Weekly tax table: Your guide to simplifying tax withholding

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. It’s far from relaxing.

Fortunately for small business owners in Australia, the Australian Taxation Office (ATO) makes calculating taxes for your employees simple with their readable tax tables. These reduce the likelihood you’ll make a common tax mistake. And, did we mention they’re free?

Whether you pay weekly, fortnightly, or monthly, the ATO tax tables clearly lay out how much pay withholding you need to send to the ATO. To make better use of their offerings and more clearly understand taxes in general, it’s important to fully grasp weekly tax tables, as well as other taxation methods and schedules. So, let’s take a closer look.

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

1. 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.
2. Find this amount in the column on the left called “Weekly earnings”.
3. 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.

A Sample weekly tax table calculation

Imagine your employee earns $950 for a week’s pay.

The middle column of the tax table shows that the weekly PAYG withholding for that employee is $165. That’s it. You’re done.

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 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. But, because the PAYG system has the withheld amount act as an advanced payment on taxes, tax returns aren’t as commonplace here as they are in other tax models.

The ATO specifies how much employers need to withhold in their PAYG withholding tax tables depending on the income tax rates, while the 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.

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.

After you have calculated and paid the 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, outstanding, PAYG withholding payments
• 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

If you run into any unique cases, don’t 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.

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 your employees
7. 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).

Keep records and provide summaries to your employees. Use Single Touch Payroll and a solution like QuickBooks Key Pay 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 — it’s not only the weekly tax table.

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, 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 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.

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 to be included in this fortnight’s pay to the normal fortnightly earnings, and ignore 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.

A Fortnightly tax table sample calculation

Imagine your employee earns $1,072 fortnightly.

Look at the middle column of the tax table, which shows that the fortnightly PAYG withholding for that employee is $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 to be included in this month’s pay to the normal monthly earnings, and ignore any cents.
2. Find this amount in the column on the left called ‘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.

A Monthly tax table sample calculation

Imagine your employee earns $1,885.00 monthly.

Looking at the middle column of the tax table, it shows that the fortnightly PAYG withholding for that employee is $74.

Important issues to note when using ATO tax tables

While the ATO tax tables make life easier, there are some things to be aware of when using them. 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, 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 is the new system where you report payroll, including PAYG, to the ATO every pay run as opposed to solely in the end of the financial year.

Small employers with 19 or fewer employees now need to report their employees’ payroll information through Single Touch Payroll. (Employers with 20 or more employees already use Single Touch Payroll).

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

You can easily comply with Single Touch Payroll using the correct payroll software.

How taxes get less taxing

Taxes may not be your favorite 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 weekly 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.

Remember, if you ever need help, don’t hesitate to contact the Australian Taxation Office at www.ato.gov.au. That, or hire a professional accountant to do your taxes for you.

Source: Quickbooks

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