This document is a withholding schedule made by the Commissioner of Taxation in accordance with sections 15-25 and 15-30 of Schedule 1 to the Taxation Administration Act 1953 (TAA). It applies to withholding payments covered by paragraph 12-80(b) of Schedule 1 to the TAA.
You should use this table if you pay an annuity that was purchased with non-superannuation money, for example, an initial capital investment of personal cash.
To work out the withholding amount for an annuity payment purchased with non-superannuation money, you must:
Work out the amount of income to withhold from using the following formula:
Annuity payment - [Deductible 27H amount / Number of instalments]
In this formula:
■ deductible amount represents the amount of the annuity payment that is exempt from tax. This amount is calculated using the formula found in section 27H of the Income Tax Assessment Act 1936.
– Where the annuity is held in only one person's name, the following formula is used:
(Undeducted purchase price of the annuity - Residual capital value) / Term of annuity or life expectation factor
The undeducted purchase price is generally the amount of the initial capital investment.
– Where the annuity is held or payable to 2 or more people, the deductible amount is apportioned depending on the amount each person received.
■ number of instalments is the number of instalments of the annuity payable in the income year.
Use the corresponding PAYG withholding tax table to find the withholding amount. The tax table you use depends on the period which the annuity is paid – for example, weekly or fortnightly.
Some payees may be eligible to claim the seniors and pensioners tax offset (SAPTO). If your payee gives you a Withholding declaration indicating that they want to claim a SAPTO entitlement through PAYG withholding, use the Tax table for seniors and pensioners to work out the amount to withhold from the income amount calculated in step 1.
These examples use the PAYG withholding tax tables that apply from 1 October 2016.
Example 1
Barbara has an annuity she purchased following the sale of a property. She receives annuity payments of $1,000 a week. The deductible amount for the 2016–17 income year is $5,200.
The amount income to withhold from:
Annuity payment - [Deductible amount / Number of instalments]
= $1,000 - [$5,200 / 52]
= $1,000 - $100
= $900
Barbara is not eligible for SAPTO so the payer will use the Weekly tax table (NAT 1005) to work out how much to withhold from $900. Assuming Barbara is claiming the tax-free threshold, the amount to be withheld is $148.
Example 2
Kenneth will receive fortnightly annuity payments on the 7th and 21st day of the month from 7 February 2017. For the remainder of the income year, the annuity will be $850 per fortnight. The annuity is indexed annually and the higher indexed amount is paid from 7 July 2017.
Kenneth's deductible amount for a whole income year is $2,400 and for the part of the current income year that he is to receive an annuity; his deductible amount is $1,000.
For the current income year, Kenneth will receive ten annuity instalments.
The amount of income to withhold from:
Annuity payment - [Deductible amount / Number of instalments]
= $850 - [$1,000 / 10]
= $850 - $100
= $750
Kenneth is not eligible for SAPTO so the payer will then use the Fortnightly tax table (NAT 1006) to work out how much to withhold from $750. Assuming Kenneth is claiming the tax-free threshold, the amount to be withheld is $8.
Withholding amounts calculated using the above formulas should be rounded to the nearest dollar. Results ending in 50 cents are rounded to the next higher dollar. Do this rounding directly – that is, do not make a preliminary rounding to the nearest cent.
Payment summaries
You must issue a PAYG payment summary – individual non-business to the payee by 14 July following the end of the financial year in which you made payments to them. However, if your payee requests a payment summary from you during the financial year, you must provide it within 14 days of receiving their request.
The answers your payees provide on their Tax file number declaration(NAT 3092) determine the amount you need to withhold from their payments. A Tax file number declaration applies to any payments made after you receive the declaration. If you receive an updated declaration from a payee, it will override the previous one.
If a payee does not give you a valid Tax file number declaration within 14 days of starting a payer/payee relationship, you must complete a Tax file number declaration with all available details of the payee and send it to us.
You must withhold 49% from any payment you make to a resident payee and 47% from any payment you make to a foreign resident payee (ignoring any cents), if it is an annuity payment that is not a superannuation income stream and all of the following apply:
If the payee has not given you their TFN within 28 days, you must withhold 49% for any annuity payment you make to a resident payee and 47% for any annuity payment you make to a foreign resident payee (ignoring any cents) unless we tell you not to.
When a TFN has not been provided do not allow for tax offsets or Medicare levy adjustments. Do not withhold any amount for: