Calculating how much tax should be withheld from your pay
Employers are required to withhold tax from your wage or salary to send to the ATO at regular intervals. At the end of the financial year when you lodge a tax return, you may be entitled to a refund or credit for the amount withheld.
Your employer calculates the amount to withhold based on information you may have included in forms like your ‘tax file number declaration’ and ‘withholding declaration’. The amount withheld is calculated based on the idea that your circumstances will stay the same through out the year. The name for this process is pay as you go (PAYG) withholding.
The ATO’s tax withheld calculator
One way to work out how much your employer should be withholding from your pay is by using the ATO’s tax withheld calculator which you can access here.
The tax withheld calculator takes into account your residency status, any applicable offsets, any required HELP repayments and Medicare levy exemptions, among other things. The calculator does not take into account the special rates applicable to some types of payments including employment termination payments, return-to-work payments, super income streams and commission payments. It also does not account for the special rates for certain industries like actors and entertainers, horticulture and shearing.
The ATO’s tax tables
You may also like to refer to the ATO’s PAYG withholding tax tables which you can access here.
There are a number of tables available, each with different instructions that need to be adhered to carefully. Choosing which table or tables is most appropriate for your will depend on a number of factors including your residency status, the industry you are employed in, the frequency with which you are paid, if you have a HELP debt and whether you are in receipt of a payment to which concessional tax rates apply.