The article is added again below and should be re-read so you can change the next pays if you are affected.
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It is likely this financial year that there will be an extra pay period.
- fortnightly – will have 27 pay days for the year instead of the usual 26
- weekly – will have 53 pay days for the year instead of the usual 52
The withholding tax tables calculated by the Australian Taxation Office are based on the normal number of pays in a year. Tax rates increase as a taxable income increase. Therefore, the additional pay day will mean that amounts withheld from salary or wage payments made to many payees will not cover the amount payable when they lodge their tax returns.
What can be done?
The Australian Taxation Office recommends that additional amounts can be withheld.
Every taxpayer’s circumstances are different, but those who normally expect to receive a small refund at the end of the year are likely to find that they owe tax, because of the additional pay day. Any payees concerned about the possible shortfall in amounts withheld, can request additional amounts. The recommendations are:-
|
Weekly earnings
|
Additional withholding per pay
|
|
$725 to $1,524
|
$3
|
|
$1,525 to $3,449
|
$4
|
|
$3,450 and over
|
$10
|
|
Fortnightly earnings
|
Additional withholding per pay
|
|
$1,400 to $3,049
|
$12
|
|
$3,050 to $6,799
|
$17
|
|
$6,800 and over
|
$42
|
An email request to the pay office should be enough. But don’t wait too long!
If you think this difference would be insignificant, then think again! An average taxpayer earning $3,200 per fortnight will be $482 out of pocket, when they lodge their 2016 income tax return.
For a normal, 26 fortnight year, the taxpayer would receive a refund of $41 on assessment of their tax return. In a 27 fortnight year, they would face a bill of $421, which would be the tax payable on assessment.
This example uses 2015-16 tax rates. It assumes the payee has no other income or deductions and is not entitled to leave loading.
Speak to the pay office immediately!
Source: Written for AcctWeb by a Melbourne accounting practice
21st-June-2016 | 