Calculate Pablo’s average total earnings, which in this example is= (salary earnings to date + current financial year additional payments to date) / number of pay periods= [($4,800 + $4,800 + $5,600) + $1,600] / 3= $16,800 / 3
$5,600
2
Use the relevant tax table to find the amount to be withheld from Pablo’s average total earnings in step 1.
$1,226
3
Add all additional payments made to Pablo in current financial year where Method B(ii) was used to calculate the withholding, to the additional payment in current pay. Then divide by the number of pay periods in the financial year.= $8,800 / 12
$733
4
Add the amount at step 3 to the average total earnings at step 1.= $5,600 + $733
$6,333
5
Use the relevant tax table to find the amount to be withheld from the amount at step 4.
$1,482
6
Subtract the amount at step 2 from the amount at step 5.= $1,482 – $1,226
$256
7
Multiply the amount in step 6 by the number of pay periods used in step 3.= $256 × 12
$3,072
8
Subtract any amounts previously withheld from additional payments in the current financial year if Method B(ii) was used, from the amount at step 7 for the withholding on the additional payment.= $3,072 – $0
$3,072
9
This step is not required as final calculations for withholding limit and total withholding will be made after SFSS component is calculated.
10
This step is not required as final calculations for withholding limit and total withholding will be made after SFSS component is calculated.
11
This step is not required as final calculations for withholding limit and total withholding will be made after SFSS component is calculated.
12
This step is not required as final calculations for withholding limit and total withholding will be made after SFSS component is calculated.
As Pablo has an accumulated Financial Supplement debt his employer will need to calculate the withholding amount from the back payment for SFSS. They use the same method as they used to calculate withholding for the back payment in the first part of this example.
Method B(ii) – SFSS component
Step
Instruction
Result
1
Calculate Pablo’s average total earnings, which in this example is:= (salary earnings to date + current financial year additional payments to date) / number of pay periods= [($4,800 + $4,800 + $5,600) + $1,600] / 3= $16,800 / 3
$5,600
2
Use the relevant tax table to find the amount to be withheld for SFSS on Pablo’s average total earnings in step 1.
$169
3
Add all additional payments made to Pablo in current financial year where Method B(ii) was used to calculate the withholding, to the additional payment in current pay. Then divide by the number of pay periods in the financial year.= $8,800 / 12
$733
4
Add the amount at step 3 to the average total earnings at step 1.= $5,600 + $733
$6,333
5
Use the relevant tax table to find the amount to be withheld for SFSS from the amount at step 4.
$191
6
Subtract the amount at step 2 from the amount at step 5.= $191 – $169
$22
7
Multiply the amount in step 6 by the number of pay periods used in step 3.= $22 × 12
$264
8
Subtract any amounts previously withheld from additional payments in the current financial year if Method B(ii) was used, from the amount at step 7 for the withholding for SFSS on the additional payment.= $264 – $0
$264
Withholding limit (including SFSS component)
Step
Instruction
Result
9
Multiply the additional payment being made using Method B(ii) in the current pay period by 49%.= $8,800 × 49%
$4,312
10
Use the lesser amount of step 8 (combined) and step 9 for the withholding on the additional payment. Ignore any cents.Combine the two step 8 results.= $3,072 + $264 = $3,336This amount is used as it’s less than step 9.
$3,336
11
This step is not applicable as total withholding for the current pay period will need to include amounts calculated in Method B(i).
12
This step is not applicable as total withholding for the current pay period will need to include amounts calculated in Method B(i).
Calculate the total PAYG withholding amount for the current pay period
Withholding on gross earnings current pay period
■ PAYG withholding on gross earnings in the current pay period = $1,226
■ SFSS withholding on gross earnings in the current pay period = $169
Method B(i) withholding
■ PAYG withholding on additional payment for current financial year = $562
■ SFSS withholding on additional payment for current financial year = $148
Method B(ii) withholding
■ PAYG withholding on additional payment for prior financial year = $3,072
■ SFSS withholding on additional payment for prior financial year = $264
Total PAYG withholding is $5,441
($1,226 + $169 + $562 + $148 + $3,072 + $264).
Example 4 uses both:
■ Student Financial Supplement Scheme (SFSS) monthly tax table (NAT 3308) effective from 1 July 2015
■ Statement of formulas for calculating the amount to be withheld (NAT 1004) effective from 1 July 2015 – the calculations are made using scale 2, with tax-free threshold.