0
DAYS
0
HOURS
0
MINS
0
SECS
Over 4.5 million customers use QuickBooks.
Sign up for a free trial!
2020-01-10 01:19:48Small Business TaxEnglishLearn more about weekly, fortnightly and monthly tax tables to correctly calculate your PAYG. See this QuickBooks Resource Centre blog for...https://quickbooks.intuit.com/au/resources/au_qrc/uploads/2020/01/Taxes.jpghttps://quickbooks.intuit.com/au/resources/small-business-tax/tax-tables-weekly-fortnightly-and-monthly/Tax tables: Weekly, fortnightly, and monthly

Tax tables: Weekly, fortnightly, and monthly

6 min read

Fortunately for small business owners in Australia, the ATO makes calculating PAYG for your employees simple with their easy to read tax tables.

Whether you do pay runs weekly, fortnightly or monthly, the ATO tax tables clearly lay out how much pay withholding you need to send to the ATO per dollar amount your employees earn. Let’s take a closer look.

What is PAYG?

If you’re an employer, you have an obligation to withhold some of your employees’ wages and send it to the ATO on their behalf.

PAYG is a system of withholding amounts from payments to employees so they can meet their end of year tax liabilities.

You have to register for PAYG and withhold amounts weekly, fortnightly, or monthly on your employees’ behalf. These amounts are used to pay the employee’s income tax at the end of the financial year.

If the amount withheld is more than the actual tax payable, the employee will get a tax refund, or they might need to supplement if there’s a shortfall.

The ATO specifies how much employers need to withhold in their PAYG tax tables and the withholding is called ‘PAYG withholding’.

What are your 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.

After you have calculated and paid withheld amounts, you need to report these amounts on your activity statements. You also need to provide PAYG withholding summaries to all employees and lodge a PAYG withholding annual report.

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 need to:

  • Make any final PAYG withholding payments which might be outstanding
  • Complete an employee termination payment
  • Send a payment summary to the employee
  • Keep a record on the employee’s TFN declaration until the end of the next financial year
  • Keep a record of the PAYG withholding

ATO Tax Tables

The ATO produce a range of tax tables to help you work out how much to withhold from payments you make to your employees or other payees.

This year, new tax tables have been created for study and training support loans which replace earlier HELP/TSL/SSL and SFSS tables. And if you employ people that are on holiday in Australia, then another table called 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 information employees supply in their tax file declaration, withholding declaration and medicare levy variation declaration.

The most common tax tables you will need to refer to as an employer are the weekly, fortnightly or monthly tax tables that correspond with how often you make pay runs.

Weekly tax table

Use the weekly tax table if you pay your employees on a weekly basis.

How to use the weekly tax table:

  1. Calculate your employee’s total weekly earnings – add any allowances and irregular payments that are to be included in this week’s pay to the normal weekly earnings, ignoring any cents.
  2. Find this amount in the column on the left ‘Weekly Earnings’.
  3. The amount to withhold is in the second column, ‘With tax-free threshold’ unless your employee is not claiming the tax threshold, for example, if they have a second job.

Weekly tax table sample calculation

Your employee is paid $950 a week.

Looking at the middle column of the tax table, it shows that the weekly PAYG withholding to withhold for that employee = $165

Fortnightly tax table

Use the fortnightly tax table if you pay salaries on a fortnightly basis.

  1. Calculate your employee’s total fortnightly earnings – add any allowances and irregular payments that are to be included in this fortnight’s pay to the normal weekly earnings, ignoring any cents.
  2. Find this amount in the column on the left ‘Fortnightly Earnings’
  3. The amount to withhold is in the second column, ‘With tax-free threshold’ unless your employee is not claiming the tax threshold.

Fortnightly tax table sample calculation

Your employee earns $1072.00 fortnightly.

Looking at the middle column of the tax table, it shows that the fortnightly PAYG withholding to withhold for that employee = $90

Monthly tax table

Use the monthly tax table if you pay salaries on a monthly basis.

  1. Calculate your employee’s total monthly earnings – add any allowances and irregular payments that are to be included in this week’s pay to the normal weekly earnings, ignoring any cents.
  2. Find this amount in the column on the left ‘Monthly Earnings’
  3. The amount to withhold is in the second column, ‘With tax-free threshold’ unless your employee is not claiming the tax threshold.

Monthly tax table sample calculation

Your employee earns $1885.00 monthly.

Looking at the middle column of the tax table, it shows that the fortnightly PAYG withholding to withhold for that employee = $74

Important issues to note with using ATO tax tables

Note that the weekly, fortnightly or monthly tables 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 or accident 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/TSL tax tables or 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 need to use the ATO’s Ready reckoner for tax offsets to convert their estimated annual entitlement to a weekly figure that you can subtract from the withholding amount.

Single Touch Payroll

Single Touch Payroll is the new system where you report payroll, including PAYG, to the ATO every pay run as opposed to the end of the financial year.

Small employers with 19 or less employees now need to report their employees’ payroll information through Single Touch Payroll. (Large employers with 20 or more employees are already using Single Touch Payroll).

Micro employers with less than 4 employees can report through their registered tax or BAS agent on a quarterly basis.

You can easily comply with Single Touch Payroll using QuickBooks KeyPay and even try it out for free for 30 days.

Checklist for PAYG tax withholding for employers

  1. Register
  2. Add up your employee’s weekly, fortnightly or monthly income
  3. Use the corresponding ATO tax table to work out the tax withholding (column 2)
  4. Pay amounts
  5. Report amounts on your activity statements
  6. Provide a summary to employees
  7. Lodge an annual withholding report

As you can see from our sample calculations using the ATO tax tables, working out PAYG withholding for your employees is simple. Make sure to check if you need to use any other tables for your employees, for example, if you need to make a Medicare levy adjustment. Keep records and provide summaries to your employees. Use Single Touch Payroll and a solution like QuickBooks Key Pay to simplify the whole process.

If this article was useful, head to the QuickBooks Resource Centre for more articles to help run your small business smoothly.

Rate This Article

This article currently has 5 ratings with an average of 2.6 stars

Information may be abridged and therefore incomplete. This document/information does not constitute, and should not be considered a substitute for, legal or financial advice. Each financial situation is different, the advice provided is intended to be general. Please contact your financial or legal advisors for information specific to your situation.

Help Your Business Thrive

Sign up for our newsletter

Thanks for signing up!

Check your inbox for a confirmation email.*

*Check your spam folder if you don’t see a confirmation email.

Related Articles

Weekly tax table: Your guide to simplifying tax withholding

Calculating taxes is one of the not-so-glamorous aspects of starting a business.…

Read more

The ATO simple tax calculator and other useful tax tools

For small business owners, tax demands year-long consideration. If you wait until…

Read more

How to master your break-even point once and for all

Every company owner wants to grow sales and increase profits, but the…

Read more