Payroll - Tax Withheld

[PeterLeonard]

I've had a query from an employee who says he had to pay tax last year. He says he has no other income. His gross was $102,080, and he paid $23,988 in tax. His card was set to "Tax Free Threshold".

I calculated from the Tax Tables that he should have paid $23,643 in tax so a refund of $345 was due without any dedcutions. I've been told there is a further 2% Medicare levy - $2,041. Is this right? What tax rate do I set to cover that? There doens't seem to be any that fit.

[gavin12345]

Hi @PeterLeonard 

There is no separate tax tables for Medicare Levy - this is included in the relevant tax table such as Tax Free Threshold. What might cause this is for example if payroll is done fortnightly, the tax tables assume 26 fortnights per year. However depending on your paydate cycle, in some years there will be 27 pays. If this happens the employer needs to adjust for this in advance, setting an Extra Tax amount on the Employee's tax screen.

Having said that, did a quick check, if paid weekly, $1963 per week means $495 per week should be deducted (or double for fortnightly) meaning annually this should be $25740. You have $23988, so something not right.

So you might need to check your setup - is there a rebate on the Employee's Card > Taxes, or is a payroll category set to be exempt by PAYG?

Regards

Gavin

[Julie_A_C]

Hi @PeterLeonard @gavin12345 

I think sometimes this is also an ATO error that they wont own up to.

I also use payroller for payroll for some clients and their system is not adjusting for my working holiday makers with special visas issued and have gone over the limit of 15% tax. I have to just keep my eye on it and know when the employee went over the threshold for the year and got to 32.5% tax.

MYOB, Xero and Payroller have also never been advised of something I brought to to the ATO"s attention three years ago.

People working two jobs and even not claiming tax free threshold at other job were underpaying their tax.

Work it out, $900 here $100 there tax not what you expect on $1,000.

ATO answer was, they can make a payment arrangement!!!!

So good for someone struggling and thinking their debts are paid.