Forum Discussion

ELC-Leo's avatar
ELC-Leo
Experienced Cover User
2 years ago

"Under 18 and below tax threshold" but 47% PAYG withheld

Two successive self-onboarded employees (both under 18, no TFN, not earning much) are having 47% tax withheld, which doesn't seem right. So, I'm hoping for some clarification. 

 

Firstly, here is the 'Tax declaration details' section from the PDF snapshot of their self-onboarding responses:

__________________________________________
"Tax declaration details
Do you have a Tax file number?
No
Under 18 and below tax threshold
Are you an Australian resident for tax purposes or a working holiday maker?
Australian resident for tax purposes
Do you wish to claim the free tax threshold?
No
Do you have any of the following outstanding debts or loans?
No
On what basis are you paid?
Casual"

__________________________________________

 

Is it correct that MYOB is using the Tax Table "No Tax File Number Resident", causing 47% PAYG withholding (as shown in the attached redacted images)?

When I use the ATO Tax withheld calculator with their responses, it only withholds $18 from fortnightly $100 gross earnings.

Is there something that I need to change manually beyond what MYOB takes from the self-onboarding responses?

If the current MYOB setup is correct for their given responses, should the employees perhaps also have opted to claim the tax free threshold to prevent the 47% tax withholding (assuming they have no other employer/earnings)?

_______________________________

Some notes from my research so far:

 

The employees DO NOT meet the following conditions from the ATO website (https://www.ato.gov.au/Business/PAYG-withholding/Payments-you-need-to-withhold-from/Payments-to-employees/Tax-file-number-and-withholding-declarations/) because, although they ARE under 18 and WILL only earn maximum $150 fortnightly and about $2000 annually, they HAVE provided a TFN declaration during self-onboarding:

 

"Employee is under 18 years old

"The amount you need to withhold from payments to the employee is nil if all of the following 3 conditions are satisfied:

  1. The individual is under 18 years of age.
  2. The individual has not provided you with a TFN declaration (NAT 3092).
  3. The amounts you pay to the individual don't exceed
    • ...
    • $700 where you pay the individual fortnightly
    • ..."

Also, they DO NOT meet the following conditions from the ATO website (https://www.ato.gov.au/Rates/Fortnightly-tax-table/?page=2 ) because, although they have not quoted their TFN and have not advised they are applying for one, they HAVE claimed an exemption from quoting their TFN:

"When a TFN has not been provided

"You must withhold 47% from any payment you make to a resident employee and 45% from a foreign resident employee (ignoring any cents), if all of the following apply:

  • they have not quoted their TFN
  • they have not claimed an exemption from quoting their TFN
  • they have not advised you that they have applied for a TFN or have made an enquiry with us."

 

  • Earl_HD's avatar
    Earl_HD
    MYOB Moderator

    Hi ELC-Leo

    Thank you so much for your post. I would recommend speaking on your Accountant on how they will setup the employee card file. They system will automatically calculates the tax depending on what they entered on the employee TFN declaration.

    Kind regards,
    Earl

    • ELC-Leo's avatar
      ELC-Leo
      Experienced Cover User

      Hi Earl,

      Thank you so much for your response. 


      For 15 years, I have been the one to set up the employee card, not our accountant. 

      The problem and confusion has come from the new self-onboarding system. If they had completed paper forms as was the process in the past, we would have manually chosen the correct Tax Table as "No Tax Free Threshold". 

       

      Having read the MYOB documentation, I understood that AccountRight would automatically fill the correct Tax Table for the employee based on what the employee enters in the tax section of the self-onboarding. 

      However, I believe that MYOB has not selected the correct Tax Table for these employees. 

      They are exempt from providing a Tax File Number, but according to the ATO, they do not come under the "No Tax File Number Resident" tax category. They should only have $18 withheld per fortnightly $100 gross earnings, not $47 per $100 as MYOB has calculated. So based on their responses, MYOB should have automatically selected "No Tax Free Threshold".

       

      So, does MYOB select the correct tax table based on the employee self-onboarding response? Or doe sit not?
      Should all AccountRight users ignore the category that MYOB selects automatically because it could be in error, and continue to choose the category manually as we did before self-onboarding? 


      Regards.

       

      • Earl_HD's avatar
        Earl_HD
        MYOB Moderator

        Hi ELC-Leo 

        Thanks for confirming. The on boarding process is there to simply data entry. The information applies based on how they answer the question, but if they answer it incorrectly, you will need to correct/update the employee card file.  
         
        Employees under 18 might not fit the default tax code criteria as there are special rules for them about earnings, and the onboarding process does not capture these special criteria. I highly recommend calling the ATO (Australian Tax Office) regarding Tax Declaration of the employee. 
         
        Feel free to post again, we are happy to help.  
        Regards, 
        Earl 

  • natk's avatar
    natk
    Contributing User

    Hi Princess

     

    I came across this post while looking for answers to the same thing happening now (2024, 2 years later).

     

    So in reply to your last post, "If the employee claims the tax-free threshold and MYOB automatically fills out the tax table with "No tax file number resident," please let me know so we can check further." - i have just had an under 18 employee submit their tax declaration details as above, and yes, myob is still filling out the tax table with "no tax file number resident".

     

    Please fix this.

    • Shella_A's avatar
      Shella_A
      MYOB Moderator

      Hi natk,

       

      You can manually change the employee tax deduction upon receiving their employee self-onboarding if this happens. However, if the system continues to automatically fill out the tax table with "No tax file number resident" upon the employee claims the tax-free threshold, this needs further investigation. It is best to reach out to our support team directly. You can reach them on Live Chat via our virtual assistant, MOCA, or by submitting a support case via MyAccount.

       

       

      Kind regards,

      Shella