Calculating taxes is one of the not-so-glamorous aspects of starting a business. First, you have to determine how to calculate taxes, and then you have to actually crunch the numbers and prepare your cashflow plan. It can be far from relaxing at times!
Weekly tax table calculator: Your guide to tax withholding
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Fortunately for small business owners in Australia, the Australian Taxation Office (ATO) has made calculating taxes for employees simple with their readable tax tables. These reduce the likelihood of making a common tax mistake. And, did we mention they’re free?
But if looking up tax tables is not your thing, using an accounting software like QuickBooks Payroll powered by Employment Hero can automatically calculate this with you. QuickBooks Payroll is up to date with the ATO’s tax rates and is fully compliant with the ATO’s requirements. Find out how automating payroll can benefit your business.
In this article you will learn:
- Weekly tax table
- How to use the weekly tax table
- Example of a calculation using the ATO’s weekly tax table
- What is PAYG?
- Average Weekly Earnings
- What Are Your PAYG Obligations As An Employer?
- Employer Checklist For PAYG Tax Withholding
- ATO Tax Tables
- Important Issues To Note When Using ATO Tax tables
- Single Touch Payroll
- How Taxes Get Less Taxing
Weekly tax table
While many businesses pay their employees every two weeks, some Australian businesses pay their employees weekly. If this describes your business, use the weekly tax table to track withholding for employees.
How to use the weekly tax table
The weekly tax table is organised into three columns split by weekly earnings and the amount to be withheld. The two ‘amount to be withheld’ columns are divided into whether an employee claims the tax-free threshold or not.
A snapshot view of the table:
Weekly earnings |
Amount to be withheld |
|
|
With tax-free threshold |
No tax-free threshold |
|
|
$20.00 |
$0.00 |
$4.00 |
|
$250.00 |
$0.00 |
$55.00 |
|
$750.00 |
$90.00 |
$197.00 |
|
$1,000.00 |
$162.00 |
$283.00 |
|
$1,500.00 |
$335.00 |
$456.00 |
|
$2,000.00 |
$508.00 |
$630.00 |
|
$2,500.00 |
$689.00 |
$825.00 |
|
$3,000.00 |
$884.00 |
$1,020.00 |
|
$3,275.00 |
$991.00 |
$1,141.00 |
The table can be used with these steps:
- Calculate your employee’s total weekly earnings, add any allowances and irregular payments for this week to the normal weekly basis earnings, and ignore any cents.
- Find this amount in the column on the left called “Weekly earnings”.
- The amount to withhold is in the second column titled “With tax-free threshold” unless your employee is not claiming the tax threshold. For example, if they have a second job, they may not claim the tax threshold.
You can view the full ATO weekly tax table guide for guidance on the withholding amount for the exact weekly earnings.
Example of a calculation using the ATO’s weekly tax table
Your employee earns $1800 for a week’s pay.
Looking at the middle column in the weekly tax table, you’ll see that the weekly PAYG withholding for that employee will be $439.
What is PAYG?
Pay as you go (PAYG), also known as pay as you earn (PAYE), is a system of withholding amounts from employee payments so they can meet their end-of-year tax liabilities.
You have to register with the ATO for PAYG and withhold amounts weekly on your employees’ behalf. These amounts are used to pay the employee’s income tax at the end of the financial year.
Even though the employer has withheld tax, the employee may still be required to submit their individual tax return as this will take into account their other taxable income and deductions such as bank interest and union fees.
The ATO specifies how much employers need to withhold in their PAYG withholding tax tables depending on the income tax rates. This withholding is called PAYG withholding. You may also need an additional form for PAYG superannuation income streams if you have employees setting aside money toward superannuation.
Average Weekly Earnings
According to a report released by the Australian Bureau of Statistics, the average weekly earnings for full time adults were approximately $2,075.30 for males and $1,821.30 for females as at 18 August 2022.
What Are Your PAYG Obligations As An Employer?
To start paying PAYG for your employees, you’ll first need to register with the ATO. You can do so on the online business portal through the ATO website or by speaking with your tax agent.
After you have calculated and paid the withheld amounts, you will need to report these amounts on your activity statements. You may need to provide PAYG withholding summaries to all employees and lodge a PAYG withholding annual report with the ATO or if you are reporting under STP you no longer need to provide PAYG withholding summaries.
Most commonly, you’ll need to withhold from:
- Employees
- Directors
- Workers you have a voluntary agreement with
- Contractors or businesses that don’t quote their ABN
If an employee leaves or retires, you will need to:
- Make any final, outstanding, PAYG withholding payments
- Complete an employee termination payment
- Send a payment summary to the employee
- Keep a record of the employee’s TFN declaration until the end of the next financial year
- Keep a record of the PAYG withholding
If you run into any unique cases, do not hesitate to contact the ATO or a financial advisor.
Employer Checklist For PAYG Tax Withholding
Taxes are an involved process, and the PAYG method is no different. To ensure you don’t miss anything important, here are the steps for the entire PAYG process.
- Register
- Add up your employee’s weekly income
- Use the corresponding ATO tax table to work out the tax withholding (column 2)
- Pay amounts
- Report amounts on your activity statements
- Provide a summary to your employees
- Lodge an annual withholding report
Using the ATO tax tables, working out PAYG withholding for your employees is simple. Make sure to check whether you need to use any other tables for your employees (for example, if you need to make a Medicare levy adjustment).
To learn how to record PAYG on QuickBooks Online view our handy video guide.
Keep your records, use STP and a solution like QuickBooks Payroll powered by Employment Hero to simplify the whole process.
ATO Tax Tables
The ATO produces a range of tax tables to help you work out how much to withhold from payments to your employees or other payees. Recently, new tax tables have been created for study and training support loans that replace earlier HELP, TSL, SSL, and SFSS tables.
If you employ people who are on holiday in Australia, the tax table for working holiday makers applies.
In addition to the tables, the ATO also has an online tax withheld calculator that calculates the correct amount of tax to withhold. There is one calculator for employees and another for contractors. To use the calculators, you will need the information employees supply in their tax file declaration, a withholding declaration, and a Medicare levy variation declaration.
The most common ATO tax tables you will need as an employer are the weekly, fortnightly, or monthly tax tables that correspond with how often you make pay runs.
Important Issues To Note When Using ATO Tax tables
Please note that the weekly tax tables will also apply if you pay any of the following:
- Paid parental leave
- Directors’ fees
- Payments to labour-hire workers
- Payments to religious practitioners
- Payments to government education or training
- Compensation, sickness, accident payments, or other leave payments
- Payments to foreign residents
Pick the table that corresponds with how often you make these payments. Other tax tables may apply if you made payments to shearers, workers in the horticultural industry, performing artists, casual employees and workers who are on a working holiday.
If your employee has an accumulated debt (e.g HELP, SSL, TSL), you’ll need to use HELP, SSL, or TSL tax tables. If your employee is entitled to make an adjustment for the Medicare levy, you’ll need to use adjustment tax tables.
If your employee is entitled to a tax offset, you’ll need to use the ATO’s ‘Ready reckoner for tax offsets‘ to convert their estimated annual entitlement to a weekly figure you can subtract from the withholding amount.
Single Touch Payroll
Single Touch Payroll (STP) is the most common way to pay employees and report payroll. STP Phase 2 was rolled out in Quickbooks Payroll powered by Employment Hero in January 2022. Under the STP system, employee wages, including PAYG are reported to the ATO every pay run as opposed to solely at the end of the financial year.
STP commenced on 1 July 2018 for employers with 20 or more employees and on 1 July 2019 for employers with under 20 employees. As of 1 July 2021 all employers were required to be reporting each pay period through STP.
You can easily comply with STP using the correct payroll software.
How Taxes Get Less Taxing
Taxes may not be your favourite thing in the world, but that doesn’t mean they have to be a difficult process. With a better understanding of the various tax methods, taxes can be just another item you check off your list during your monthly upkeep as a small business owner.
This will free you to focus on more pressing matters like growing your business, serving your customers, and enjoying the unparalleled freedom that comes with running your own company.
If you ever need help, don’t hesitate to contact the ATO, seek professional advice from a ProAdvisor or hire a professional accountant to do your taxes for you.
Disclaimer: This page is provided for general information purposes only and does not constitute accounting, tax, business, or legal advice. You should always consult your own advisors for advice relating to your business or situation. Always consult the ATO directly as information changes from time to time: https://www.ato.gov.au/rates/tax-tables/
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