Schedule Sch 6 - Taxation Administration Withholding Schedules 2023 - – Tax table for annuities

Sch 6– Tax table for annuities

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Schedule 6 – Tax table for annuities

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.

For annuities purchased using money rolled over from a super fund or super income stream payments, refer to Tax table for superannuation income streams.

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 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.

The recipient of the annuity may request the ATO to calculate the deductible amount of their annuity using Request for determination of the deductible amount of UPP of an Australian pension or annuity.

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.

Example 1Barbara 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 2020–21 income year is $5,200.The amount of income to withhold tax from:Annuity payment − [Deductible amount / Number of instalments]= $1,000 − [$5,200 / 52]= $1,000 − $100= $900Barbara is not eligible for SAPTO, so the payer will use the Weekly tax table (NAT 1005) to work out how much tax to withhold from $900. Assuming Barbara is claiming the tax-free threshold, the amount of tax to be withheld is $127.